Tag Archives: market lab report

MLR – PMP 12/15/14

Note to members: On November 2, we sent out a Short-Sale Set-up (SSS) report discussing the concept of anticipating the short side of the market during an uptrend in order that one might be prepared to act on the short side rather than re-act on the short side once a market breakdown becomes obvious. Part 2 of that report was sent out yesterday. Major averages sold off Friday on higher volume with the S&P 500 and DJIA ending at their respective 50-day moving averages, which sets up the potential for a bounce, thus this morning’s futures action is not surprising. Oil cracked new multi-year lows on Friday, falling to under $58 a barrel. According to Bank of America analysts, $55 is the breakeven point for half of U.S. oil producers. This put additional pressure on commodities which have been in a downtrend for months. The fall in oil spilled over into other areas of the market as points were raised that weakened energy companies might default on bank loans, begin laying off large swaths of employees raising unemployment, and so on. Oil is currently bouncing on news of the closure of two Libyan oil terminals. That said, United Arab Emirates said that the oil cartel would accept a price slump right down to $40 per barrel.

MLR – PMP 12/12/14

Major averages bounced yesterday at the open, then weakened and reversed later in the day to finish near their trading day lows. The Market Direction MOdel MDM took advantage of the bounce and switched to cash. Futures are currently lower at the time of this writing. European stocks continue to sell off after the International Energy Agency cut its outlook for global oil demand. Oil prices are at around $59 as oil continues its free fall due to the U.S. shale boom brought on by fracking technologies, stagnating oil demand growth in Asia and Europe, and the reluctance of large Middle Eastern producers such as Saudi Arabia to intervene to cut the global supply glut. Furniture retailer Restoration Holdings (RH) had a buyable gap up after a strong earnings report. We mentioned RH’s pocket pivot on 12/9. Members should keep in mind, however, that in this environment buying anything carries a high degree of risk given the current general market action. Short-sale target Workday (WDAY) rallied right into its 200-day moving average yesterday before reversing to close near flat on the day. The stock remains shortable here using the 200-day line as the new upside stop. We currently have a position in the stock. Tesla Motors (TSLA) rallied yesterday on the big phony market rally early in the day but reversed to close down on the day on above-average volume. So far the stock has been unable to get back above the prior October low in the 217 area. We continue to look for a breach of the 200 price level and a move towards our next downside price target at the 177.22 low of the prior cup base. We currently have a position in the stock.

MLR – PMP 12/11/14

Major averages fell hard yesterday on mixed volume. Volume came in heavier on the NYSE but lighter on the NASDAQ. However, volume picked up sharply in the last hour of the day as the market sell-off accelerated. Leading stocks were hit hard. The price of oil continued to plummet triggering investors’ nerves. While global demand has been weak, this current correction in oil is more due to too much supply due to the fracking revolution in the U.S. as well as the price war spurred by Saudi Arabia. Indeed, Saudi Arabiaâs oil minister made it pretty clear that he is in no hurry to help stop the slide in prices when he reiterated on Wednesday: âWhy should we cut production? Why?â A strong dollar has also added to the selling pressure. While lower oil prices can help the global economy, leading stocks have been underperforming during the bounce which began in October and have been hit hard over the last few days. So selling stocks short that are in prime positions during the bounce has been a viable strategy, and the weak action in the general markets over the last few days has made such positions even more profitable. We maintain our longer-term downside price targets for Tesla Motors (TSLA) at 177-178 and the lows of the prior cup-with-handle base from which the stock’s breakout attempt failed three months ago, and for Workday (WDAY) at the prior base low of 75.23. However, short-sellers should have been working these up higher in their patterns based on our original discussions of TSLA and WDAY as short-sale targets some time ago.