David Moenning�s Daily State of the Markets 06/22

All About the Earnings

Good morning. Stocks rebounded nicely Wednesday in response to better than expected earnings numbers from the likes of FedEx and Morgan Stanley. For one day at least, investors were able to put aside their fears of inflation and what the Fed might do to the economy and focus on the stuff that usually matters most to the market � earnings.

While it remains to be seen how long traders will continue to celebrate the prospect of solid earnings results, yesterday�s triple digit move certainly gave the bulls hope. The bull camp reminds us that there is usually a rather positive vibe associated with the start of a new quarter and that expectations are running high for another strong earnings season. Therefore, the bulls are hoping that there is a light at the end of the tunnel and would be happy to fast forward out of the current malaise.

The thinking right now is that the current correction may have gotten a little out of hand given the expectations for one, or possibly two more rate hikes. Sure, higher rates will inflict some damage, but so far, the sixteen straight rate increases have hardly put a dent in the record string of double digit earnings seasons. Thus, if earnings can continue to come in strong, the worry over higher rates may be for naught.

So with the idea in mind that this business is still all about earnings, traders did a little buying yesterday. However, while the blast, which seemingly came from out of the blue, certainly helped the mood, it really didn�t do much for the indices from a chart standpoint. In short, the move up simply returned prices to about where they stood four sessions ago � smack into resistance.

One glance at the charts shows that all the other major indices find themselves facing major overhead resistance. And from a purely technical standpoint, this area might become a bit of a hurdle as there are important moving averages, retracement levels, and good old fashioned price resistance (the prior support levels) to contend with.

So with stocks remaining oversold and a little time to kill before the Fed meeting and the start of earnings season, it will be interesting to see what kind of charge the bulls will be able to mount from here. A little backing and filling would be a positive and the market breadth certainly must improve if the bulls are going to have much of a chance. But most importantly, our barnyard buddies will need some help from earnings and perhaps our old friend Goldilocks in order to get the party going from here.

Turning to this morning, without any major economic news, the markets are fairly quiet once again. We will get a report on the Index of Leading Economic Indicators at 10:00. However, most economists will admit that this data series is really better at confirming the current status of the economy than making a projection about the future.

Running through the rest of pre-game indicators, overseas markets were higher across the board on the back of Wall Street�s strong showing. Gold is moving a little lower so far today and trading off by $0.50 right now to $590.50. Oil is moving up a little further this morning and August crude futures are currently trading higher by $0.44 to $70.77. Interest rates are also continuing to inch up this morning as traders begin to push rates toward where the Fed Funds rate is expected to be next Thursday. The 2-year is currently trading at 5.20% while the 10-yr is quoted at 5.17% right now. And finally, with about an hour before the bell, stock futures in the U.S. aren�t showing much movement once again. The Dow futures are currently off by 10 points; the S&Ps are basically unchanged, and the NASDAQ is sporting a decline of less than a point.

Stocks �In Play� This Morning:

Quanta Services (PWR) � Upgraded at Friedman Billings
Federated Dept Stores (FD) � WSJ reports company close to deal to sell Lord & Taylor
Boeing (BA) � Receives orders for six 747-400 from Cathay Pacific
Goldman Sachs (GS) � New Treasury Secretary Paulson will sell stake
Research in Motion (RIMM) � Will launch Blackberry service in Taiwan
Panera Bread (PNRA) � Upgraded at CIBC
Realnetworks (RNWK) � Downgraded at Goldman Sachs
General Mills (GIS) � Upgraded at Merrill Lynch
Juniper Networks (JNPR) � Citigroup speculates on takeover targets, also JNPR
Sprint Nextel (S) � Downgraded at RW Baird
Papa Johns (PZZA) � Mentioned positively at Ryan Beck
J2 Global Comm (JCOM) � Price target raised at First Albany
Toronto Dominion Bank (TD) � Upgraded at Merrill
3Com (COMS) � Mentioned positively at Bear Stearns
BEA Systems (BEAS) � Mentioned positively at Deutsche Bank

Remember to take time to enjoy your day and until next time, �may the bulls be with you!�

Positions in stocks mentioned: FDX, GS, BSC

** 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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