Tag Archives: market lab report

MLR – PMP 12/5/14

Major averages finished near breakeven on lower volume. Small caps, however, fared worse and continue to lag in the current uptrend. Risk is off for the riskier small caps as easy money finds its way into larger cap stocks. This morning’s jobs number came in at 314,000, sparking an initial sell-off in the futures. Two names had lower quality pocket pivots yesterday, Tubemogul (TUBE) and Veeva Systems (VEEV), thus we did not send out reports on these stocks. TUBE offers a digital platform for branding and advertising, and is a small cap with mostly negative earnings. VEEV has lagged the general market in the current bounce, so even though it gapped up during its prior earnings report, the lackluster technical action makes it a riskier name. As always, it is generally a good rule of thumb to focus on the best of the best on a risk/reward basis.

MLR – PMP 12/4/14

Major averages rose yesterday on lower volume. Futures fell when the European Central Bank announced it would leave its key interest rates unchanged at record lows, thus no additional QE is in the offing, reinforcing its position that with rates near zero, borrowing costs cannot go any lower. Futures then found their quick floor and bounced after ECB president Draghi said asset purchases for at least the next two years will instead be the primary means for the ECB to further stimulate the eurozone’s struggling economy and raise the troublingly low levels of inflation, which at 0.3% on an annual basis last month was far below the ECB’s target of just below 2%. To add to the deflationary pressures, analysts said they expect inflation to weaken to zero this month on the back of lower oil prices. Managed healthcare service provider Centene (CNC) had a pocket pivot. Earnings and sales accelerating, institutional sponsorship up 7 quarters in a row, group rank 22. Tesla Motors (TSLA) has moved below its 200-day moving average and is currently gapping down slightly pre-open. Our near-term downside target on the stock is the low of the prior base at 217.32, with the 177.22 May low representing the second, longer-term price target. Keep in mind, however, that when it comes to shorting, “longer-term” can be anywhere from as short as 2-3 weeks or as much as 3-6 months or more.

MLR – PMP 12/3/14

​Major averages rose yesterday on lower volume. The Dow closed on a new high while the small cap Russell 2000 has not seen a new high since early July. The risk is off for small caps which carry more risk than they normally would in this QE-manipulated environment where institutions are more comfortable doing a poor job of keeping up with the market averages by investing in more stable, large cap names. But they have little choice as their mandate usually requires them to invest a majority of their funds. Hedge funds which have no such mandate aren’t faring much better which speaks to the treacherous manipulative nature of the markets over the last few years. There was also a second Hindenburg Omen signal on Tuesday. Two signals close together produce a confirmed signal which can lead to a market correction. For example, we got a Hindenburg Omen on September 18th, 2014, and a confirming Hindenburg Omen on September 19th, 2014, which led to a correction of roughly -10% in the major indices. That said, the Hindenburg Omen track record is spotty at best especially in this QE environment. From historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%. That said, since 1985, a Wall Street Journal article dated 8/23/2010 said accuracy is 25%, and usually takes place within the next forty days. The article said the probability of a panic sellout was 41% and the probability of a major stock market crash was 24%. Though the Omen does not have a 100% success rate, every NYSE crash since 1985 has been preceded by a Hindenburg Omen. Since 2010, Hindenburg Omen has confirmed on the following dates: July 24, 2010 confirmed. Markets did not fall but rallied. Aug 20, 2012 confirmed. Markets fell 3% then resumed uptrend. 3 confirmations in the month of June 2013. Markets fell a few percent then the rally resumed. 3 confirmations in the month of August 2013. Markets fell a few percent then the rally resumed. Sept 19, 2014. Markets corrected roughly -10%.  In this age of quantitative easing, many tried-and-true indicators have failed. It seems that Hindenburg Omen is no exception to this observation.    Various pocket pivots: Vasco Data Security (VDS)I – Computer security systems. Earnings and sales are strongly accelerating, group rank 1. Truecar (TRUE) – Provides market-based pricing data on new and used cars. Earnings just turned slightly positive, strong sales, group rank 47. This is a more speculative stock as it is a smaller cap in a highly competitive space. ANI Pharmaceuticals (ANIP) – Pharmaceutical company focusing on prescriptions. Skyrocketing earnings and sales, institutional sponsorship has increased over the last 6 quarters, group rank 6. Stock is more speculative as it is a highly volatile small cap. Biotech Alexion Pharmaceuticals (ALXN) had a pocket pivot breakout. Pretax margin 42.9%, ROE 28.7%, robust earnings and sales, 7 quarters of rising institutional sponsorship, group rank 4.