Time For The Implosion?

Sign Up to Receive an Email Alert when "Daily State of the Markets" is Published

 

Good morning. To hear the bears tell it, we should expect the stock market to embark on the long-awaited implosion process. The argument anxiously provided by our furry friends this morning is that all is lost in Europe with yields on Italian debt now over 7%. Now toss in a situation in Greece that just won't ever go away and Team Merkozy's talk yesterday of a "new Eurozone" (which presumably kicks out the PIGI'S), and well, the glass-is-at-least-half-empty gang just doesn't see any way forward.

To be sure there are some disconcerting facts to deal with here. For example, Italy is the world's third largest debtor nation (care to guess who number one is?). And then there is the fact that the Italian bond market is the biggest in Europe. Next, with yields soaring to the levels that prompted three of the PIGI's to seek help from the EU/ECB/IMF, it is easy to be unnerved by the action in Italy's bond market. And finally, we should keep in mind that up until now, Italy has been considered both "too big to fail" and "too big to bail" (bail out, that is).

Traders around the world voted with their feet yesterday as the term "risk off" may be the understatement of the month so far. The major indices got smacked around pretty hard and the action on the charts turned ugly in a hurry. And with important support just below at 1220, the thinking is that the market is one bad headline from returning to that now-familiar trading range.

While I don't want to be accused of being a perma-bull, I do have one nagging question that I'd like to bring up this morning - so here goes. Is any of the "stuff" that is happening in Italy really a surprise? I mean seriously, did anyone not see this coming?

The key point is this. I will submit that while global leaders can certainly be accused of consistently being behind the curve on the European debt crisis, they, at some point, must have considered the possibility that the contagion would eventually spread to Italy and then perhaps to Spain.

Of course, this is not to say that the powers-that-be in Europe can do much to stop the crisis from spreading. However, I would like to point out that before the EU went all-out on their "comprehensive plan" there was a fair amount of talk about the "coordinated response bazooka" that could be wielded by the world's central bankers. So, while things may be allowed to get ugly for a while, it might be worth considering that the global leaders could actually do a wee bit more - if they have to.

Is this in and of itself a reason to be outright bullish? Uh, no. However, it also might be a reason to keep from positioning your portfolio for the European implosion that the bears keep going on about. And yes, I could certainly be dead wrong here. But, I AM just saying...

Turning to this morning... Markets have improved a bit on the relatively successful T-Bill auction in Italy.

On the Economic Front... Initial Claims for Unemployment Insurance for the week ending 11/5 fell by 10,000 to 390K. This was below the consensus estimate for 400K and better than last week’s revised total of 400k (from 397K). Continuing Claims for the week ending 10/20 came in at 3.615M vs. 3.690M and last week’s 3.707M.

Thought for the day... “A clever person solves a problem. A wise person avoids it.” - Albert Einstein

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell...

• Major Foreign Markets:
  • Australia: -2.24%
    
  • Shanghai: -1.80%
    
  • Hong Kong: -5.25%
    
  • Japan: -2.91%
    
  • France: +0.55%
    
  • Germany: +1.11%
    
  • Italy: +2.41%
    
  • Spain: +0.32%
    
  • London: +0.50%
  
  
• Crude Oil Futures: +$1.80 to $97.54
  
• Gold: -$16.30 to $1775.30
  
• Dollar: higher against the Yen, lower vs. Euro and Pound
  
• 10-Year Bond Yield: Currently trading at 2.045%
  
• Stock Futures Ahead of Open in U.S. (relative to fair value):
  • S&P 500: +18.90
    
  • Dow Jones Industrial Average: +125
    
  • NASDAQ Composite: +28.95

 

Remember, you are in control your email alerts! You can receive alerts for more than 25 free research report alerts including: The “10.0” Report, The Insiders Report, ETF Leaders Report, and The Focus List.

 

 

The opinions and forecasts expressed are those of David Moenning, founder of StateoftheMarkets.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 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