I was recently taken to task on Seeking Alpha for providing a "daily dump" of information (this was likely a play on the title of my morning missive, "Daily State of the Markets") and for failing to provide specific guidance on (a) what the reader should do and (b) what I believe will happen next. This individual is obviously not a fan of my work, and frankly, I can respect that. What I do is definitely not for everyone.

However, the complaint brings up an interesting and to me, anyway, a very important point. You see, I do NOT and will NOT make predictions about the stock market. Sorry, but years of experience has taught me that such endeavors are a fool's errand.

For the record, I manage "OPM" (other people's money) for a living and have done so since 1987. Also to be placed in the full and fair disclosure category is the fact that my firm and my approach can be put in the "active risk manager" category. I started officially managing client money just before the "Crash of '87" and have been trying to keep client accounts in line with the big-picture market environment ever since.

Perhaps the most important thing I have learned over the past 27 years is that Ms. Market doesn't give a hoot about what I think is about to happen next in "her" game. I've learned that my opinions just don't matter. I've learned to check my ego at the door each and every day. I've learned not to equate luck with skill. I've learned that "taking a stand" can be painful and oftentimes costly. And I've learned that "making calls" and predictions are for those seeking attention.

On that note, I will relay a story from a friend/colleague in the money management business about how he is able to get CNBC, Fox Business, Yahoo! Finance, etc. to contact him for interviews on a regular basis. And I quote, "What I do is take the exact opposite stance of whatever is hot at the time. For example, back when Apple was soaring, I called for the stock to crash 60%. The media LOVED that one - I got tons of calls!"

My friend/colleague then laughed and said, "And the funny part is that Apple did actually crater! Suddenly I was a hero and everybody wanted to talk to me!" He added that he has publicly and loudly taken the opposite side of "anything popular" ever since.

But here's the important part. When asked if he used any of his prognostications in his money management business, he replied, "Are you nuts? Of course not!"

My friend went on to emphasize that he uses disciplined models, indicators, and/or systems to dictate 95% of his investing decisions. He says he likes to keep a teeny tiny amount of subjectivity available to him, "just in case things get nutty and my experience might actually be useful."

So, call me a chicken. Challenge my manhood. Throw proverbial stones if you must. But I'm not going to bore you with what I think is about to happen next in the stock market - ever.

Sure, my opinion might be accompanied by more than 27 years of experience. Sure, I can get it right now and again. And yes, there have been times where my intuition was actually better than the models/indicators/systems I use (did I mention the idea about not equating luck with skill?). But, in reality, providing readers with opinions of what "should" happen next isn't likely to do you, or me for that matter, any good.

The bottom line is this: No one (repeat, no one) has been able to consistently "call" the direction of the market for any length of time. So, what would make anyone think they can? Hubris, is the likely answer.

Let's be honest; this is a tough game. Staying on the right side of this bucking bronco we call the stock market is challenging at best. Thus, the goal of my morning missive is to provide anyone willing to spend a few minutes reading my work with an unbiased analysis of what IS happening in the market. I want to try and focus on the actual drivers of the market and not what I think "should" be happening. No, this missive is intended to help readers make informed decisions - or better yet, learn from my years of investing mistakes.

In case it isn't obvious, I'd also like to point out that I don't make predictions or use "my view" when investing people's hard-earned money. In fact, the words 'should', 'could' and 'would' are strictly banned from use in our shop. No, we depend on unemotional, market models, indicators, and systems to guide our positioning. In my humble opinion, investors deserve our best work, not my best guess!

It is my sincere hope this helps clarify why I don't - and won't - "take a stand" in my writing. I am trying to provide objective analysis, not be just another pundit yammering on about what I think the future holds. As the late, great Marty Zweig (a key influence on my career in the early 1980's) used to say, "Those who depend on a crystal ball will end up with an awful lot of crushed glass in their portfolio."

Turning To This Morning

The announcement of the first case of ebola in the U.S. spooked traders after the close yesterday. The patient is now in "strict isolation" in a Dallas hospital and the initial fear appears to have subsided a bit. The big news in the early going is the official PMI numbers out of China and Europe. China's manufacturing PMI came in at 51.1, which was actually a tenth above the consensus and in line with last month's reading. However, the new orders component did continue to weaken. Across the pond, Germany's manufacturing PMI slipped into the contraction mode with a reading of 49.9 and the Eurozone PMI continued to slip. Both reports should prompt more talk of stimulus measures. Here at home, we will get our first look at last month's jobs data courtesy of ADP before the bell. U.S. futures currently point to a slightly lower 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: -0.57%
    Hong Kong: closed
    Shanghai: closed
    London: -0.31%
    Germany: +0.13%
    France: -0.41%
    Italy: -0.16%
    Spain: +0.23%

Crude Oil Futures: +$0.51 to $91.67

Gold: -$1.80 at $1209.80

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

10-Year Bond Yield: Currently trading at 2.487%

Stock Indices in U.S. (relative to fair value):
    S&P 500: -2.11
    Dow Jones Industrial Average: -7
    NASDAQ Composite: -5.09

Thought For The Day:

When you get to the end of your rope, tie a knot & hang on. -Franklin D. Roosevelt

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of the Geopolitical 'Issues'
      2. The State of Fed/ECB Policy
      3. The Level of Interest Rates
      4. The Outlook for U.S. Economic Growth

The State of the Trend

We believe it is important to analyze the market using multiple time-frames. We define short-term as 3 days to 3 weeks, intermediate-term as 3 weeks to 3 months, and long-term as 3 months or more. Below are our current ratings of the three primary trends:

Short-Term Trend: Neutral
(Chart below is S&P 500 daily over past 1 month)

Intermediate-Term Trend: Moderately Negative
(Chart below is S&P 500 daily over past 6 months)

Long-Term Trend: Positive
(Chart below is S&P 500 daily over past 12 months)

Key Technical Areas:

Traders as well as computerized algorithms are generally keenly aware of the important technical levels on the charts from a short-term basis. Below are the levels we deem important to watch today:

• Key Near-Term Support Zone(s) for S&P 500: 1960(ish)
• Key Near-Term Resistance Zone(s): 1980

The State of the Tape

Momentum indicators are designed to tell us about the technical health of a trend - I.E. if there is any "oomph" behind the move. Below are a handful of our favorite indicators relating to the market's "mo"...

Trend and Breadth Confirmation Indicator (Short-Term): Negative
Indicator Explained

Price Thrust Indicator: Negative
Indicator Explained

Volume Thrust Indicator: Negative
Indicator Explained

Breadth Thrust Indicator: Neutral
Indicator Explained

Bull/Bear Volume Relationship: Moderately Positive
Indicator Explained

Technical Health of 100 Industry Groups: Neutral
Indicator Explained

The Early Warning Indicators

Markets travel in cycles. Thus we must constantly be on the lookout for changes in the direction of the trend. Looking at market sentiment and the overbought/sold conditions can provide "early warning signs" that a trend change may be near.

• S&P 500 Overbought/Oversold Conditions:
        - Short-Term: Moderately Oversold
        - Intermediate-Term: Moderately Oversold
  
• Market Sentiment: Our primary sentiment model is Positive .

The State of the Market Environment

One of the keys to long-term success in the stock market is stay in tune with the market's "big picture" environment in terms of risk versus reward.

Weekly State of the Market Model Reading: Neutral
Indicator Explained

Looking For Guidance in the Markets?

The Daily Decision: If you want a disciplined approach to managing stock market risk on a daily basis - Check the "Daily Decision" System. Forget the fast money and the latest, greatest option trade. Investors first need is a strategy to keep them "in" the stock market during bull markets and on the sidelines (or short) during bear markets. The Daily Decision system was up 30.3% in 2012, is up more than 25% in 2013, and the system sports an average compound rate of return of more than 30% per year.

The Insiders Portfolio: If you are looking for a truly unique approach to stock picking - Check out The Insiders Portfolio. We buy what those who know their company's best are buying - but ONLY when they are buying heavily! P.S. The Insiders is up over 30% in 2013 and has nearly doubled the S&P 500 since 2009.

The IRA/401K Advisor: Stop ignoring your 401K! Our long-term oriented service designed for IRAs and 401Ks strives to keep accounts positioned on the right side of the markets. This is a service you really can't afford not to use.

All StateoftheMarkets.com Premium Services include a 30-day money-back guarantee!

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

David D. Moenning
Founder and Chief Investment Strategist
StateoftheMarkets.com
President, Heritage Capital Research
Check Out the NEW Website!

Positions in stocks mentioned: none

For up to the minute updates on the market's driving forces, Follow Me on Twitter: @StateDave (Twitter is the new Ticker Tape)

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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 and on our website is for informational purposes only. No part of the material presented in this report or on our websites 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 editors of StateoftheMarkets.com 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.