Market Lab Report - Premarket Pulse 5/5/16
Major averages fell yesterday on higher volume as the S&P 500 is testing its 10-week moving average. Of the FANG stocks, FB and AMZN are showing improved leadership while NFLX and GOOG continue to founder. Leading stocks in general have been having a tough time showing true leadership characteristics, as many lacked the thrust during the rally than began in February.
On April 24th we issued a Short-Sale Set-Up report covering three such broken down former leaders: GOOG, MSFT, and NFLX.
GOOG is currently sitting just below its 200-day moving average at 696.36 (719.96 for GOOGL shares) where it is in a shortable position using the 200-day line as a guide for an upside stop. We reported on GOOG as a short-sale set-up two Sundays ago and it has since moved lower. MSFT is sitting just below its 200-day moving average and we would look to use any rally up to the line at 50.68 as a potential short-sale opportunity. Otherwise, the stock could be shorted at current levels using the line as a guide for an upside stop given that the stock is less than 2% away from the 200-day line. We would prefer to short NFLX into any rally that potentially carries up into the 20-day moving average, currently at 96.12.
Tesla Motors (TSLA) is set to open up just below its 50-day moving average at 229.42. It is currently trading at 226-227 in pre-open trade. We would look to short the stock as close to the 50-day line as possible, although it will open a little over 1% away from the line and would still be in a shortable position using the 50-day line as a guide for a stop.
One significant clue of a weakening market is the fact that we've seen many of these junk-off-the-bottom rallies off of the February lows start to roll over. For example, housing stocks and airlines have been decimated over the past two weeks, and they were both groups that had sharp rebounds off of the February lows.
Oil is trading higher due to the wildfires in Canada which could affect oil production. Futures moved higher on this news but have lost some of their upside momentum. We would look at any market rallies as potentially shortable affairs given that the Market Direction Model is currently on a sell signal, though short-sale opportunities as well as buying opportunities can come regardless of its signal.
This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.