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Daily State of the Markets To listen to an Audio Version of the report, click on the Play button below: |
Good morning. After the best July in 20 years and the biggest 5-month gain for the stock market since 1938, it is safe to say that investors are hopeful about the future right now. Of course, the bears will quickly point out that this is likely to be false hope as a double-dip recession is being projected by the glass-is-half-empty crowd. But with earnings coming in largely better than expected and the cold, hard numbers suggesting that the recession is ending, being hopeful appears to be the way to play the game – well, for now, anyway.
How else do you explain the lack of any pullback worth mentioning over the last three weeks, during which the S&P has popped 13%. To be sure, the news has not been all peaches and cream during this time and the earnings numbers haven’t been universally stellar. However, the real story behind the numbers right now is experienced investors know that the time to get back into the game (or return to a fully invested position) is BEFORE the government announces that the recession is over. So, although the bandwagon might be getting a bit crowded at the present time, hope is where it’s at right now.
A weekly chart of the S&P 500 really tells the whole story. For the past 9 months, stocks have basically been attempting to find a bottom after the waterfall/panic decline seen last fall. And except for the dive sponsored by the fear of Financial Armageddon from January through early March, stocks had been going sideways – until two weeks ago, that is. At that time, stocks broke on through to the other side and haven’t looked back since.
S&P 500 Weekly
So, you can call it fund manager buying as the pros fear being left behind the S&P 500 come bonus time, or investors becoming more hopeful, or whatever you’d like, but there is no denying the fact that the bulls are once again on a roll. And if history is any kind of guide, except for the requisite pullbacks, it looks like our heroes in horns might have some more work to do before the fun in the sun is over this summer.
Why all the big picture yammering this fine Monday morning, you ask? Because it is the big picture that kept stocks levitated at the end of the week last week. There really wasn’t any big news that kept the bears completely and totally stymied. In fact, the economic data that came out on Friday was mixed. Thus, the driver behind the market in the short-term would appear to be the big picture scenario.
Don’t get me wrong. Stocks are overbought and overdo for a pullback. However, as I’m guessing is the case among the fund manager crowd these days, we’d probably continue to use any pullback as a buying opportunity for a while yet.
Turning to this morning, we don’t have any economic data to review before the bell but we will get the ISM Manufacturing and US Construction data at 10:00 am eastern.
Running through the rest of the pre-game indicators, with the exception of Japan, which was down a smidge, the major overseas markets are higher across the board. Crude futures are moving up with the latest quote showing oil trading higher by $1.47 to $70.92. On the interest rate front, we’ve got the yield on the 10-yr trading lower at 3.58%, while the yield on the 3-month T-Bill is trading at 0.17%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 75 points; the S&P’s are up by about 10 points, while the NASDAQ looks to be about 19 points above fair value at the moment.
Don’t forget, ego is the enemy… and until next time, “may the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
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