It's been quite a roller coaster ride on Wall Street lately. Since the dog days of July (7/24/14 to be exact) the S&P 500 has been on a wild ride. In a period of just a little more than three months, the venerable stock market index has experienced a pullback of -4.35 percent, a rally of +5.74 percent, a scary decline of -9.84 percent, and a stampede to the upside which totaled +11.2 percent (so far) from the intraday low of October 15.

And as the chart below illustrates, with the exception of a couple weeks in early September, all the moves have been one-way affairs. In other words, stocks have been either moving straight up or straight down for the better part of three-plus months now.

S&P 500 - Daily

View Larger Image

So, after blasting higher over the past three weeks, it is safe to say that the stock market finds itself overbought and the bulls in need of a rest. In short, what investors have seen over the past two days is just that; a rest, a pause (that refreshes?), the start of a pullback, or what we like to call a sloppy period.

Although the bears have not been able to get anything to speak of going to the downside (yet?), this isn't to say they haven't tried. And on Tuesday, our furry friends actually had something to work with.

Cue The Next Crisis?

The day started out well enough. The bulls got some good news as St. Louis Fed President James Bullard, flip-flopped his position on the state of the economy, saying that there is "no need for more QE for now, the economy is in good shape." This after saying 14 days ago that the Fed should consider delaying the end of QEIII.

Then something came out of the blue (as it usually does these days) to cause traders to begin to worry, to fret, and perhaps to fear that the next crisis may be upon us. But in this case, it is really just a return of an old crisis - the European debt debacle.

Citing sources inside the ECB, Reuters reported that central bankers plan to challenge ECB President Draghi over his secretive management style and erratic communications. The story implied the Draghi had gone rogue in Jackson Hole and had gone against the plan the ECB Board of Governors had agreed upon.

Reuters suggested further that as the ECB has moved into more unconventional territory with regard to policy considerations, Draghi has acted increasingly on his own or with only the counsel of a few aides. In other words, the report indicated that Draghi may be challenged at the next ECB meeting.

Why Should We Worry About Draghi?

In short, the key thing to understand is the stock market HATES uncertainty. And if the ECB governors aren't all rowing in the same direction - especially on the topic of QE - then a lot of uncertainty could creep into the mix VERY fast.

Remember, one of the key reasons behind the recent joyride to the upside in stocks is the fact that first Japan announced a big bump in its QE program and then, at some point in the future, it is assumed that the ECB will be joining in the QE game and printing new money that would need to find a home. And given that the ECB isn't known for swift action to begin with, the fact that there could be infighting (or worse) at the ECB could certainly create uncertainty about the very launch of a QE initiative.

Then there is the state of the Eurozone economy. Just yesterday morning the European Commission had downgraded their forecast for economic growth in 2014 and 2015 with several projections getting uncomfortably close to the zero-line.

The point here is that if the ECB is no longer united in their stance toward aiding the economies of Europe, then the economic future of the Euro area is clearly uncertain. And if the likes of France, Germany, etc. start dipping back into recession, it is a safe bet that the debt crisis would once again rear its ugly head.

So, while the Dow actually closed up on the day and the S&P 500 pulled back only 6 points, the key takeaway from Tuesday's action is the idea that some uncertainty could possibly be creeping in. And as such, investors may want to keep an eye on Europe (yes, again) for a while.

Turning To This Morning

While Europe was the story of the day on Tuesday, today's market is all about the Republicans gaining control of the Senate. In an impressive victory, voters handed the keys to both the Senate and the House back to the Republicans. Although the outcome was expected, the margin of victory served as an exclamation point that Americans have had enough of the political gridlock in Washington. The President's sagging approval rating was cited by analysts as the primary reason the vote swung the GOP's way. In other news, the data on Europe's Services Sector showed that the economic struggle continues across the pond. Here at home, the ADP report on employment in the private sector showed that job growth continues to be strong. U.S. futures are currently pointing to a higher open on Wall Street.

Pre-Game Indicators

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

Major Foreign Markets:
    Japan: +0.44%
    Hong Kong: -0.63%
    Shanghai: -0.48%
    London: +1.07%
    Germany: +1.40%
    France: +1.50%
    Italy: +2.08%
    Spain: +1.36%

Crude Oil Futures: -$0.05 to $77.14

Gold: -$27.20 at $1140.50

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

10-Year Bond Yield: Currently trading at 2.359%

Stock Indices in U.S. (relative to fair value):
    S&P 500: +10.60
    Dow Jones Industrial Average: +83
    NASDAQ Composite: +22.37

Thought For The Day:

Do not speak unless you can improve the silence. -Spanish 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.