Daily State of the Markets 
Tuesday Morning – September 14, 2010  

We’ve been saying for what seems like an eternity now that the market has been trapped in a trading range due to the uncertainty of the macroeconomic outlook. But after eight gains in the last nine days, during which time the bulls have romped to the tune of more than 530 Dow points, the key question that traders have to be asking themselves is if the bulls are ready to break on through to the other side of the range.

Yesterday’s edition of the bulls’ joyride to the upside was sponsored by a handful of better-than-expected economic reports out of China, the EU upping its estimate for GDP growth in the region, and the report out of Basel, the global banking committee, on the new capital requirements, which came in a little lenient side. So, armed with a handful of surprise positives, the bulls were able to push the S&P 500 back to within spitting distance of the August highs.

However, it is important to note that despite the bulls’ heroics over the past nine days; none of the major indices have yet been able to escape from the trading range jail. And while the S&P 500 and the S&P 400 Midcap indices currently appear to be sitting on the doorstep of the Promised Land, we should also point out that the other major indices (DJIA, NASDAQ, and Russell 2000) still have a fair amount of work to do in order to have a shot at the all-important breakout.

The bears argue that since the trading range that has been intact for this long, the bulls will need some sort of a catalyst to break on through. And frankly, it is hard to argue with this line of thinking as the news has been the primary driver of the action for quite some time. However, the bulls contend that with earnings coming in above expectations, valuations in decent shape, and the funeral for the economy having been called off, there is some upside potential left in this run.

The bottom line sports fans, is that we’ve now got a ballgame on our hands and it will be very interesting to see if the bulls have enough in the tank to break through. What makes things even tougher for the bull camp is the fact that the high percentage trade at this stage would be to fade the current rally from the short side. After all, the market has been up eight of the last nine days, is up 5% to 7% so far this month, is overbought, and into resistance. Thus, traders know that a pullback is likely in the near-term. Unless, of course, the bulls can find a catalyst to make a break for it.

Turning to this morning… things are failry quiet so far as European markets are waffling around breakeven and the futures here in the U.S. are pointing modestly lower.

On the economic front… The Commerce Department reported that Retail Sales rose in the month of August by +0.4%. This was above the consensus for +0.3%. When you strip out the sales of autos, sales were up nicely at +0.6%, which was double the consensus for an increase of +0.3%.

Finally, make every effort to enjoy your day…

Pre-Game Indicators

Here are the important indicators we review each morning before the opening bell…

  • Major Foreign Markets:
    • Australia: +0.32%
    • Shanghai: +0.01%
    • Hong Kong: +0.17%
    • Japan: -0.24%
    • France: +0.09%
    • Germany: -0.06%
    • London: -0.17%

     

  • Crude Oil Futures: – $0.29 to $76.90
  • Gold: + $13.40 to $1260.50
  • Dollar: higher against the Yen, Euro and Pound
  • 10-Year Bond Yield: Currently trading lower at 2.717%

     

  • Stocks Futures Ahead of Open in U.S. (relative to fair value): 
    • S&P 500: -1.80
    • Dow Jones Industrial Average: -6
    • NASDAQ Composite: -2.37  

Wall Street Research Summary

Upgrades:

Medicis (MRX) – BofA/Merrill Total (TOT) – ING Financial

Downgrades:

Entergy (ETR) – BofA/Merrill WW Grainger (GWW) – FBR Capital Campbell Soup (CPB) – Goldman Sachs Impax Labs (IPXL) – Jefferies FirstEnergy (FE) – Jefferies Windstream (WIN) – Morgan Stanley Newell Rubbermaid (NWL) – Morgan Stanley Teradyne (TER) – Oppenheimer Kulicke & Soffa (KLIC) – Oppenheimer Salesforce.com (CRM) – Oppenheimer Red Hat (RHT) – Oppenheimer TIBCO Software (TIBX) – Oppenheimer Corning (GLW) – Estimates reduced at RBC Capital Exxon Mobil (XOM) – RBC Capital Research In Motion (RIMM) – Mentioned cautiously at William Blair

Long positions in stocks mentioned: IPXL, RHT

For more “top stock” portfolios and research, visit TopStockPortfolios.com

 

The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com 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.

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