Daily State of the Markets: Resistance: 7 Bulls: 0
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Good morning. Yes, it is true that the stocks appear to be picking up where they left off before the market mugging in Dubai. Yes, it is true that the indices got the final month of the year started off on the right foot with a triple-digit gain yesterday. And yes, it is true that it was economic data both here and overseas that put the bounce back in the bulls’ step on Tuesday.
However, our furry friends are quick to point out that after yesterday’s fun, the S&P 500 is once again right back where it stood on November 16th, 17th, 18th, 23rd, 24th, and 25th. And this, dear readers, is a splendid example of something chart technicians call ‘resistance.’ What’s more, unless the bulls can find a way to “break on through to the other side” in the very near future, the bears contend that the line in the sand the bulls currently face will quickly turn into something more on the order of the Berlin Wall.
While I don’t want to spend too much time this morning on what CNBC has dubbed ‘chartology,’ the glass-is-half-empty crowd has also been crowing a lot lately about the change in leadership, the negative divergences, and the overall decline in volume seen lately. And although all of the problems noted above could be easily rectified with a rip-roaring move to the upside accompanied by solid breadth and volume, we need to soberly recognize that the ‘issues’ presently being pointed to by the bear camp are usually present at important market tops.
Before you start throwing things or hurling insults at the very suggestion that this record breaking run for the roses might come to an end at some point, please allow me to clarify my point. We do not want to imply that the bulls are done and I can confirm that no one in our office has been seen printing up “the end is near” signs. No, we recognize that market moves usually go much farther than imaginable and in short, we fully expect this bull run to continue to impress – especially if the economy can perk up a bit and maybe produce a couple new jobs along the way.
However, we have also been around long enough to know what the telltale signs of trouble are. So, if you are looking for reasons to be worried, check out a chart of Goldman Sachs (GS), GE (GE), Bank of America (BAC), and the Russell 2000. All of the above were poster-children for the rebound that began on March 10th and all have been noticeably absent during the latest move the upside. Add to that the less than robust readings from some of our momentum models, and well, let’s just say that we’ll be watching things rather closely as the year draws to a close.
Before we got sidetracked, we mentioned that yesterday’s romp to the upside was sponsored by some solid economic data. And as has been the case throughout much of this year’s rally, the manufacturing data both here at home and in China was a key driver. Overnight we learned that China’s manufacturing sector expanded for the ninth straight month. And then the U.S. PMI confirmed a fourth straight month of growth in the sector. Add to that a sigh of relief over Dubai, improving overseas markets, and much better-than-expected report on Pending Home Sales and you have a recipe for success.
But, of course, the key question from here is if the bulls will stay stuck in the mud below resistance or find a way to break on through to the other side?
Turning to this morning, ADP reported that the private sector lost 169,000 jobs in November, which was 19K more than the consensus estimate for 150K. However, ADP notes that the trend continues to improve as November was the 8th straight month in which job losses were less than the month prior.
Running through the rest of the pre-game indicators, Asian markets were higher while European bourses are hovering around breakeven. Crude futures are lower with the latest quote showing oil trading down by $0.41 to $77.96. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.30%, while the yield on the 3-month T-Bill is currently at 0.05%. In addition, gold is up another $12.20 and the dollar is weaker against the Yen, Euro, and Pound. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a relatively flat open. The Dow futures are currently off by about 8 points; the S&P’s are down a fraction, while the NASDAQ looks to be about within a point of fair value at the moment.
Wall Street Research Summary
Upgrades:
# Sysco (SYY) – BB&T Capital Markets
# SunTrust Banks (STI) – Credit Suisse
# BB&T Corp (BBT) – Credit Suisse
# KB Home (KBH) – Credit Suisse
# MDC Holdings (MDC) – Credit Suisse
# Express Scripts (ESRX) – JP Morgan
# AMR Corp (AMR) – Morgan Stanley
# UAL Corp (UAUA) – Morgan Stanley
# Morgan Stanley (MS) – Estimates reduced at UBS
# JP Morgan (JPM) – Estimates reduced at UBS
# Citi (C) – Estimates reduced at UBS
# RF Micro Devices (RFMD) – USB
Downgrades:
# Mechel Steel (MTL) – Credit Suisse
# Constellation Brands (STZ) – Goldman
# Alaska Air (ALK) – Morgan Stanley
Long positions in stocks mentioned: ESRX, ALK
Best wishes for a pleasant day and until next time, “may the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
For more "top stock" portfolios and research, visit www.TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com 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 TopStockPortfolios 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. Stocks 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 our websites and TopStockPortfolios publications 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.
However, our furry friends are quick to point out that after yesterday’s fun, the S&P 500 is once again right back where it stood on November 16th, 17th, 18th, 23rd, 24th, and 25th. And this, dear readers, is a splendid example of something chart technicians call ‘resistance.’ What’s more, unless the bulls can find a way to “break on through to the other side” in the very near future, the bears contend that the line in the sand the bulls currently face will quickly turn into something more on the order of the Berlin Wall.
While I don’t want to spend too much time this morning on what CNBC has dubbed ‘chartology,’ the glass-is-half-empty crowd has also been crowing a lot lately about the change in leadership, the negative divergences, and the overall decline in volume seen lately. And although all of the problems noted above could be easily rectified with a rip-roaring move to the upside accompanied by solid breadth and volume, we need to soberly recognize that the ‘issues’ presently being pointed to by the bear camp are usually present at important market tops.
Before you start throwing things or hurling insults at the very suggestion that this record breaking run for the roses might come to an end at some point, please allow me to clarify my point. We do not want to imply that the bulls are done and I can confirm that no one in our office has been seen printing up “the end is near” signs. No, we recognize that market moves usually go much farther than imaginable and in short, we fully expect this bull run to continue to impress – especially if the economy can perk up a bit and maybe produce a couple new jobs along the way.
However, we have also been around long enough to know what the telltale signs of trouble are. So, if you are looking for reasons to be worried, check out a chart of Goldman Sachs (GS), GE (GE), Bank of America (BAC), and the Russell 2000. All of the above were poster-children for the rebound that began on March 10th and all have been noticeably absent during the latest move the upside. Add to that the less than robust readings from some of our momentum models, and well, let’s just say that we’ll be watching things rather closely as the year draws to a close.
Before we got sidetracked, we mentioned that yesterday’s romp to the upside was sponsored by some solid economic data. And as has been the case throughout much of this year’s rally, the manufacturing data both here at home and in China was a key driver. Overnight we learned that China’s manufacturing sector expanded for the ninth straight month. And then the U.S. PMI confirmed a fourth straight month of growth in the sector. Add to that a sigh of relief over Dubai, improving overseas markets, and much better-than-expected report on Pending Home Sales and you have a recipe for success.
But, of course, the key question from here is if the bulls will stay stuck in the mud below resistance or find a way to break on through to the other side?
Turning to this morning, ADP reported that the private sector lost 169,000 jobs in November, which was 19K more than the consensus estimate for 150K. However, ADP notes that the trend continues to improve as November was the 8th straight month in which job losses were less than the month prior.
Running through the rest of the pre-game indicators, Asian markets were higher while European bourses are hovering around breakeven. Crude futures are lower with the latest quote showing oil trading down by $0.41 to $77.96. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.30%, while the yield on the 3-month T-Bill is currently at 0.05%. In addition, gold is up another $12.20 and the dollar is weaker against the Yen, Euro, and Pound. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a relatively flat open. The Dow futures are currently off by about 8 points; the S&P’s are down a fraction, while the NASDAQ looks to be about within a point of fair value at the moment.
Wall Street Research Summary
Upgrades:
# Sysco (SYY) – BB&T Capital Markets
# SunTrust Banks (STI) – Credit Suisse
# BB&T Corp (BBT) – Credit Suisse
# KB Home (KBH) – Credit Suisse
# MDC Holdings (MDC) – Credit Suisse
# Express Scripts (ESRX) – JP Morgan
# AMR Corp (AMR) – Morgan Stanley
# UAL Corp (UAUA) – Morgan Stanley
# Morgan Stanley (MS) – Estimates reduced at UBS
# JP Morgan (JPM) – Estimates reduced at UBS
# Citi (C) – Estimates reduced at UBS
# RF Micro Devices (RFMD) – USB
Downgrades:
# Mechel Steel (MTL) – Credit Suisse
# Constellation Brands (STZ) – Goldman
# Alaska Air (ALK) – Morgan Stanley
Long positions in stocks mentioned: ESRX, ALK
Best wishes for a pleasant day and until next time, “may the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
For more "top stock" portfolios and research, visit www.TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com 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 TopStockPortfolios 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. Stocks 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 our websites and TopStockPortfolios publications 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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