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Let The Games Begin

Daily State of the Markets 
Tuesday Morning – July 6, 2010

Good morning. With the S&P having fallen nearly -16% on a closing basis from its April 23rd high, the bulls will argue that the decline, which has taken on a rather nasty feel of late, has adequately discounted the slowdown that appears to be occurring in the U.S., China, and Europe. After all, there are few, if any, signs of an actual recession cropping up anywhere around the world and most analysts expect to see a slowing growth rate; not a replay of the "Great Recession" seen in 2007-09.

But since it takes two to tango, our furry friends in the bear camp argue that the current decline is only Act I. The glass-is-half-empty crowd points out that the austerity movement that seems to be sweeping across Europe, the ongoing housing decline in the U.S., and the slowdown in China all support the idea that the global economic recovery may have already peaked and that its downhill from here.

Last week's economic data may not have completely supported the bear argument. However, the data most certainly pointed to a stalling economy with Friday's Jobs report headlining the story as the Nonfarm Payrolls declined for the first time this year. Looking a little farther east, China's Premier Wen Jiabao said over the weekend that his country's economic recovery is facing more problems that had been expected as indicators are pointing to a slowdown in growth is occurring.

So, with the bulls arguing that "enough is enough, already" and the bears countering with an expectation of more economic weakness ahead, it looks like we may finally have a ball game on our hands. And given that the market is severely oversold, sentiment is about as negative as it comes, and our heroes in horns have been completely shut out of the action for a while now, we wouldn't be surprised to see some upside action in here soon (but then again, we've been singing that song for a while now).

Turning to this morning... it looks like the bulls may finally try to climb back in the game this morning as there are no economic indicators to dampen the mood just yet (note we'll ge the Non-manufacturing ISM report at 10:00 am) and the foreign markets are bouncing higher in the early going.

While it will certainly be enjoyable to see some green on the screen for a change, we will note that there is now significant resistance overhead at the 1040 and 1060 areas. Thus, it will be important to see whether or not the anticipated pop to the upside has any oomph behind it. If so, the bulls could run a while. But if not, look for the bears to reload after a day or two.

Finally, try doing something nice for someone today (for no reason at all)...

Pre-Game Indicators

Here are the important indicators we review each morning before the opening bell...

  • Major Foreign Markets:
    • Australia: +1.16%
    • Shanghai: +1.92%
    • Hong Kong: +1.22%
    • Japan: +0.77%
    • France: +3.24%
    • Germany: +2.28%
    • London: +2.29%


  • Crude Oil Futures: + $1.02 to $73.16
  • Gold: - 2.80 to $1204.90
  • Dollar: Lower against Yen, Lower vs Euro and Pound
  • 10-Year Bond Yield: Currently trading lower at 2.97%


  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +8.92
    • Dow Jones Industrial Average: +73
    • NASDAQ Composite: +20.71


Wall Street Research Summary


  • Carbo Ceramics (NYSE:CRR) - Barclays
  • Patterson-UTI (NASDAQ:PTEN) - Barclays
  • Pride International (NYSE:PDE) - Barclays
  • FMC Technologies (NYSE:FTI) - Barclays
  • Halliburton (NYSE:HAL) - Barclays
  • Progressive (NYSE:PGR) - Citi
  • Deutsche Telekom (DT) - Credit Suisse
  • Walter Energy (NYSE:WLT) - FBR Capital
  • Linear Technology (NASDAQ:LLTC) - JPMorgan
  • Goldman Sachs (NYSE:GS) - JPMorgan
  • Thor Industries (NYSE:THO) - Soleil Securities
  • Trex Company (NYSE:TREX) - Stephens



  • RF Micro Devices (RFMD) - JPMorgan
  • Deutsche Bank (NYSE:DB) - JPMorgam
  • Aplied Materials (NASDAQ:AMAT) - Piper Jaffray
  • Intersil (NASDAQ:ISIL) - RBC Capital
  • Maxim Integrated (NASDAQ:MXIM) - RBC Capital
  • Zoran (NASDAQ:ZRAN) - RBC Capital


    Long positions in stocks mentioned: None

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