Dave  Moenning

As I've written a time or twenty, the purpose of my morning market missive is to identify the forces that are driving the market. The thinking is that if one can understand what is happening to the stock market (SPY, DIA, QQQ, MDY, IWM) in the short-term then you ought not be surprised when the really big moves occur. And let's be clear about one thing; the real money in this game comes from getting the really big moves right such as the massive decline seen in 2008 and early 2009, the move off the bottom in 2009, the "everything is a buy" rally (based on QE2 in 2010), and the mini bear of 2011.

Speaking of last year's mini bear, it certainly feels like "déjà vu all over again" right now as we're seeing the same pattern and the same issues/concerns, all at exactly the same time for the third year in a row. As was the case in the spring/summer of 2010 and 2011 traders are currently focused on three things: a slowdown in global economic activity, the debt mess and the potential for contagion in Europe, and the fiscal/debt situation here in the good 'ol USofA.

However, unlike the -16% decline seen in the summer of 2010 and the -19% mini bear that occurred during the "Sell in May and go away" period in 2011, the 2012 summer of discontent has been less painful (well, so far at least) as the S&P has fallen just -9.93% from the high seen on 2-April to the low of 4-June. So, with the situation in Greece appearing to be "solved" again (yes, again, and at least for now) and the EU leaders looking like they will begin moving toward a United States of Europe, the question at this stage of the game is if there are reasons to be optimistic going forward.

To be sure, it is easy to see the negatives at the present time. For starters, the economic data has been deteriorating in the U.S. for the past month. Evidence to be submitted here includes the reports on Weekly Jobless Claims, Philly Fed, Industrial Production, Consumer Sentiment, Empire Manufacturing, Retail Sales, ISM Manufacturing, Q1 GDP, and the all important Nonfarm Payrolls. In response to the punk data, even the Federal Reserve has cut their growth forecast for the U.S. (while actually increasing their projections for the unemployment rate). And while the reports have not debunked the "muddling through" thesis, the slowdown in growth leaves the country vulnerable to economic shocks/events.

Dave Moenning

David Moenning is the President and Chief Investment Strategist for Heritage Capital Management, a Chicago based SEC Registered Investment Advisory firm which he founded in 1989. You can follow Dave at .