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Daily State of the Markets At this time of year, it is very easy to lose sight of the market drivers. Between the shopping, the gatherings, spending time with family, and the weekend skiing (it is dumping in Colorado right now) last week’s stock market action can seem like a million miles away come Monday morning. So, while the bulls may just keep on keepin’ on with the Santa Rally this week, let’s take a moment to review. From where I sit, the bottom line appears to be that once again the bears had a case for much of last week and once again, they couldn’t do anything with it. So, whether you want to blame it on the calendar, the asset allocators, the hedgies, or fund buying, we must recognize that the bulls continue to retain possession of the ball and appear to be playing a ground-control game at the present time. Yes, yes, I recognize that stocks are overbought and that sentiment is fairly upbeat at the present time. However, it is important to remember that while such conditions almost always accompany declines in stock prices, the condition itself is rarely the cause of the decline. No, the market usually needs some sort of a trigger to start moving from one direction to another. To hear the bears tell it, they’ve been able to produce just such a trigger (or two) lately; it’s just that no one seems to care right now. A five-notch downgrade of Ireland – not a problem, say the bulls. Lloyd’s announcing that they are going to take a big hit because of Irish holdings – no worries. The IMF saying that Ireland’s economic condition faces “big risks” – come on, that’s yesterday’s news. Our furry friends suggest that this environment of simply ignoring all the bad news that’s out there is definitely going to come home to roost at some point. And I’m hearing a lot of chatter about the calendar change creating an ugly scene in a couple of weeks. But on the other sideline, the bull camp is adamant that they are not ignoring the bad news. Their point is two-fold. First, our heroes in horns suggest that there is a lot of good stuff happening right now in QE2, better economic data, the M&A activity, rising corporate profits, support for Europe, the signing of the tax bill (which, according to the glass-is-at-least-half-full crowd, will all but guarantee that we can add an extra point or so onto U.S. GDP next year). etc. And second, the bull camp reminds us that the “bad news” that’s out there isn’t new. As such, market participants have had ample time to noodle on the various scenarios and plan accordingly. It is this last point that tends to rile the bear team as one of my favorite Wall Street-isms is brought up rather quickly: “Things don’t matter until they do and then they matter a lot.” The Negative Nancy’s insist that issues such as the European debt mess, the rise in rates, and/or inflation will cause traders to sit up and take notice at some point soon. So, upon further review, it would appear that the bulls are winning the argument at the present time and are likely to continue to run their plays until the defense proves they can stop them. And while we could easily see a pullback at any time for just about any reason, so far at least, the bear defense looks a little weak. Turning to this morning… Word that North Korea won’t retaliate to the South’s military drills is providing some relief in the early going and U.S. futures are following European bourses modestly higher. On the economic front… There is nothing on the economic calendar today here in the U.S. Thought for the day: Try doing something nice for someone today (for no reason at all)… Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell…
Wall Street Research Summary Upgrades: |
CME Group (CME) – BofA/Merrill Huntington Bancshares (HBAN) – BofA/Merrill Post Properties (PPS) – Barclays Patriot Coal (PCX) – FBR Capital CONSOL Energy (CNX) – FBR Capital NetApp (NTAP) – Stifel Nicolaus
Downgrades:
MannKind (MNKD) – BofA/Merrill BMO Financial (BMO) – Barclays Fiserv (FISV) – RW Baird Sunstone Hotel (SHO) – RW Baird American Express (AXP) – Stifel Nicolaus Iridium Communications (IRDM) – Stifel Nicolaus
Long positions in stocks mentioned: none
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