David Moenning�s Daily State of the Markets: 08/11

Standing Tall

Good morning. The stock market stood its ground yesterday in the face of the terrorist plot to detonate liquid explosives onboard international flights bound for the United States. Stocks around the globe initially dove on the report that 21 people had been arrested in the despicable plot. However, traders here in the U.S. refused to be bullied and actually took stocks higher on the day. The market appeared to applaud the collective intelligence efforts to get the bad guys before anything happens.

After the initial reaction, traders were reminded that the trend has been for stocks to initially dive on news of terrorist attacks and then move substantially higher in the days that follow. So in light of the fact that this attack did not actually occur, the bargain hunters started to do their thing early. And with the threat of a fear-induced meltdown brushed aside, investors were able to look past the news and focus on a couple of decent earnings reports and a takeover in tech.

Stocks also benefited from lower oil prices. Crude futures fell hard on the idea that there will be less demand for jet fuel if travelers decide to curtail their plans in the wake of yesterday�s plot to blow up planes. Crude for September delivery dropped by $2.35 and settled at $74. However, with the Prudhoe Bay shutdown, ongoing fighting in the Middle East, and renewed terrorist activity, it is unlikely that oil will stay down for long.

So, all in all, the cold hearted machine that is Wall Street didn�t see any reason to worry about something that didn�t happen and traders decided to make a stand. From an emotional standpoint, yesterday�s action was impressive, but from a technical perspective, there wasn�t much to write home about. Volume fell short of the recent average, breadth was uninspiring, and the advance did little to help the charts. But given the alternative, the bulls have to be pleased with their work.

Turning to this morning, the markets have some fresh data to sift through so let�s get to it. Import Prices for July came in with an increase of +0.9%, which was a smidge higher than the consensus for a gain of +0.8%. However, Retail Sales in July came in much hotter than expectations and are sure to spark some additional debate as to whether the Fed made the right move.

Retail sales increased by 1.4% in July, which was much higher than the +0.8% that was anticipated and Ex-Autos, the number was double expectations. However, downward revisions to the June numbers are helping to offset some of the negativity toward the numbers and the markets have seen only minor moves in response.

Running through the rest of the pre-game indicators, the overseas markets are mixed with most bourses seeing fractional gains. Gold futures are moving a bit higher at the moment and are currently exchanging hands at $649.50. Crude futures are trading higher by $0.49 to $74.49 right now. Interest rates are a little higher this morning following the economic data with the 2-year currently quoted at 4.96% while the 10-yr is trading with a yield of 4.955% right now. And finally, with about an hour before the bell, stock futures in the U.S. are doing very little. The Dow futures are currently off by 5, the S&Ps are ahead by a fraction, and the NASDAQ is also sporting a fractional increase at the moment.

Stocks �In Play� This Morning:

Nordstrom (JWN) � Mentioned positively in Barron�s
Companhia Vale Do Rio (RIO) � Bidding for N
Kohls (KSS) � Mentioned positively at Oppenheimer
Mills Corp (MLS) � Downgraded at BofA
ATI Technologies (ATYT) � Downgraded at Deutsche Bank
Tenet Healthcare (THC) � Upgraded at Jefferies, Raymond James
Advance Auto Parts (AAP) � Downgraded at Lehman
Eaton Vance (EV) � Upgraded at Merrill Lynch
Bisys Group (BSG) � Downgraded at Merrill Lynch
Rio Tinto (RTP) � Upgraded at Prudential
Deutsche Telekom (DT) � Downgraded at UBS
Meridian Gold (MDG) � Upgraded at UBS
Hansen Natural (HANS) � Mentioned positively at Goldman Sachs
Fairchild Semi (FCS) � Mentioned positively at Citigroup
Lincoln National (LNC) � Upgraded at Raymond James

Long positions in stocks mentioned: MER, GS

** 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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