MLR - PMP 1/14/15

Published : January 14 2015 at 8:54 ET

Major averages sold off yesterday on higher volume that was well above average after gapping higher at the open. At one point the Dow was up about 287 points, but ended the day to close down -27.16. High volume reversals are one of the most bearish short-term patterns. The sharp increase in selling pressure pushed the MDM intraday into a sell signal.

So even though the European Central Bank gave indication is will accelerate its QE bond buying program, the market was unable to sustain its initial move higher. The global economy is a big issue as while it is expected to expand 3% this year, up from 2.6% in 2014, it is still slower than an earlier 2015 forecast of 3.4%. In addition, the slowdown in growth out of China is putting further pressure on commodity prices including copper.

Futures are sharply lower at the time of this writing as the selling in the futures gained momentum after December retail sales ex-autos came in at a weak -1.0%. This makes the point that consumers are already so strapped that even the extra money saved from lower gasoline pump prices is not an automatic "tax cut." It merely gives consumers a little bit of breathing room from an already squeezed position.

One potential short-sale target that catches our eye this morning is semiconductor name Arm Holdings (ARMH), which has been forming a big, rolling head and shoulders complex and this morning is rallying above its 200-day moving average in pre-open trade after an analyst slapped it with an "outperform" rating. This helps to bring the stock into a more optimal short-sale position, but other short-sale target stocks that reversed yesterday, also remain in play on any rallies. We currently have a position in ARMH.

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