Good Morning. This time the bears refused to be run over. This time, after a quick 50-point swing upwards in the S&P 500, the short-sellers were rewarded for selling into some resistance. This time, the good economic news (the NFIB Small Business Index hit the second highest level since December 2007) was ignored. And this time, there may actually be a question as to which way the next move in the stock market is going to go.

To be fair, the bears have had a rough go of it this year, so they probably deserve a day or two in the sun. In short, all of those deep-thinking macro doom-and-gloomers haven't been rewarded for their negativity. Once again, hedge funds are dramatically underperforming the S&P 500. This was the group who were so sure that the sequester debate would lead to disaster, that the economy was in trouble, that Europe was going to actually implode this year, that the slowdown in China was going to tank the global economy, and that the new highs in the stock market, which were driven by "monetary meth," would certainly give way to the next great bear market.

Instead of another debacle, our furry friends in the bear camp have been tortured almost daily for six straight months as the market indices have marched merrily higher in the face of all those concerns. While I may contend that investors have shunned bonds, commodities, and the emerging markets, leaving only the U.S. stock market as a viable alternative, those in the glass-is-half-empty camp contend that the rally in stocks has been all about "hopium" and the money being created by the central bankers of the world on a daily basis.

I might also contend that the upward mobility in the stock market since mid-November has been based on the idea that there isn't another calamity on the horizon and that the U.S. economy may have finally turned the corner. While the term "escape velocity" hasn't been used by the Fed and the economy isn't exactly hitting on all cylinders at the moment, there is little doubt that housing is on a roll and that the jobs market is improving. And the bottom line is that with these to areas on the rise, as long as rates and inflation remain low, stocks are the place to be.

However, everybody knows that all good things come to an end. In addition, everybody in this business knows that Wall Street has a tendency to overdo just about everything it ever does. As such, one must always be on the lookout for when the music stops and the trend changes directions.

Although I am not suggesting that the end is nigh or that we are on the precipice of the next bear market. However, I am willing to recognize that the game has been rather lopsided of late and that it rarely stays that way for long. Therefore, it is probably a good idea to be on the lookout for something that could trigger an extended run for the bears.

While stocks have not broken down and we rate the current short-term trend as neutral, there are a handful of issues cropping up that could give the bears an edge at some point soon. Japan is one example. The move in the yen, the Japanese Government Bonds and the country's stock market has been swift. And since the moves have all been driven by central bank intervention, there is room for disappointment here.

Next up there is Europe. Yes, again. Don't look know but Greece got smoked yesterday on the usual fears. More importantly, there are concerns that Germany's high court may muck up the works by declaring the ECB's bazooka (which isn't even in existence yet) unconstitutional. Oh, and if you had your t.v. on yesterday, you undoubtedly saw the violence that continues to erupt in Turkey (and for the record, yes, I am aware of the fact that half of Turkey lies in Asia).

Then there was the scare in Georgia yesterday that got people's attention for a bit. There was the intraday spike in oil that could be a concern if it continues. And finally, there is the ongoing tie-up between the movement in the yen and the stock market.

So, while yesterday's triple-digit loss in the stock market may not be something to run and hide over, we do have to recognize that some of these issues may be enough for the bears to capitalize on at some point. As such, we're keeping our eyes open and will be watching the important support zones closely.

Publishing Note: I have early commitments on Thursday/Friday and will publish morning commentaries as time permits.

Turning to this morning... Improved sentiment in Europe has U.S. stock futures rebounding this morning. Better than expected Industrial Production numbers as well as expectations that Germany's high court will defer any decision on the constitutionality of the OMT until after the elections in September are being cited as the key drivers behind the bounce in Europe and U.S. futures.

Pre-Game Indicators

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

Major Foreign Markets:
- Shanghai: closed
- Hong Kong: closed
- Japan: -0.21%
- Germany: +0.04%
- France: +0.48%
- Italy: +0.11%
- Spain: +1.74%
- London: +0.27%

Crude Oil Futures: +$0.19 to $95.57

Gold: +$0.50 to $1377.50

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

10-Year Bond Yield: Currently trading at 2.198%

Stock Futures Ahead of Open in U.S. (relative to fair value):
- S&P 500: +10.89
- Dow Jones Industrial Average: +99
- NASDAQ Composite: +18.76

Thought For The Day...

The less you know, the more you believe. -Bono

Positions in stocks mentioned: none

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. The opinions and forecasts expressed are those of the editor 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.

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