Daily State of the Markets 
Monday Morning – August 31, 2009  

Although Intel (INTC) provided tech with a much needed boost and the economic news wasn’t half bad, the bottom line is nobody seemed to care on Friday. And with the Labor Day holiday being late this year, we can probably expect more of the same this week. So, looking ahead, there is a decent chance you may find yourself occasionally tapping on your screen to make sure the thing is still on.

Once again, the bears had an opening on Friday. And once again they didn’t do anything with it. By lunchtime, the glass-is-half-empty crowd could be heard telling us that the market should be rallying on the Intel news and the fact that the Dow had given up its gains and was now down 80 points meant things might get ugly in a hurry.

While the Intel news did indeed provide the indices with a boost out of the box Friday morning, the University of Michigan’s Consumer Confidence index gave the bullishly inclined a reason to pause. It wasn’t that the number was bad, because the index actually did come in above expectations with a reading of 65.7 vs. 64.0. However, a quick glance at the chart of the index made it clear that the August reading was actually below July’s, which gave the bears yet another reason to bring up the topic of a less-than robust recovery.

Before long, the early gains were gone and the bulls were running for cover. But, unfortunately for anyone doing some shorting ahead of the much anticipated decline, the bears didn’t seem to have any support. Or, viewed another way, the dip buyers came in at the low of the day and did their thing.

In any event, the indices wound up little changed and as we’ve mentioned a time or two lately, it’s beginning to feel like déjà vu all over again as the sideways action is reminiscent of what we saw in early June – right before the most meaningful pullback of this bull market. So, while the pressure seems to be on the bears right now to do something with this overbought environment, the bulls would prefer not to see a repeat of the June swoon.

Speaking of swoons, don’t look now but September starts on Tuesday. And we probably don’t need to remind you that this is not only the market’s worst performing month from an historical standpoint, but also the month that Lehman’s fall from grace started a panic, the likes of which we hadn’t seen in a very long time.

So, while things could wind up being quiet this week as traders finish up their vacations, given the calendar and the jobs report due out on Friday, you may want to keep your seatbelt securely fastened.

Turning to this morning, we don’t have any economic news before the bell but another big dive in Shanghai (-6.74%) along with a rise in the Yen in response to the Democratic Party’s sweeping victory in Japan (a rising yen hurts Japanese exporters) has the major markets around the world seeing red in the early going.

Running through the rest of the pre-game indicators, the major overseas markets are lower across the board. Crude futures are moving lower with the latest quote showing oil trading down by $1.80 to $70.94. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.44%, while the yield on the 3-month T-Bill is trading at 0.14%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 66 points; the S&P’s are down about 8 points, while the NASDAQ also looks to be about 12 points below fair value at the moment.

Upgrades/Downgrades/Brokerage Research:

Morgan Stanley (MS) – Downgraded at BofA/Merrill EchoStar (SATS) – Removed from Top Picks Live list at Citi Cablevision (CVC) – Added to Top Picks Live list at Citi Frontline (FRO) – Upgraded at FBR Capital GameStop (GME) – Upgraded to Conviction Buy at Goldman Chicago Bridge (CBI) – Upgraded at JP Morgan Shaw Group (SGR) – Downgraded at JP Morgan Boeing (BA) – Downgraded at Macquarie Research Visa (V) – Estimates increased at Piper Jaffray Toronto-Dominion Bank (TD) – Upgraded at RBC Capital Varian Medical (VAR) – Upgraded at RW Baird Genzyme (GENZ) – Downgraded at RW Baird XL Capital (XL) – Target increased at UBS MBIA (MBI) – Target increased at UBS Coca-Cola FEMSA (KOF) – Downgraded at UBS Carnival Corp (CCL) – Target increased at Wells Fargo Royal Caribbean (RCL) – Target increased at Wells Fargo

Long positions in stocks mentioned: MS, V

Try doing something nice for someone today (for no reason at all) and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

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


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