Bulls, Bears (and Cubbies)

Daily State of the Markets 
Tuesday Morning – January 11, 2011  

Having spent the better part of my life in the Chicago area, I grew up rooting for “da Bears”, “da Bulls”, and of course, “the Cubbies.” But with the exception of “da Bulls'” impressive run in the 1990’s, I’m here to tell you that rooting for the hometown heroes proved challenging over the years. Perhaps it was my first experience as a baseball fan that set the tone. The year was 1969 and the Cubs were on a roll. Well, right up until the time things started falling apart at the seams that is. (And okay, I guess I’m old enough now to admit that the Mets were playing some decent ball at the time as well.)

Needless to say, life as a Cubs fan is torturous. I won’t bore you with the endless string of disappointments – you know whose legs the ball rolled under and the name of the fan who simply wanted a souvenir. And frankly, with the exception of the one glorious year that involved the “Super Bowl Shuffle,” some guys named “Dicka”, “Fridge” and “Sweetness,” rooting for “da Bears” hasn’t been easy at times either.

It is for this reason that most Chicagoans likely failed to enjoy the first three-peat “da Bulls” put together in the early 1990’s. You see, being a Chicago sports fan meant continuously bracing for heartbreak. And with the referees giving the conspiracy-theory crowd a reason to be each and every visit to New York, well, most fans were probably just waiting for the fun to abruptly end at every turn during the reign of Jordan, Pippen, and Jackson.

I know, I know, what on earth does this have to do with the stock market, you ask? It’s simple really. Watching this market is a lot like trying to enjoy “da Bears” during 1985 and “da Bulls” in their first two championship seasons. Instead of watching in awe as a simply dominant team rolled over their opponents and enjoying the ride, investors these days are too busy trying to figure out when their beloved Cubbies are going to collapse again.

Make no mistake about it; someday this glorious bull run in the stock market WILL end. However, based on the action we’ve seen recently, that “someday” doesn’t appear to be now. Sure, stocks could and probably should pull back in the near term. Frankly, this may be what we’re seeing now (after all, sideways might be the “new down”). And there is certainly a possibility that Wednesday’s auction in Portugal and/or the Thursday auctions in Spain and Italy could initiate a corrective phase.

But as I wish someone had told me back in 1985 and again during the early days of the bulls dynasty, we’re watching a simply dominant performance by the stock market bulls right now. So, instead of fretting about what might trigger the next little wiggle and giggle to the downside, it is probably better to understand the true nature of the team. In other words, this is a bull market – enjoy it.

Putting the sports metaphors aside, the bears once again had a pretty decent setup on Monday. There was the overhang from Friday’s Jobs report, the worry in Europe as CDS spreads lept higher, and China’s trade surplus well below expectations. So, with France and Germany pleading with Portugal to admit they have a problem and three very big sovereign debt auctions coming up, it would not have been surprising to see the buyers stand aside and for the bears to do their thing. But after opening down big, the Dow finished down just 37 points while the Russell, NASDAQ, and Midcap indices all erased early losses and finished with healthy green numbers.

So, until the buyers decide to stop doing their thing, we should recognize that this is a healthy stock market and that while pullbacks are normal, we ought to give these bulls the benefit of the doubt for a while longer.

Turning to this morning… Stock futures are following European bourses higher this morning after a decent T-Bill auction in Greece and word that the Japanese will lend a hand to the Eurozone via bond purchases.

On the Economic front… There is nothing on the economic calendar before the bell this morning but we will get Wholesale Inventories at 10:00 eastern.

Thought for the day: Choose to have a mind that is open to anything and everything…

Pre-Game Indicators

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

• Major Foreign Markets:
  • Australia: -0.08%
  • Shanghai: +0.47%
  • Hong Kong: +0.99%
  • Japan: -0.29%
  • France: +0.96%
  • Germany: +0.77%
  • London: +1.20%

   

• Crude Oil Futures: + $0.91 to $88.98
• Gold: + $2.00 to $1370.90
• Dollar: lower against the Yen, higher vs Pound and Euro
• 10-Year Bond Yield: Currently trading at 3.310%

   

• Stocks Futures Ahead of Open in U.S. (relative to fair value): 
  • S&P 500: +5.10
  • Dow Jones Industrial Average: +53
  • NASDAQ Composite: +9.25

Wall Street Research Summary

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