David Moenning

About the Author David Moenning

David Moenning is a the Chief Investment Officer at Heritage Capital, which focuses on active risk management of the U.S. stock market. Dave is also the proprietor of StateoftheMarkets.com, which provides free and subscription-based portfolio services. Dave began his investment career in 1980 and has been an independent money manager since 1987. Thus, Dave has been live on the firing line and investing for a living for more than 25 years.

Greece, Oil Remain the Focal Points


Trying to pin down the primary driver of the current stock market is a little tricky as there seems to be three or four sources of input these days. For starters, there can be little doubt that traders are keeping an eye on Europe/Greece. Yet, the headlines coming from across the pond have not been rocking the market the way they did in the past. As such, one could conclude that the market is looking past all the grandstanding and political posturing, and assuming a deal will get done before month-end.

Next up is the Fed. The release of the minutes from the January FOMC meeting made it clear that what Janet Yellen’s merry band of central bankers will or won’t do next remains a key part of the market’s puzzle. The takeaway from the latest Fed gathering is that the committee members appear to be more than a little concerned about the goings on in Greece, the slowdown in China, the strength of the dollar, and the crash in oil.In short, the Fed minutes conveyed an unexpectedly dovish tone, suggesting to analysts that the Fed may be open to backpedalling on the idea of raising rates in June. The worry is that raising rates “prematurely” could dampen the economic momentum that has finally arrived in the U.S.This brings us to driver number 3: The state of the U.S. economy. While most folks liken economic reports with watching paint dry, the message from the most recent round of data has been interesting. Cutting to the chase, with the exception of the jobs data, the vast majority of the economic reports have come in on the punk side. And given the preponderance of commentary coming from Fed governors these days, the thinking is that this has not been lost on Ms. Yellen’s bunch.What about oil, you ask? The bottom line here seems to be that unless oil resumes its dive, the worst has already occurred. And given that the major stock indices are sitting at or near cycle highs, the conclusion is that there are both positives and negatives as far as the economic impact from crude’s rude move is concerned. But for now at least, the market appears to be none the worse for wear given the massive decline that has occurred in the oil patch.

So for now, there appear to be cross currents in the market and yet, the indices are sitting at all-time highs. So, unless Greece decides to do something stupid…Turning to this morning’s trade, the focus remains on Greece. The fact that the Greek government has sent European creditors its proposed compromise to end bailout impasse has aided sentiment today. There are also rumors that the Germans are demanding that Athens put capital controls on the banks, but this has been denied by Greek officials. European markets opened lower but have since moved back toward breakeven. Chinese markets are closed for holiday. Finally, oil is also back in the spotlight this morning as API data shows supplies have surged. Crude futures are diving more than 4% in response and U.S. futures point to a slightly lower open in the early going.

Current Market Environment

Sometimes this game is all about perspective. For example, someone watching the intraday action of the stock market might be inclined to believe that the market is weak as sell programs tend to hit each and every time the S&P 500 hits a new high. Yet, those looking at only a daily or weekly chart of the market indices are likely to have a bullish view. And then there are our indicators/models, which at this stage suggest that we should side with the bulls. In sum, THIS is the reason that everyone in the game isn’t rich!

Technical Take

There is nothing new to report on the technical front with the exception of the fact that stocks are now overbought from both a short- and intermediate-term perspective. In addition, one of our VIX indicators flashed a sell signal yesterday, indicating that risk may be on the rise. But the key to the next move in the market remains the question of whether or not stocks have broken out of the recent range. Stay tuned!

S&P 500 – Daily