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Daily State of the Markets Good Morning. Let’s start this morning with a couple questions. First, are we having fun yet? And second, is this headline/rumor/HFT-driven, up-one-minute-down-the-next market environment ever going to end? As to the first question, if you are one of the multi-billion dollar banks or hedge funds that utilizes high-frequency-trading in your day-to-day operations, I’m guessing the answer is yes. But if not, well, the answer is likely a resounding no. And as for the second question, the answer is probably best found in another question: Will EU leaders find a solution before or after a major European bank fails? I don’t know about you, but I am growing weary of the incessant headlines, opinions, comments, observations, and/or rumors that drive the market up and down hundreds of points in a matter of minutes these days. In short, it is becoming increasingly difficult to do any sort of analysis or implement any kind of portfolio strategy when you know that some newspaper is going to publish a story in the last forty-five minutes of the day that will create a hysterical response. As we were discussing what to do about a handful of “open” positions in a portfolio yesterday afternoon, the situation became almost laughable. We came to the conclusion that with the ECB meeting on Thursday and then the EU summit concluding on Friday, the only real way to make a decision about whether or not to add a position was to guess. We decided that we needed to guess not only what the ECB would do and whether or not that would be “enough” for the market, but also what was going to come out of a meeting between no fewer than 27 countries. To lighten the mood, I said that I had the perfect solution. I held up my hand to signal that the conversation should stop and ran to my desk drawer where I proceeded to dig around until I finally found it – my lucky Peso (I keep this to remind me of my trip to Mexico after the country had experienced some “issues” with their currency a decade or two back). Without hesitating and with a straight face, I announced “Heads we buy, tails we sell.” Although the little stunt proved only mildly amusing, what was about to happen really got the group going. You see, at 3:47 pm eastern time, a headline hit: “G-20 Mulls IMF Lending Program for Europe.” And the one line that accompanied the headline read, “Nikkei reports that the G20 is preparing a $600B lending facility at the IMF to support the European debt crisis.” And before you could figure out where you’d heard that number before, stocks were roaring higher. Never mind the fact that there was no source or that this was basically a retread of a recent rumor (which was also sans source but from a European newspaper). Nope, the computers didn’t care – and within minutes the Dow had leapt 135 points. Oh, by the way, the IMF quickly denied the rumor (via CNBC) and as you might suspect, the market took a quick dive into the close. So… My point this morning is relatively simple. Until this manic/depressive market environment ends, you may need to keep your lucky Peso close at hand because trying to figure out what a market that has changed directions 10 times in four months (and by my calculations, the market changed directions only 9 times in all of 2009) is going to do next requires some serious guesswork. Kidding aside and gun to the head: Assuming Thursday or Friday doesn’t contain any new surprise, it looks like stocks want to go higher. However, these days you can’t be too sure of much besides the fact that the next rumor will create a fairly volatile response. Turning to this morning… All eyes are on the ECB as the central bank has announced a second consecutive cut of 0.25% in its benchmark interest rates. Traders will now be listening intently for other measures the ECB plans to take in order to improve banking liquidity in the Eurozone. On the Economic front… Initial Claims for Unemployment Insurance for the week ending 12/3 fell by 24,000 to 381K which was below the consensus estimate for 396K and also last week’s revised total of 404k. Continuing Claims for the week ending 11/26 came in at 3.583M vs. consensus of 3.700M and last week’s 3.757M. In addition, we will get the Bloomberg Consumer Comfort Index at 9:45 am eastern and Wholesale Inventories at 10:00. Thought for the day… Learn to trust in an idea whose time has come… Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell…
Positions in stocks mentioned: None For more of Mr. Moenning’s thoughts and research, visit StateoftheMarkets.com The opinions and forecasts expressed herein are those of Mr. David Moenning 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 StateoftheMarkets.com 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. One should always consult an investment professional before making any investment. Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided. The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed. The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer. Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice. Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results. |
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