The list of concerns is as long as your arm. The headlines are worrisome. The bull market is old. Valuations are starting to raise some eyebrows. Oil has crashed. The dollar is giving multinational companies fits. China continues to slow. And the major indices are flirting with big trouble on the charts. So, the bears have got to be given the edge here, no?

However, the bears, like the Seahawks had done just hours earlier, managed to snatch defeat from the jaws of victory on Monday. Yep, that's right; just when you thought it was "game over," the other team did something surprising.

Bears Feeling It

Running down the headlines on Monday, one couldn't be blamed for thinking that the bears would most assuredly punch the ball over the goal line. They had the weapons. The defense was looking shaky. They had the ball on the one-yard line. And they had plenty of downs and time left.

Let's review... First China's Manufacturing PMI came in below expectations in January. At 49.8, the bottom line is the reading put the manufacturing sector of the world's second biggest economy in contraction zone. And that can't be good.

Next, there was Europe's PMI data. While the report for the Eurozone showed a modest uptick on a monthly basis, the takeaway was that Europe's economy continues to go nowhere fast.

Then came the U.S. data. First, the ISM Manufacturing report was weaker than expected. The report indicated a third straight decline in monthly activity and that the index had hit the lowest level since March of last year.

And then seconds later, the Consumer Spending report for December in the U.S. also managed to disappoint. The report showed the largest drop in spending since September 2009. Granted, much of the decline was attributable to the drop in gasoline prices. But still, the negative trend in the data was clear.

Not that anyone really cares that much, but the report on Construction Spending also came in below expectations on Monday. But the bears tell us that this is important. Our furry friends contend that if housing growth is slowing... and manufacturing growth is slowing... and the consumer is spending less, well, nothing good can come of it from an economic standpoint.

Thus, it wasn't at all surprising to see the bears take the snap at the opening bell on Monday looking ready to win the game. Within minutes, they had the Dow down 130 points. The S&P was down 14. Both indices had broken their respective 150-day moving averages. And short-term support could be heard snapping like kindling in the background. Some of the bear teammates could even be seen celebrating on the sidelines.

But Wait... What's This?

By late morning, all signs pointed to the bears scoring a decisive victory. It had been a tough game thus far. But this was their time, they could feel it. They had surprised everyone by coming up with a lucky play and had somehow pushed the ball to within just few feet of The Promised Land.

Then it happened. Instead of punching through for the score, which most assuredly would have caused all kinds of traders to jump on the bear band wagon, oil started to rally. And then it rallied some more. And before you knew it, there was talk of oil's decline having ended. And suddenly, everything was fine.

You see, the thinking is that a meaningful rally in oil could cure an awful lot of ills. Remember, crude's rude move has been blamed for all kinds of difficulties and has caused a great deal of consternation about the potential for even more problems in the future. So, if oil could rally - really rally - it would be like a rookie defensive back making his first career interception the play of the year.

As the clock expired on Monday's session, the bears were definitely deflated. One minute they had the brass ring in their hands and the next, well, we all saw the play.

So, Is That It?

The question of the day would seem to be if the decline in oil is over. Will crude now go the type of joyride to the upside that tends to accompany crashes along the way? And if so, won't stocks naturally follow suit?

U.S. Oil Fund ETF (NYSE: USO) - Daily

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Sure, the decline in oil might have hit bottom. Who knows really? And yes, if oil does indeed rally hard in the coming days (it certainly has room) stocks may go along for the ride. We all know how Wall Street's elite love to play their correlation games with their fancy computers.

But What About the Buck?

However, there is one little issue that doesn't quite jive with the Happy Days are Here Again theme being bandied about by the bulls - the dollar. Remember, at least part of the reason behind the crash in oil prices has to do with the rise in the greenback. As such, oil and stock market bulls will probably need to see a decline in the dollar for things to get truly interesting.

PowerShares US Dollar ETF (NYSE: UUP) - Daily

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But that won't happen, right? The ECB is going to start printing money. Japan is printing money. China will likely start doing something to stimulate their economy. And the Fed seem bent on getting rates up off the floor. So, as one currency trader put it to me, the only way the dollar can go is up.

Then again, the chart of the dollar does have that overdone feeling to it. So, if traders could find a reason to start selling dollars, the bulls could really be in business. We'll see...

Turning to This Morning...

There are two primary stories to focus on in the early going on this fine Tuesday morning. First and foremost, oil is continuing to rally, with prices currently trading near $51 in the futures market. This puts the gain for the 3-day rally at approximately 14% and has many analysts now calling the bottom in the oil crash. However, oil bears contend that the current move is nothing more than an oversold bounce with short-covering being the primary driver. The other story garnering attention this morning is the rally in Greek stocks and bonds. Support for Greece markets stems from the more conciliatory tone out of Syriza as Finance Minister Yanis Varoufakis proposed swapping debt for growth-linked bonds. There was also talk of scrapping the plan to write-down Greek debt. The morning news has European bourses up strongly and U.S. futures pointing to a stronger 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: -1.26%
    Hong Kong: +0.29%
    Shanghai: +2.45%
    London: +1.14%
    Germany: +1.14%
    France: +1.22%
    Italy: +2.02%
    Spain: +2.30%

Crude Oil Futures: +$1.39 to $50.96

Gold: +$1.60 at $1278.50

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

10-Year Bond Yield: Currently trading at 1.711%

Stock Indices in U.S. (relative to fair value):
    S&P 500: +9.15
    Dow Jones Industrial Average: +63
    NASDAQ Composite: +14.01

Thought For The Day:

We tend to judge others by their behavior, and ourselves by our intentions. -Stephen M.R. Covey

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 Oil Crash
      2. The State of the U.S. Economy
      3. The State of Fed/ECB Policy
      4. The State of the Earnings Season

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: Moderately Negative
(Chart below is S&P 500 daily over past 1 month)

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

Long-Term Trend: Positive
(Chart below is S&P 500 daily over past 2 years)

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: 1995-75
• Key Near-Term Resistance Zone(s): 2060-90

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
• Price Thrust Indicator: Neutral
• Volume Thrust Indicator: Neutral
• Breadth Thrust Indicator: Neutral
• Bull/Bear Volume Relationship: Neutral
• Technical Health of 100 Industry Groups: Neutral

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 Neutral .

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 Market Environment Model Reading: Positive

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

David D. Moenning
Founder and Chief Investment Strategist
Heritage Capital Research - A CONCERT Advisor
Be Sure To Check Out the NEW Website!

Indicator Explanations

Trend and Breadth Confirmation Indicator (Short-Term) Explained: History shows the most reliable market moves tend to occur when the breadth indices are in gear with the major market averages. When the breadth measures diverge, investors should take note that a trend reversal may be at hand. This indicator incorporates an All-Cap Dollar Weighted Equity Series and A/D Line. From 1998, when the A/D line is above its 5-day smoothing and the All-Cap Equal Weighted Equity Series is above its 25-day smoothing, the equity index has gained at a rate of +32.5% per year. When one of the indicators is above its smoothing, the equity index has gained at a rate of +13.3% per year. And when both are below, the equity index has lost +23.6% per year.

Price Thrust Indicator Explained: This indicator measures the 3-day rate of change of the Value Line Composite relative to the standard deviation of the 30-day average. When the Value Line's 3-day rate of change have moved above 0.5 standard deviation of the 30-day average ROC, a "thrust" occurs and since 2000, the Value Line Composite has gained ground at a rate of +20.6% per year. When the indicator is below 0.5 standard deviation of the 30-day, the Value Line has lost ground at a rate of -10.0% per year. And when neutral, the Value Line has gained at a rate of +5.9% per year.

Volume Thrust Indicator Explained: This indicator uses NASDAQ volume data to indicate bullish and bearish conditions for the NASDAQ Composite Index. The indicator plots the ratio of the 10-day total of NASDAQ daily advancing volume (i.e., the total volume traded in stocks which rose in price each day) to the 10-day total of daily declining volume (volume traded in stocks which fell each day). This ratio indicates when advancing stocks are attracting the majority of the volume (readings above 1.0) and when declining stocks are seeing the heaviest trading (readings below 1.0). This indicator thus supports the case that a rising market supported by heavier volume in the advancing issues tends to be the most bullish condition, while a declining market with downside volume dominating confirms bearish conditions. When in a positive mode, the NASDAQ Composite has gained at a rate of +38.3% per year, When neutral, the NASDAQ has gained at a rate of +13.3% per year. And when negative, the NASDAQ has lost at a rate of -8.5% per year.

Breadth Thrust Indicator Explained: This indicator uses the number of NASDAQ-listed stocks advancing and declining to indicate bullish or bearish breadth conditions for the NASDAQ Composite. The indicator plots the ratio of the 10-day total of the number of stocks rising on the NASDAQ each day to the 10-day total of the number of stocks declining each day. Using 10-day totals smooths the random daily fluctuations and gives indications on an intermediate-term basis. As expected, the NASDAQ Composite performs much better when the 10-day A/D ratio is high (strong breadth) and worse when the indicator is in its lower mode (weak breadth). The most bullish conditions for the NASDAQ when the 10-day A/D indicator is not only high, but has recently posted an extreme high reading and thus indicated a thrust of upside momentum. Bearish conditions are confirmed when the indicator is low and has recently signaled a downside breadth thrust. In positive mode, the NASDAQ has gained at a rate of +22.1% per year since 1981. In a neutral mode, the NASDAQ has gained at a rate of +14.5% per year. And when in a negative mode, the NASDAQ has lost at a rate of -6.4% per year.

Bull/Bear Volume Relationship Explained: This indicator plots both "supply" and "demand" volume lines. When the Demand Volume line is above the Supply Volume line, the indicator is bullish. From 1981, the stock market has gained at an average annual rate of +11.7% per year when in a bullish mode. When the Demand Volume line is below the Supply Volume line, the indicator is bearish. When the indicator has been bearish, the market has lost ground at a rate of -6.1% per year.

Technical Health of 100 Industry Groups Explained: Designed to provide a reading on the technical health of the overall market, this indicator takes the technical temperature of more than 100 industry sectors each week. Looking back to early 1980, when the model is rated as "positive," the S&P has averaged returns in excess of 23% per year. When the model carries a "neutral" reading, the S&P has returned over 11% per year. But when the model is rated "negative," stocks fall by more than -13% a year on average.

Weekly State of the Market Model Reading Explained:Different market environments require different investing strategies. To help us identify the current environment, we look to our longer-term State of the Market Model. This model is designed to tell us when risk factors are high, low, or uncertain. In short, this longer-term oriented, weekly model tells us whether the odds favor the bulls, bears, or neither team.

Disclosures

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., a 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.