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Daily State of the Markets For weeks now, the stock market has been a one-way street. Any and all dips have been bought as traders focus on the idea that the economy here in the U.S. may be improving faster than had been anticipated a few short months ago. Couple this with the Fed remaining steadfastly “on the case” and just about everybody and their grandmother suggesting that the U.S. stock market is “THE” place to be in 2011, and well, the bulls have been able to just keep on keepin’ on. But on the other side of the aisle, our furry friends in the bear camp are becoming adamant that this happy-go-lucky stock market environment simply CANNOT! continue. Maybe it’s the overbought condition that, with the exception of a couple weeks in November, has been intact since September 1st. Perhaps it is the fact that the S&P has now stormed higher to the tune of 86% since March 9, 2009 (oh, and the bears also like to remind us that average bull market since 1900 has gained 81.2%). Maybe it is the sentiment data, which, by any and all measures, is now red-lining. And maybe, just maybe, it is the idea that trees don’t grow directly to the sky. In any event, the frustrated souls in the bear camp remain convinced that their day in the sun is near and that the grotesque pain they’ve endured is quickly coming to an end. And after two – count ’em, two – down days, during which time the Dow has fallen a grand total of 48 points (or about -0.4%), perhaps our furry friends have a point. Although the dip-buyers were active on Friday, it does feel like change may be in the air. Stocks initially declined on Friday in response to the weaker-than-expected jobs report, uninspiring testimony from Mr. Bernanke (who may have been talking his QE2 book), and some bad news for the banks from Massachusetts. However, just about the time you might have been convinced to buy some SDS just to be on the safe side, the buyers returned and the bears were seen walking away, mumbling under their breath. Make no mistake about it; at some point, perhaps very soon, this game will indeed change. We’ve seen this type of joyride to the upside before and generally speaking something usually comes out of the woodwork to change the thinking and to cause the buyers to stand down for a while. Maybe it will be another of the PIGI’S finally asking for help (word is that France and Germany were pressuring Portugal to admit they have a problem over the weekend). Maybe it will be a rally in the dollar, the return of inflation, or another soft patch in the economic data. Regardless of the reason, we are fairly confident that something will crop up to turn the tables – at least for a little while. From a technical perspective, we do see some signs of weakness cropping up. There are some divergences developing and the momentum of the market is indeed waning. So, while there is no reason to change the game plan at the present time, it might be best to lean a little toward the cautious side – just in case the game doesn’t go on forever. Turning to this morning… It appears that the bears may be attracting a following this morning as concerns regarding peripheral Europe are driving world markets lower. More specifically, the problems in Portugal may be reaching a boiling point. So, with Portugese officials this morning saying “We don’t need aid” (anybody heard that one before?) and a big auction in Portugal scheduled for Wednesday, this issue might come to a head in the next couple days. As such, futures are pointing down at the present time. On the Economic front… There is nothing on the economic calendar at all today. Thought for the day: Just for fun, try smiling at everyone you meet today… Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell…
Wall Street Research Summary Upgrades: |
Adobe Systems (ADBE) – BofA/Merrill Taleo (TLEO) – BofA/Merrill Lear Corp (LEA) – Barclays Blue Nile (NILE) – Benchmark Co. Constellation Brands (STZ) – Added to short-term buy at Deutsche Bank Dow Chemical (DOW) – Goldman Sachs PPG Industries (PPG) – Goldman Sachs Sherwin-Williams (SHW) – Goldman Sachs, Morgan Stanley Parker-Hannifin (PH) – Goldman Sachs Target (TGT) – Goldman Sachs Emerson (EMR) – Goldman Sachs Novellus (NVLS) – Morgan Stanley RF Micro Devices (RFMD) – Target increased at Oppenheimer BP (BP) – Target increased at Oppenheimer General Electric (GE) – UBS Warnarco Group (WRC) – Wells Fargo
Check Point Software (CHKP) – BofA/Merrill Symantec (SYMC) – BofA/Merrill Valero Energy (VLO) – Barclays Exxon Mobil (XOM) – Barclays Frontier Oil (FTO) – Barclays Career Education (CECO) – Barclays Corinthian Colleges (COCO) – Barclays PG&E (PCG) – Citi Edison (EIX) – Citi KB Home (KBH) – Credit Suisse BorgWarner (BWA) – Credit Suisse Radio Shack (RSH) – Credit Suisse Canadian Pacific (CP) – Removed from Conviction Buy at Goldman Dover Corp (DOV) – Removed from Conviction Buy at Goldman Parexel (PRXL) – Goldman Sachs Compass Minerals (CMP) – Goldman Sachs Roper Industries (ROP) – Goldman Sachs Pentair (PNR) – Goldman Sachs Wal-Mart (WMT) – Goldman Sachs Zoran (ZRAN) – JPMorgan Praxair (PX) – Morgan Stanley Cablevision (CVC) – Morgan Stanley BJ’s Wholesale (BJ) – UBS
Long positions in stocks mentioned: None
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