David Moenning's Daily State of the Markets: 12/29

Looking Ahead Brings Questions

As the year draws to a close, money managers everywhere are anxiously awaiting the opportunity to hit the reset button and begin the 2009 edition of the game with a fresh slate. However, in looking ahead there seems to be far more questions than answers these days.

For example, probably the biggest question managers are wrestling with at the moment is if we’ve seen the worst from the credit debacle or if something like commercial real estate will become the next big problem needing to be solved. And while the market has been going sideways for more than two months, it is likely that investors will need to get a handle on the Madoff damage and believe that we won’t see any more big surprises in hedge-fund-land before any serious buying returns.

Speaking of blowups and questions, will there be any other industries that suddenly and without warning need tens of billions of dollars in order to stay afloat for a couple of months? Will China lead us out of this global recession or will new problems in Europe cause the slowdown to worsen? And finally, will the upcoming earnings season be as abysmal as projected or will investors be able to locate some pockets of strength?

Shorter-term, as the saying goes, since Santa failed to call, will there be problems at the corner of Broad and Wall going into the New Year? And with the end of this year now measured in hours, will we see window dressing or undressing into the close of 2008?

On the subject of what to expect this week, the bottom line is the market will be susceptible to both news and the direction in which the programs are run. It is obvious that trading will be extremely thin as traders rest up and get ready to toe the line for the start of the new race next week.

However, we can say that it was a modest positive that the major indices enjoyed the traditional pre and post-Christmas strength. Yet at the same time, while the two-day bump helped improve the mood, it did little to affect the status of the charts.

In looking more closely at the charts, we can also say that it is a positive that stocks are now becoming oversold on a short-term basis and that the major indices appear to be sitting at some sort of a support zone. However, the bulls will likely need some sort of a trigger to get the anticipated trading rally started. Otherwise, a quick trip down to the bottom of the trading range can’t be ruled out.

Turning to this morning, oil is up more than $2.45 and gold is surging by $15 in response to Israel’s attacks in Gaza, but that’s about it on the news front as there is no economic data scheduled to be released today.

Running through the rest of the pre-game indicators, the major overseas markets are higher across the board. Crude futures are up with the latest quote showing oil futures trading higher by $2.47 to $40.18. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.12%, the yield on the 3-month T-Bill is at 0.005%, and overnight LIBOR is at 0.14%. And finally, with about 60 minutes before the bell, stock futures in the U.S. are now pointing to a modestly higher open. The Dow futures are currently ahead by about 25 points; the S&P’s are about even, while the NASDAQ looks to be about 5 points above fair value at the moment.

Stocks “In Play” This Morning:

News, Upgrades/Downgrades/Brokerage Research:

Honeywell (NYSE: HON) – Downgraded at Argus Research
Charter Communications (Nasdaq: CHTR) – Downgraded at Citi
FPL Group (NYSE: FPL) – Downgraded at UBS
Standard Pacific (NYSE: SPF) – Upgraded at UBS

Disclosure: Mr. Moenning and/or related firms hold long positions in: none

Note: All earnings reports compared to Reuter’s consensus estimates

** For More of David Moenning’s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopGunsTrading.com

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.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 of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

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