For me, one of the most important indicators of where the market is headed is when there is not a lot of catalyst to give the market a sense of whether its bullish or bearish it still goes either up or down. That gives me a sense of where the market is headed, in terms of, general momemtum.
Today is going to be one of those days. Nearly every indicator and bit of news is basically saying nothing. Starting with futures, as of 8 AM, the futures for the Dow are up just four points, whereas the Nasdaq is actually down a single point. The market is not really getting any clues as to which way it will go and which way it should go. There is no major economic data coming out until 2 PM when the Fed releases its economic barometer, the Beige Book. Other than that, there is really nothing coming out today.
Additionally, there were no major earnings releases to help even drive specific sectors. Even the world markets are confusing because Asia was hit today with a 0.5% to 1 % loss across thboard. Yet, the e European markets opened in the red and proceeded to march upwards and onwards and are up 0.5% to 1% now. Europe did not really have a catalyst either. The only major data point was Germany’s CPI, which believe it or not was just NEUTRAL and met right at expectations.
Some financial news is saying that a weak dollar was the means for the drop out in Asia and Europe, and Europe is less affected by the fluctuations in the dollar, so it hurt the stocks. If it is true that the dollar did have a significant drop this is not good for stocks, and it may be one hint about where we could be headed for the day.
The oil market, though, has skyrocketed on the weak dollar above $71 per barrel and those higher commodity prices seem as of recently, even though it is fundamentally flawed, has pumped stock prices up higher. This could be a rallying point, but it is pretty weak if there is not at least something else to complement it.
The final news, on the day, that I found pretty interesting was a statement from execs at Boeing and Airbus. The two companies have commented that they do not believe air travel will pick up and return to normal until 2011. Until then, a lot of companies will have to continue to offer less flights and lower prices. This is not good news for the airplane producers because less airline revenue means less new planes.
So, with all that said, are we going up or down?
Buy Pick of the Day: Ultra Proshares Financials (UYG)
I am not sure about the market, and my guess would be any movement down or up will not be significant unless some type of intraday report or event takes place that really turns the side. Therefore, it may be that today is a "show me" market where various sectors and groups of stocks do well while quieter sectors may have trouble rallying.
The reason I like Proshares Ultra Financial ETF (UYG) is because the financials had a very interesting morning in the upgrades/downgrades sector. Two out of the eight major holdings of UYG were upgraded with Goldman Sachs receiving a "market outperform" from JMP and Morgan Stanley receiving an 
"overweight" rating from JP Morgan. Further, Capital One Financial and Mastercard were upgraded, as well as, MB Financial. UYG also holds Visa, and the credit card upgrades is definitely bullish for UYG.
The market, however, is tough to call this morning as I have been mentioning. How much power do these upgrades have, and if the market reacts poorly and sells off, will it drive down down the price of UYG and its holdings. The stock is up just over 0.4% this morning, which plays to the fact that investors are just not making any movement. Therefore, getting the stock at the price it is at is definitely a value investment.
My only concern with this ETF is that the market will tank because of my continuous bearish skepticism, as well as, a report from JP Morgan that new regulations may curb bank profits. It is definitely a news piece under the radar, but it no doubt will have an affect on JPM and other banks in the long run.
Futures are moving up slightly it appears as of 8:30 AM, so that is good news. UYG is definitely in a place where it can move majorly up or down. It is basically halfway in between its upper band and lower band. On slow stochastics, it is right at the 50 mark, as well. The movement of the stock is creeping upwards, and it could soon put on a short squeeze, which will help establish a breakout.
Check back at morning levels for entry and exit points.
I am just going to stick with the Buy for today. Market is really murky, and I have trouble reading it. I don’t feel terribly confident about any short sales for today. If I was going to recommend a short, I would look at AMR Corp., which is the parent company of American Airlines. The news from Boeing and Airbus is bad for the airlines, but the airline sector and market have a mind of their own. Everytime I try to call the airline industry, it does something crazy. AMR is strongly overvalued, and it is a definite candidate for a major pullback.
Good Investing,
David Ristau
