David Moenning's Daily State of the Markets:
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Searching For Clues
Good Monday morning and welcome back. Stocks were modestly positive but basically little changed on Friday as investors may be wondering what will drive prices higher from here. The indices have indeed enjoyed a stellar move over the past three months without so much as even a modest pullback. However, with some resistance now forming overhead, the bulls may be searching for clues as to what the next catalyst might be.
There were some clues available during Friday�s session to support the bull case, however none of them seemed to trigger any enthusiasm. For example, crude oil plunged $1.57 to $59.59 on an IEA report that cut the forecasted demand for 2006. Next up, bonds staged an impressive rally without the help of any major economic data. The move pushed the yield on the 10-year down to 4.59% and back near the recent lows. And finally, market internals were solid as there were more than 1000 net advancing stocks on the session.
While none of these clues were enough to encourage the bulls to get moving on a sleepy Friday, they do provide us with what has to be considered an ongoing bullish backdrop. However, it is obvious that traders are going to need some sort of a catalyst if they are to push stocks to new highs from here.
Both teams are hoping that this week will provide the clues to support their arguments. With both the big inflation reports on tap, the bulls will be hoping to hear that inflation remains contained and does not present much of a threat going forward. In addition, the earnings numbers from the nation�s retailers will help provide a clue as to what the consumer is really thinking these days.
In looking ahead, we�ve got a full slate of economic data to review this week:
Tuesday � October Producer Price Index, Retail Sales, Business Inventories
Wednesday � Empire Manufacturing
Thursday � October CPI, Industrial Production, and Philly Fed Index
Friday � Housing Starts for November
The bears, of course, will be looking for signs of economic weakness in the manufacturing and housing sectors as well as price pressures that might lead to inflation concerns. Our furry friends might also be paying close attention to the inventory numbers tomorrow as any further buildup in inventories would be a sign that things are not all that rosy for manufacturers.
So, in sum, traders will be looking for direction this week and the data will likely provide the clues as to what direction things will go.
Turning to this morning, there is no economic data scheduled for release before the bell. In looking at the pre-market activity, is appears that Friday�s lackluster environment has spilled over as things are pretty quiet so far.
Running through the rest of the pre-game indicators, the major overseas markets are mixed with Asian markets finishing in the red while the European bourses are mostly green this morning. Gold futures are moving lower so far and are quoted at $622 right now. Crude futures are heading south again, with the latest quote showing oil down another $0.68 to $58.91. Interest rates are showing little movement this morning with the 2-year currently quoted at 4.75% while the 10-yr is trading with a yield of 4.60% 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 about 6 points, the S&Ps are down by a little more than a point, and the NASDAQ looks to be about 2 points below fair value at the moment.
Stocks �In Play� This Morning:
Best Buy (BBY) � Mentioned positively in Barron�s
New York Times (NYT) � Mentioned positively in Barron�s
Wynn Resorts (WYNN) � Mentioned positively in Barron�s
Whole Foods (WFMI) � Mentioned positively in Barron�s
UAL Corp (UAUA) � Chicago Tribune reports company considering going private
RF Microdevices (RFMD) � Upgraded at CIBC
United Parcel Service (UPS) � Citigroup initiates coverage with Buy
FedEx (FDX) � Citigroup initiates coverage with Buy
McDonalds (MCD) � Removed from Recommended List at Citigroup
Johnson & Johnson (JNJ) � Removed from Recommended List at Citigroup
Intel (INTC) � Added to Recommended List at Citigroup
General Electric (GE) � Added to Recommended List at Citigroup
Humana (HUM) � Added to Conviction Buy list at Goldman Sachs
Express Scripts (ESRX) � Upgraded at JP Morgan
Thermo Electron (TMO) � Upgraded at Lehman
LM Ericsson (ERIC) � Upgraded at RBC
Sandisk (SNDK) � Downgraded at UBS
Long positions in stocks mentioned: GS, JNJ, TMO, LEH
** 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.
Good Monday morning and welcome back. Stocks were modestly positive but basically little changed on Friday as investors may be wondering what will drive prices higher from here. The indices have indeed enjoyed a stellar move over the past three months without so much as even a modest pullback. However, with some resistance now forming overhead, the bulls may be searching for clues as to what the next catalyst might be.
There were some clues available during Friday�s session to support the bull case, however none of them seemed to trigger any enthusiasm. For example, crude oil plunged $1.57 to $59.59 on an IEA report that cut the forecasted demand for 2006. Next up, bonds staged an impressive rally without the help of any major economic data. The move pushed the yield on the 10-year down to 4.59% and back near the recent lows. And finally, market internals were solid as there were more than 1000 net advancing stocks on the session.
While none of these clues were enough to encourage the bulls to get moving on a sleepy Friday, they do provide us with what has to be considered an ongoing bullish backdrop. However, it is obvious that traders are going to need some sort of a catalyst if they are to push stocks to new highs from here.
Both teams are hoping that this week will provide the clues to support their arguments. With both the big inflation reports on tap, the bulls will be hoping to hear that inflation remains contained and does not present much of a threat going forward. In addition, the earnings numbers from the nation�s retailers will help provide a clue as to what the consumer is really thinking these days.
In looking ahead, we�ve got a full slate of economic data to review this week:
Tuesday � October Producer Price Index, Retail Sales, Business Inventories
Wednesday � Empire Manufacturing
Thursday � October CPI, Industrial Production, and Philly Fed Index
Friday � Housing Starts for November
The bears, of course, will be looking for signs of economic weakness in the manufacturing and housing sectors as well as price pressures that might lead to inflation concerns. Our furry friends might also be paying close attention to the inventory numbers tomorrow as any further buildup in inventories would be a sign that things are not all that rosy for manufacturers.
So, in sum, traders will be looking for direction this week and the data will likely provide the clues as to what direction things will go.
Turning to this morning, there is no economic data scheduled for release before the bell. In looking at the pre-market activity, is appears that Friday�s lackluster environment has spilled over as things are pretty quiet so far.
Running through the rest of the pre-game indicators, the major overseas markets are mixed with Asian markets finishing in the red while the European bourses are mostly green this morning. Gold futures are moving lower so far and are quoted at $622 right now. Crude futures are heading south again, with the latest quote showing oil down another $0.68 to $58.91. Interest rates are showing little movement this morning with the 2-year currently quoted at 4.75% while the 10-yr is trading with a yield of 4.60% 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 about 6 points, the S&Ps are down by a little more than a point, and the NASDAQ looks to be about 2 points below fair value at the moment.
Stocks �In Play� This Morning:
Best Buy (BBY) � Mentioned positively in Barron�s
New York Times (NYT) � Mentioned positively in Barron�s
Wynn Resorts (WYNN) � Mentioned positively in Barron�s
Whole Foods (WFMI) � Mentioned positively in Barron�s
UAL Corp (UAUA) � Chicago Tribune reports company considering going private
RF Microdevices (RFMD) � Upgraded at CIBC
United Parcel Service (UPS) � Citigroup initiates coverage with Buy
FedEx (FDX) � Citigroup initiates coverage with Buy
McDonalds (MCD) � Removed from Recommended List at Citigroup
Johnson & Johnson (JNJ) � Removed from Recommended List at Citigroup
Intel (INTC) � Added to Recommended List at Citigroup
General Electric (GE) � Added to Recommended List at Citigroup
Humana (HUM) � Added to Conviction Buy list at Goldman Sachs
Express Scripts (ESRX) � Upgraded at JP Morgan
Thermo Electron (TMO) � Upgraded at Lehman
LM Ericsson (ERIC) � Upgraded at RBC
Sandisk (SNDK) � Downgraded at UBS
Long positions in stocks mentioned: GS, JNJ, TMO, LEH
** 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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