Posted |
Isn't It Odd That... image

Although the S&P 500 and Dow Jones Industrial Average indices enjoyed pretty good gains Wednesday and finished at fresh all-time highs, the rest of the major indices failed to join the party. And the NASDAQ, NASDAQ 100, and Microcap indexes actually finished lower.

To be sure this was somewhat odd behavior on a day that was supposed to reflect the great cheer created by the Republicans trouncing their opponents in the midterm elections and retaking control of the Senate for the first time in 8 years.

The lackluster performance reminds me of the old Wall Street saw which suggests that a market that doesn't rally on good news could be in trouble. But wait, the S&P did rally. So, this is a little odd.

Digging deeper into yesterday's action , it was also odd to see some of the social media darlings such as LinkedIn (NASDAQ: LNKD) take a hit and for some big names in the NASDAQ 100 (NASDAQ: QQQ) such as Intel (NASDAQ: INTC), Google (NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN) to struggle on a day that was expected to be a sea of green on the screens.

Also odd is the leadership being displayed by some of the traditionally defensive sectors. For example...

Consumer Staples Sector SPDR (NYSE: XLP) - Daily

View Larger Image

Consumer Staples, which normally lead when the market is in trouble, are blasting higher at the present time with the chart looking like tech in the late 1990's.

So, is this action indicative of concern about the state of the market on the part of money managers? Is this the reluctant long play? Or are the valuations simply compelling at current levels? In any event, it is indeed odd to see Consumer Staples ripping to new highs as the major indices struggle to reach The Promised Land.

Along those lines, it is odder still to see the normally staid Utilities sector rocketing higher here.

Utilities Sector SPDR (NYSE: XLU) - Daily

View Larger Image

The bears contend that the recent leadership seen in the Staples and Utilities sectors is a harbinger of bad things to come. Our furry friends suggest that defensive leadership is not healthy action and that another meaningful decline is on the horizon.

However, it should be noted that the profitability of many utility companies is tied to energy prices. So with oil diving the lowest level in years, it isn't exactly surprising to see momentum-oriented traders bopping into the utility space for a trade.

The Takeaway

So let's review. The bears tried to implement the "sell the fact" trade yesterday on the Republican win but were only mildly successful - and only in certain areas. Then the current sector leadership is clearly defensive - all during what appears to be a fairly strong period for stocks. Thus, the takeaway is that things are just a little bit odd these days. And since the market has been a roller coaster ride of late, this is probably not a good time to be asleep at the switch.

Turning To This Morning

All eyes are on Mario Draghi this morning as the ECB President hosts the post meeting press conference beginning at 8:30 am eastern. So far we know that the ECB has left rates unchanged and there has been no mention of a QE program. We also learned that the ECB's inner circle did not call Draghi on the carpet for his so-called secretive behavior during the meeting. In addition, Draghi says the ECB's Governing Council is unanimously supportive of using "unconventional measures" and that covered bond purchases will soon begin. Finally, Draghi notes that the economic data coming in for the Eurozone indicates that growth momentum is clearly weakening and that the risks to the outlook are to the downside. All the talk about the ECB taking action has turned things around in Europe as well as here at home as U.S. stock futures now point to a stronger open.

Pre-Game Indicators

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

Major Foreign Markets:
    Japan: -0.86%
    Hong Kong: -0.20%
    Shanghai: +0.28%
    London: +0.47%
    Germany: +1.32%
    France: +1.56%
    Italy: +1.30%
    Spain: +1.33%

Crude Oil Futures: -$0.49 to $78.19

Gold: -$1.20 at $1144.50

Dollar: higher against the yen and pound, lower vs. euro

10-Year Bond Yield: Currently trading at 2.337%

Stock Indices in U.S. (relative to fair value):
    S&P 500: +3.78
    Dow Jones Industrial Average: +43
    NASDAQ Composite: +7.00

Thought For The Day:

Fear makes the wolf bigger than he is. -German proverb

Important Reminder: In order to keep pace with our growth, better serve our advisors and clients, and to provide scale for future growth, Heritage is teaming up with CONCERT Global - an SEC Registered Investment Advisor with more than $2 Billion in assets under management. CONCERT will provide more robust back-office, compliance, technology, and trading infrastructure. Client packets to make the transition will be arriving in the coming weeks.

Positions in securities mentioned: None

Wishing you green screens and all the best for a great day,

David D. Moenning
President, Chief Investment Officer
Heritage Capital Research
Check Out the NEW Website!

Investment Advisory Services Offered Through CONCERT Wealth Management, Inc. An SEC Registered Investment Advisor


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 is for informational purposes only. No part of the material presented in this report 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.

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.

David D. Moenning, an advisor representative of CONCERT Wealth Management Inc. (CONCERT), is founder of Heritage Capital Advisors LLC, a legal business entity doing business as Heritage Capital Research (Heritage). Advisory services are offered through CONCERT Wealth Management, Inc., an SEC registered investment advisor. For a complete description of investment risks, fees and services review the CONCERT firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting Heritage or CONCERT.

Mr. Moenning is also the owner of Heritage Capital Management (HCM) a state-registered investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Neither HCM, Heritage, or CONCERT is registered as a broker-dealer.

Employees and affiliates of Heritage and HCM 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 Heritage/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.