David Moenning�s Daily State of the Markets: 05/22
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Relief Yes, But Will it Last?
During a waterfall decline, such as we are currently experiencing, traders on both teams know to be on the lookout for an eventual reflex bounce. After several days of selling the inevitable rebound is characterized by an explosive move higher, which usually comes out of nowhere, and is driven by short covering. The so-called �dead-cat bounce� generally lasts about 3 days and then gives way to a retest of the lows.
Since both teams are well aware of how this phase of the game is played, it is normal for the sellers to head to the sidelines for a bit to wait for the bounce to run its course. And although Friday�s 15 point gain was a far cry from �explosive,� it did give the bears a reason to take a day off.
Unfortunately, our barnyard buddies didn�t do much with their opportunity. Instead of a sharp move higher, Friday�s action is better described as a day that lacked selling pressure for a change. Even the combination of falling oil prices and lower interest rates couldn�t convince the bulls to hit the buy button with any veracity. And although volume was strong and stocks did technically reverse, the day can hardly be classified as a key reversal day. So, in short, the bears continue to hold serve.
About the only fundamental factor leading to Friday�s �sigh of relief� rally was a decline in oil prices. With OPEC making noise about increasing production capacity and worries over a global economic slowdown of sorts, the argument can be made that the supply/demand picture for crude could actually improve in the future.
The only other item of note was a slight improvement on the Fed front. Treasury Secretary Snow�s interview on CNBC provided Fed Chairman Bernanke with a much needed vote of support. Bernanke has been battered lately for his apparent flip-flop and there is already talk of a crisis of confidence in the new Fed-head. In addition, Kansas City Fed President Tom Hoenig made a statement suggesting that the Fed must guard against overdoing it with regard to further rate hikes. And while this was definitely a positive, it wasn�t enough to shake last week�s negative mood.
Looking at the week ahead, it is a relatively light week in terms of economic data and there are no reports scheduled for release this morning. Here�s the rest of the week�s calendar:
Tuesday � Richmond Fed Index
Wednesday � Durable Goods, New Home Sales
Thursday � Preliminary Q1 GDP, Help Wanted Index, Existing Home Sales
Friday � Personal Income & Spending, U of M Consumer Sentiment
Turning to this morning, the economic extrapolation game is causing problems in commodities and the emerging markets, which has spilled over into the major Asian and European markets, which, of course, is creating some additional weakness here in the U.S.
The trouble stems from talk of the Chinese Central Bank increasing the equivalent of their bank reserve requirement. This would create higher interest rates, which causes concerns about economic growth in China, which creates worries over demand for commodities, which causes selling in commodities, which hits the emerging markets very hard (India has fallen -20% in 3 sessions), which generates selling in just about every other market around the world.
Running through the pre-game indicators, overseas markets in Asia were hit hard with a loss of -3.1% in Hong Kong and a drop of -1.8% in Japan while European markets are down close to 1%. Oil futures are trading lower on concerns over reduced demand and are down by $0.69 right now to $67.84. Gold is lower again this morning and is quoted down $9.00 to $648.50 right now. Interest rates are also heading down this morning with the 2-year is currently trading at 4.93% while the 10-yr is at 5.02%. And finally, with about an hour before the bell, stock futures in the U.S. are heading lower once again. The Dow futures are currently off by 54 points, the S&Ps are down by 6.60, and the NASDAQ is sporting a loss of 12.20 points.
Stocks �In Play� This Morning:
Yahoo (YHOO) � Mentioned positively in Barron�s
National Semiconductor (NSM) � Downgraded at Piper Jaffray
Cypress Semiconductor (CY) � Upgraded at UBS
Target (TGT) � Mentioned positively in Barron�s
Amgen (AMGN) � Upgraded at Wachovia
Electronic Arts (ERTS) � Upgraded at Piper Jaffray
St. Jude Medical (STJ) � Downgraded at Deutsche
Total SA (TOT) � Will partner with Saudi Aramco to build refinery in Persian Gulf
Ann Taylor Stores (ANN) � Downgraded at Lehman
Starbucks (SBUX) � Upgraded at UBS
Lucent (LU) � Upgraded at UBS
F5 Networks (FFIV) � Upgraded at Harris Nesbitt
Lowe�s (LOW) � Reports $1.06 vs. $0.94, Revenues $11.92 vs. $11.84B
NYSE Group (NYX) � A deal with Euronext is expected in next 48 hours
For More of David Moenning�s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopGunsTrading.com
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.com and may not actually come to pass. Mr. Moenning�s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM�s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
During a waterfall decline, such as we are currently experiencing, traders on both teams know to be on the lookout for an eventual reflex bounce. After several days of selling the inevitable rebound is characterized by an explosive move higher, which usually comes out of nowhere, and is driven by short covering. The so-called �dead-cat bounce� generally lasts about 3 days and then gives way to a retest of the lows.
Since both teams are well aware of how this phase of the game is played, it is normal for the sellers to head to the sidelines for a bit to wait for the bounce to run its course. And although Friday�s 15 point gain was a far cry from �explosive,� it did give the bears a reason to take a day off.
Unfortunately, our barnyard buddies didn�t do much with their opportunity. Instead of a sharp move higher, Friday�s action is better described as a day that lacked selling pressure for a change. Even the combination of falling oil prices and lower interest rates couldn�t convince the bulls to hit the buy button with any veracity. And although volume was strong and stocks did technically reverse, the day can hardly be classified as a key reversal day. So, in short, the bears continue to hold serve.
About the only fundamental factor leading to Friday�s �sigh of relief� rally was a decline in oil prices. With OPEC making noise about increasing production capacity and worries over a global economic slowdown of sorts, the argument can be made that the supply/demand picture for crude could actually improve in the future.
The only other item of note was a slight improvement on the Fed front. Treasury Secretary Snow�s interview on CNBC provided Fed Chairman Bernanke with a much needed vote of support. Bernanke has been battered lately for his apparent flip-flop and there is already talk of a crisis of confidence in the new Fed-head. In addition, Kansas City Fed President Tom Hoenig made a statement suggesting that the Fed must guard against overdoing it with regard to further rate hikes. And while this was definitely a positive, it wasn�t enough to shake last week�s negative mood.
Looking at the week ahead, it is a relatively light week in terms of economic data and there are no reports scheduled for release this morning. Here�s the rest of the week�s calendar:
Tuesday � Richmond Fed Index
Wednesday � Durable Goods, New Home Sales
Thursday � Preliminary Q1 GDP, Help Wanted Index, Existing Home Sales
Friday � Personal Income & Spending, U of M Consumer Sentiment
Turning to this morning, the economic extrapolation game is causing problems in commodities and the emerging markets, which has spilled over into the major Asian and European markets, which, of course, is creating some additional weakness here in the U.S.
The trouble stems from talk of the Chinese Central Bank increasing the equivalent of their bank reserve requirement. This would create higher interest rates, which causes concerns about economic growth in China, which creates worries over demand for commodities, which causes selling in commodities, which hits the emerging markets very hard (India has fallen -20% in 3 sessions), which generates selling in just about every other market around the world.
Running through the pre-game indicators, overseas markets in Asia were hit hard with a loss of -3.1% in Hong Kong and a drop of -1.8% in Japan while European markets are down close to 1%. Oil futures are trading lower on concerns over reduced demand and are down by $0.69 right now to $67.84. Gold is lower again this morning and is quoted down $9.00 to $648.50 right now. Interest rates are also heading down this morning with the 2-year is currently trading at 4.93% while the 10-yr is at 5.02%. And finally, with about an hour before the bell, stock futures in the U.S. are heading lower once again. The Dow futures are currently off by 54 points, the S&Ps are down by 6.60, and the NASDAQ is sporting a loss of 12.20 points.
Stocks �In Play� This Morning:
Yahoo (YHOO) � Mentioned positively in Barron�s
National Semiconductor (NSM) � Downgraded at Piper Jaffray
Cypress Semiconductor (CY) � Upgraded at UBS
Target (TGT) � Mentioned positively in Barron�s
Amgen (AMGN) � Upgraded at Wachovia
Electronic Arts (ERTS) � Upgraded at Piper Jaffray
St. Jude Medical (STJ) � Downgraded at Deutsche
Total SA (TOT) � Will partner with Saudi Aramco to build refinery in Persian Gulf
Ann Taylor Stores (ANN) � Downgraded at Lehman
Starbucks (SBUX) � Upgraded at UBS
Lucent (LU) � Upgraded at UBS
F5 Networks (FFIV) � Upgraded at Harris Nesbitt
Lowe�s (LOW) � Reports $1.06 vs. $0.94, Revenues $11.92 vs. $11.84B
NYSE Group (NYX) � A deal with Euronext is expected in next 48 hours
For More of David Moenning�s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopGunsTrading.com
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.com and may not actually come to pass. Mr. Moenning�s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM�s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
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