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Daily State of the Markets Good morning. After it became clear that the Mario Draghi was not going to let the Eurozone implode this summer and that the U.S. economy was not going to plunge into recession, investors began to look ahead. And what they saw wasn’t half bad. They saw corporate America with a boatload of cash and decent earnings. They saw the housing market starting to show signs of improvement. They saw the consumer starting to regain some confidence. And they saw Ben Bernanke readying his printing press again. So, is it any wonder that the major indices hit new bull-market highs in mid-September? However, since then things have gotten a little sloppy. And in some areas such as big-cap tech, things have gotten a lot sloppy. No scratch that, a quick glance at the NASDAQ Composite or the semiconductor index reveals that things have gotten downright u-g-l-y there. For those of you keeping score at home, the semiconductor index has dropped -10.3% from its summer high point and the NASDAQ has given back -6.07% since 9/14, while the S&P is off -3.6% as of yesterday’s close. The problem is simple as the environment has changed. Optimism about the future is out and the worries have returned. Tuesday was a perfect example of this as the DJIA was shellacked for a loss of 243 points – without the benefit of that big headline or data point that the bears love to capitalize on. Sure, there were some pretty crummy earnings reports from the likes of DuPont (DD) and United Parcel (UPS). And yes, the futures did react negatively when these numbers came in below expectations. But from my perch, it was clear that Tuesday was all about the worry of what might happen next. It started with the debate. Although the average American (myself included) really isn’t qualified to comment or even comprehend much of this nation’s foreign policies, the President made a point to talk about “sequestrations” and his quest to raise taxes. And with Mr. Obama not falling on his face this time, the debate brought out worries about the ‘Fiscal Cliff’ as well as the potential for increases in the tax rates on incomes, capital gains, and dividends. The bottom line here is if you want people to sell stocks, just tell them that they can get a break on their taxes by doing it now instead of next year. Next up, Moody’s realized that there was something that they had not yet downgraded and got straight to work. The ratings agency cut the credit rating on five of Spain’s regions. While this may cause you to roll your eyes or perhaps yawn in response, the key is that this, along with the renewed bickering between what is now being referred to as “Merde” (As a quick sidebar, first there was Merkozy, then Merkollande, and now just “Merde.” And in case you don’t remember your high school french, type the word into Google and you may get a giggle or two out of the shortcut to the names of the leaders of Germany and France.) has caused some investors to worry that the Euro-mess could reignite at any time if rates start rising in Spain. Oh wait… This brings us back to Tuesday’s earnings releases. After watching the current parade of corporate reports, the question that comes to mind is if any company in the U.S. is ever going to exceed revenue estimates again. And if you want something to create more worry regarding the outlook for future earnings, weakening revenue growth is your ticket. And finally, we have the report that, according to some of his close friends, Ben Bernanke is growing tired of mounting up his trusted white steed and saving America’s hind quarters every other year or so. As such, it looks like “Gentle Ben” isn’t interested in sticking around when his term expires in January 2014. This, of course, creates the worry about what will happen to the economy if someone at the Fed isn’t keeping rates at all-time lows or dropping money out of a helicopter. So there you have it; a potpourri of worries, if you will. Worries ranging from Spain, to the election, to earnings, to economic growth, and now… even to the Fed. Ughh. It’s enough to make even us optimistic sorts start buying some SH, SDS, and/or SPXU. Turning to this morning… The economic data overnight was mixed as China’s Flash PMI was better than expected while Europe’s were below concensus expectations. However, the earnings parade has shown some bright spots as the reports from both Facebook and Boeing were well received. As a result, stock futures in the U.S. are pointing to a rebound at the open. On the Economic front… We will get the reports on Flash PMI in the U.S., New Home Sales, and FHFA Housing this morning. And lest we forget, the FOMC announcement is due out at 2:15 pm today. Thought for the day… “Being ignorant is not so much a shame, as being unwilling to learn.” — Benjamin Franklin Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell… !========>
Positions in stocks mentioned: SPXU Follow Me on Twitter: @StateDave!========> Download our Special Report on our New “Adaptive” Active Risk Management System for the Stock Market 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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