We're In A News-Driven Market -- So What Happened Tuesday?

Daily State of the Markets  
Wednesday Morning – March 9, 2011

Good morning. I have been saying for a week or so now that we’re smack in the middle of a news-driven market. This basically explains the volatility and the manic depressive behaviour seen recently as stocks tend to be up one day and then down the next. However, the only problem with this assessment is that the news really didn’t drive the market on Tuesday.

I’m sure you too saw all of the reports yesterday suggesting that stocks were higher in response to a decline in oil prices. However, with oil closing down a whopping $0.42 to $105.02, it is hard to get too fired up about the idea that it was this bit of “news” that drove the Dow up 124 points. And I do understand that Brent crude was down more, but again, this is hardly the stuff from which celebrations are born.

I know, I know… there was the news from Bank of America (BAC) where CEO Brian Moynihan had good things to say about the future. And then there was the report out of China that the powers-that-be may have rolled back the reserve requirements for certain banks (which would be an indication that the Chinese might not be dumb enough to completely kill the Chinese economy with their tightening campaign after all). And yes, there was the news relating to the possible postponement of the news fees for the credit card companies. Oh, and there was the rumour du jour that Gadhafi was stepping down.

However, none of the above really justifies the nearly complete reversal of Monday’s dance to the downside. The bulls could be heard arguing that it is the fourth successful test of the 1305 area on the S&P that we should be paying attention to. But then again, our furry friends in the bear camp are quick to point out that the overhead resistance remains solidly in place.

So, if it wasn’t the news that drove the action on Tuesday, what was it? While I can clearly be accused of “just spitballin’ here,” I’m of the mind that we might be seeing some foreshadowing of good things to come.

Here’s my thinking (and please note that I reserve the right to retract this idea upon a moment’s notice if proven wrong, because, remember, this game isn’t about being right!). The bears have had more than a couple opportunities to swing the momentum to their side of the field lately. But, with the market trading in a relatively tight range, you’ve got to admit that the glass-is-half-empty crowd hasn’t been able to do much with their opportunity.

Next up, my hunch is that if traders truly believed that the Libyan situation was going to have an impact on the global economy, or that there was going to be serious problems in Saudi Arabia later this week, then we might be seeing the S&P trade down to the 1280 zone right about now. Remember, the battle cry amongst the fast-money traders is “panic first and ask question later.” But instead, the bulls appear to be holding up pretty well as the S&P is currently just -1.6% from its recent high.

Finally, most technicians understand that a market tends to exit a consolidation pattern heading in the same direction it was moving when it entered the pattern. So, unless the bears can get their act together tout suite, I’m going to assume that every trader who has ever read “Technical Analysis for Dummies” will soon be looking for a breakout to pile onto.

Turning to this morning… Stock futures are a little above fair value as the risk trade seems to be waning a bit of late. In the news this morning, we have Libyan officials flying to Cairo carrying a message from Gadhafi, a less-than inspiring auction in Portugal, and mixed foreign markets.

On the Economic front… We don’t have any economic data to review before the bell, but we will get the report on Wholesale Inventories at 10:00 am eastern.

Thought for the day: Consider raising your expectations. As Michelangelo said, the danger is not that your hopes are too high, but rather…

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell…

 

Major Foreign Markets:

  • Australia: -0.80%
  • Shanghai: +0.11%
  • Hong Kong: +0.42%
  • Japan: +0.61%
  • France: +0.22%
  • Germany: +0.33%
  • London: -0.28%

 

Crude Oil Futures: +$0.17 to $105.19 Gold: +$9.10 to $1436.30 Dollar: higher against the Yen, lower vs. Euro and Pound 10-Year Bond Yield: Currently trading at 3.529   Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: -0.30 Dow Jones Industrial Average: +9 NASDAQ Composite: -2.8 

Wall Street Research Summary

Upgrades:  

Johnson Controls (JCI) – Barclays Cheniere Energy Partners (CQP) – Citi Ensco PLC (ESV) – Credit Suisse Tyson Foods (TSN) – Deutsche Bank Tractor Supply (TSCO) – RW Baird Zions Bancorp (ZION) – Stifel Nicolaus Forest Oil (FST) – Susquehanna 

Downgrades:  

United Natural Foods (UNFI) – Argus Mosaic (MOS) – Citi Potash (POT) – Citi FedEx (FDX) – Estimates reduced at JPMorgan Canadian Pacific (CP) – Estimates reduced at JPMorgan Kansas City Southern (KSU) – Estimates reduced at JPMorgan Continental Resources (CLR) – Morgan Keegan Whiting Petroleum (WLL) – Morgan Keegan Robert Half (RHI) – Morgan Stanley 

Long positions in stocks mentioned: KSU

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.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.