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Daily State of the Markets Good Morning. By now I’m sure you are aware of the fact that the S&P’s 12% gain in the first quarter was the best Q1 of any year since 1998. And by now I’m guessing that you are also well aware that just about everyone on the planet is looking for a pullback, a consolidation, a correction, or even a “sloppy” phase to set in. After all everybody knows trees don’t grow to the sky and as any bear will undoubtedly attest, that is exactly what appears to be happening at the present time. To review, Q1’s joyride to the upside was caused by several factors. First and foremost, the funeral for the Eurozone was cancelled after “Super Mario’s” LTRO programs flooded the European banking system with liquidity. And while the glass-is-always-at-least-half-empty crowd is still watching every word coming out of Spain these days – in anticipation of the crisis being reignited, of course – stock traders have moved on. Moved on to economic data here at home that has been largely better than expected, that is. Then there is fact that it looks like the entire hedge fund industry got caught leaning the wrong way as the year began. As such, professional managers of all colors, shapes and sizes have been buying every dip that has come along this year. And then lest we forget, the bulls have been able to play both sides of any and all data releases this year as Mr. Bernanke appears to stand ready, willing, and able to drop even more money from the Fed’s helicopter in order to keep the U.S. out of a deflationary cycle and bring the unemployment rate down. Therefore, the bulls have been able to celebrate any and all good news as good news and bad news as being supportive of more Fed assistance. Can you say “win/win”? However, while our furry friends have been completely shut out of the game this year, they do seem to be making some noise lately about what appears to be a slowdown in China. Although the Chinese stock market is still sporting a green number on the year, the action since the latest PMI reports and all the talk of political unrest has been rather ugly. Thus, the “growth slowing” crowd has been pointing to China and suggesting that now is the time for all traders to take some profits and rethink the current theme. However, there are a couple of points that the bear camp may need to be reminded of. First, it is vital to remember that Ms. Market can do any darn thing she wants for as long as she wants. We are merely players in HER game. Thus, I find it interesting to note that since the Credit Crisis Bear ended on March 9, 2009, there have been three major rallies. The first one went 13 weeks before stumbling over a four-week corrective phase, which led to another 26-week rally into early 2010 before the bears could put something together. Then came the first go-round with Europe. This was followed by the QE2 rally, which lasted 25 weeks before stocks fell for at least 4 weeks. And then the current rally has been running for about 18 weeks. So, as you can see, the bulls certainly have some time left on the possession clock. And finally, there is a chance that the jobs market may turn out to be better than anyone is expecting. On Sunday, the Wall Street Journal ran a “Heard On The Street” column, which dug into the way the jobs data is collected. And the bottom line appears to be that yep, you guessed it, the number of jobs being created could actually be better than we realize. According to the Journal, “The jobs data come from a monthly Labor Department payroll survey of nearly 6% of U.S. employers–a big statistical slice of the total job market that usually does a good job of capturing the ups and downs of employment.” But there seems to be one fairly large problem. The Journal’s Justin Lahart writes, “The flaw in the payroll survey is that it only polls established firms, and so misses employment gains at the very young companies that have historically fueled U.S. job growth.” And Mr. Lahart opines that this little glitch has meant that the Labor Dept. stats tend to understate growth during economic rebounds. Mr. Lahart goes on to suggest that this may mean that more jobs are being created than we realize. This, if it turns out to be true, will bring to new meaning to the phrase “better than expected.” Turning to this morning… Stock futures started the overnight sessin in fine fashion on the back of the better than expected PMI report out of China. However, the PMI’s from the Eurozone have been a drag on markets everywhere as the index contracted for the eight consecutive month and highlights the economic difficulty seen across the pond. On the Economic front… We will get reports on ISM Manufacturing and Construction Spending at 10:00 am eastern. Look for the markets to react to the ISM data. Thought for the day… Do you think to say “thank you” for the good things that happen each day? Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell… !========>
Positions in stocks mentioned: none For more of Mr. Moenning’s thoughts and research, visit StateoftheMarkets.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 StateoftheMarkets.com 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. One 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. !========> |
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