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Daily State of the Markets Good Morning. There are times when the phrase “market logic” is clearly an oxymoron. Such is the case when stocks rally furiously after bad economic news based on the idea that the negative data means more economic hand-holding from the Federal Reserve. And yet there are other times when the drivers behind the stock market’s moves are blatantly obvious and easy to understand. Lately we’ve seen a little of both as hopes for more Global QE have certainly driven stock prices at times this year and then on days like yesterday, it was pretty darn easy to understand what was going on. If you will recall, stocks rallied relentlessly from late-December through April 2nd on the idea that maybe the sky wasn’t going to fall after all across the pond and that things were actually better than expected here in the good ‘ol USofA. Thus, it became clear that BTE trumped all the hand wringing and fretting about what should, could or would happen next to any number of European countries. And then when “Super Mario” hatched up his grand plan (aka the LTRO offerings) to provide liquidity to the European banks, well, things started to look downright peachy – especially here at home. Recently though (as in yesterday morning) the S&P 500 has started look a little wobbly (and yes, that is a technical term). But I guess after the best start to a year in ages, some sloppiness, some profit taking, or a period of consolidation was certainly to be expected. And this appears to be exactly what we’ve got. Stocks are wobbling but they have yet to fall down. And yet at the same time, the U.S. market is clearly the place to be this year. To make this point come alive, compare and contrast the charts of the SPY and the DIA to their European brethren such as EWI (Italy), EWP (Spain), EWQ (France), and/or EZU (the EU) over the past six months. Now take a quick gander at the charts of EEM (emerging markets), FXI (China) and EPI (India) versus our markets. This little exercise should make it perfectly clear that the U.S. has indeed been the global leader this year. Sure there are some obscure winners around the globe such as VNM (Vietnam), but the bottom line is that global investors have had a pretty tough time beating the good ‘ol SPY. But I digress (shocking, I know). The point here is that yesterday’s action in the stock market was fairly straightforward. As my uber-bearish buddy tried to tell me yesterday (I seriously couldn’t take the call), the sea of red seen on all sides of the Atlantic was due to Europe. If one listens to the growling market grizzlies, the French election, the problem with the gov’t in Belgium, the news that Spain was officially in recession, the really lousy PMI data from the Eurozone, France, and Germany, and Italy’s bond yields are going to be a problem for us soon. At the outset yesterday morning, this certainly looked like a distinct possibility. The European markets had tanked in earnest after the PMI numbers stunk up the joint. And with France, Germany, et al down around 3%, it looked like things might get really ugly, really fast on this side of the pond. So, a drop of 180 points on the Dow wasn’t terribly surprising. And with Apple (AAPL) on the ropes yet again, well, things weren’t looking good. However, while the S&P did indeed wobble a bit, the bears were not able to push any of the indices down through important support. And until they do I guess we’ll need to view the U.S. as a “weebles” market because, as everybody knows, weebles wobble but they don’t fall down. Turning to this morning… Stock markets in Europe are rebounding a bit this morning as Spain and Italy held debt auctions that weren’t a disaster. In addition there is a fair amount of earnings news, economic data, the FOMC’s 2-day meeting, and of course Apple after the bell today. On the Economic front… We will get reports on Case-Shiller Home Prices, Consumer Confidence, New Homes Sales, and FHFA Housing later this morning. Thought for the day… Remember to say hello when opportunity knocks… Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell…
Positions in stocks mentioned: AAPL, SPY, EEM 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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