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Daily State of the Markets From where I sit, perhaps the most important question stock market investors need to ask on a day like Friday is if the action really counts. The question becomes even more interesting when the boys and their toys slam the market to the tune of nearly 100 points in the final few minutes of the session when everyone else is already on their way home, at the beach, or on the golf course. Clearly, Friday’s late-day dive was a program driven event that was designed to make money solely for those pulling the trigger on the trade. And clearly the computers don’t care about technical matters such as important support zones or moving averages. So, again, I have to ask if the resulting action of a program trade designed to execute a whole bunch of orders in a very short period of should be taken seriously. The answer, of course, is yes and no. If Friday’s computer-related losses cause investors to come in on Monday morning (or in this case, Tuesday morning) and either begin or continue to “de-risk” their portfolios as a result, I guess it counts. However, for those of you that like to use charts as your guide in making investing decisions, the answer is no. In short, I think even the most ardent technicians will agree that an age-old trading rule may apply here: A breakout isn’t a breakout if you are the one breaking it out. After a very volatile week and a long holiday weekend on the horizon, Friday’s session was supposed to be a sleepy day which gained or lost a few points. And that was exactly the way the day was shaping up. Well, until the tape bombs started, that is. Frankly, traders didn’t seem to care much about the Personal Income and Spending report. And the modest signs of slowing in the pace of growth from the Chicago Purchasing Managers Index also didn’t create much of a stir. But, the minute the North Koreans started using words like “on the brink of all out war,” the fun started. And then just about the time investors figured out that Kim Il Jong seemed to be stuck in the 1960’s with his accusations and ridiculous saber rattling, Fitch decided to lob another news flash into the mix with a downgrade of Spain’s sovereign debt from AAA to AA+. Although this move was long overdue and very much expected, the news, when coupled with a long weekend, provided entirely too much temptation for the high frequency trading types late in the day. But today is another day and it will be very interesting to see which side of this morning’s issue investors decide to take. Turning to this morning… it looks like Friday’s selloff will indeed count as stock futures and global markets are pointing lower on the back of weaker than expected PMI reports out of China, the Eurozone, and France. On the economic front here at home, we don’t have any data to reveiw before the opening bell, but we will get reports on May ISM Manufacturing and Construction Spending at 10:00 am and the Dallas Fed Manufacturing Activity at 10:30 am eastern. Finally, we wish you all the best today… Pre-Game Indicators Here are the important indicators we review each morning before the opening bell…
Wall Street Research Summary Upgrades: |
AOL (AOL) – Upgraded at Benchmark Boeing (BA) – Bernstein Newfield Exploration (NFX) – Goldman Sachs Noble Energy (NBL) – Goldman Sachs Camden Property (CPT) – Goldman Sachs Federal Realty Investment (FRT) – Goldman Sachs Las Vegas Sands (LVS) – Janney Capital Genzyme (GENZ) – JPMorgan Nasdaq OMX Group (NDAQ) – Keefe, Bruyette & Woods Priceline.com (PCLN) – KeyBanc CSX Corp (CSX) – Morgan Keegan Norfolk Southern (NSC) – Morgan Keegan Union Pacific (UNP) – Morgan Keegan Macy’s (M) – Morgan Stanley Apple (AAPL) – Estimates and target increased at UBS
Downgrades:
Quicksilver Resources (KWK) – Goldman Sachs Cinemark Holdings (CNK) – Janney Capital Regal Entertainment (RGC) – Janney Capital Gaylord Entertainment (GET) – Janney Capital Boyd Gaming (BYD) – Janney Capital Goodrich (GR) – Oppenheimer
Long positions in stocks mentioned: AAPL
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