Daily State of the Markets
Friday Morning – April 8, 2011
While I don’t want to appear as if I am beating a dead horse, Thursday was likely another day of disappointment for anyone leaning toward the dark side. Yes, it is true that the indices did all finish in the red for a change. And it is also true that the action did get a little ugly there for a while mid-morning. However, even the most ardent bears will have to admit that a drop of 17 Dow points isn’t anything to write home about and that things just don’t seem to be going their way right now.
While I am a card-carrying member of the glass-is-at-least-half-full club and you may find it hard to believe, I actually do have friends that regularly reside in the bear camp. At least two of my colleagues take great delight in shorting the market at a moment’s notice using options and/or futures. However, these guys tend to keep their bearish bent on a short leash and like to take profits “Chicago style” (early and often). Thus, despite one’s outlook of the world, it is important to recognise that there are many ways to skin a cat in this business.
For example, the group I will term the “functional bears” – I.E. the guys and gals that may have gold, canned goods, and a shotgun locked in a basement safe but yet are still able to trade with the best of them on a daily basis – can do alright for themselves even in this type of environment. The trick, I’m told, to being profitable when playing from the short side is to “pick your spots, hit it hard, and then run like the wind with profits when you have them.” And while this isn’t exactly my cup of tea, it may have been exactly what was happening on Thursday.
Just before 10:30am Eastern Time, the shorts “hit it” and they did indeed hit it hard. While it took a few minutes to get the headline that another earthquake had struck Japan’s northeastern coast, it was obvious that something was up besides the usual defence of the S&P 1340 line in the sand. So, before you could remember how to spell Fukushima Dai-ichi, the Dow had plunged 100 points. But as we got word that (a) this earthquake was near the areas already devastated, (b) that there was no further damage to nuclear plants, and (c) that the tsunami warning was a false alarm, the “functional bears” reeled in their profits in a hurry.
While the bears did try to get something going a couple more times during the session, it appears that the good news relating to the nation’s retailers and the weekly jobless claims kept the Negative Nancy’s from making any progress with their efforts to push prices out of the teeny tiny range that has developed recently. And despite the much anticipated rate hike by the ECB, the likelihood of a government shutdown here at home, and some trepidation in front of the upcoming earnings season, we’ve got to say the end result wasn’t half bad.
Speaking of things that aren’t half bad, I think we’ve also got to recognise that, so far at least, this week’s little consolidation certainly fits into this category. As we’ve been saying, the bears have had the table set with an overbought condition and a spike in bullish sentiment. And yet, despite their opportunities, each day has been a bit of a disappointment for any bears looking to do something besides take profits “Chicago style.”
Turning to this morning… Traders are in an upbeat mood as a sigh-of-relief rally has taken hold in the overseas markets. However, with a gov’t shutdown looming and the start of the earnings parade on the horizon, we wouldn’t be terribly surprised to see stocks stick close to the recent range.
On the Economic front… There is no economic data to review before the bell this morning. However, we will get a report on Wholesale Inventories at 8:00 am eastern.
Thought for the day: Best of luck on this Friday and be sure to enjoy the weekend!
Here are the Pre-Market indicators we review each morning before the opening bell…
- Major Foreign Markets: Australia: +0.62% Shanghai: +0.74% Hong Kong: +0.47% Japan: +1.85% France: +0.95% Germany: +0.57% London: +0.90%
- Australia: +0.62%
- Shanghai: +0.74%
- Hong Kong: +0.47%
- Japan: +1.85%
- France: +0.95%
- Germany: +0.57%
- London: +0.90%
- Crude Oil Futures: +$1.30 (May contract) to $111.60
- Gold: +$13.20 to $1473.20
- Dollar: lower against the Yen, Euro and Pound
- 10-Year Bond Yield: Currently trading at 3.609%
- Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: +5.89 Dow Jones Industrial Average: +52 NASDAQ Composite: +8.19
- S&P 500: +5.89
- Dow Jones Industrial Average: +52
- NASDAQ Composite: +8.19
Wall Street Research Summary
Pier 1 Imports (PIR) – BB&T Capital Cooper Companies (COO) – Estimates and target increased at BMO CVS Caremark (CVS) – BMO Capital Baker Hughes (BHI) – Credit Suisse BJ’s Wholesale (BJ) – Goldman Sachs Parametric Technoloty (PTC) – Jefferies Qualcomm (QCOM) – MKM Partners Williams-Sonoma (WSM) – Oppenheimer Alliance Data (ADS) – Target increased at RBC Capital Immunogen (IMGN) – RBC Capital Downgrades: Target (TGT) – BAC/ML DeVRY (DV) – BAC/ML Strayer Education (STRA) – BAC/ML Masimo (MASI) – BMO Capital Bally Technologies (BYI) – Credit Suisse Costco (COST) – Goldman Sachs Safeway (SWY) – Goldman Sachs SunPower (SPWRA) – JMP Securities Clorox (CLX) – JPMorgan Long positions in stocks mentioned: none For more “top stock” portfolios and research, visit TopStockPortfolios.com The opinions and forecasts expressed herein are those of Mr. David Moenning 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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment. Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided. The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed. The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer. Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice. Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.