MLR - PMP 10/8/14

Published : October 8 2014 at 8:27 ET

The major market averages got whacked yesterday on higher, above-average volume. Both the S&P 500 and NASDAQ Composite are now 4-5% off their highs and looking like they are headed for their respective 200-day moving averages.

The global economy remains weak despite quantitative easing. The International Monetary Fund downgraded its global growth forecast for 2014 and 2015, and German industrial orders for August fell the most since 2009. Further, the ECB has not indicated they will increase the level of QE, disappointing markets.

The MDM remains on a sell signal. This time may be different compared to prior corrections since January 2013 when QE3 began since QE3 winds down this month. Nevertheless, with heightened volatility, MDM remains watchful for a potential bounce, even if short-lived, as the correction may not yet be over should such a bounce occur.

Short-sale targets Tesla Motors (TSLA) and LinkedIn (LNKD) remain in play with LNKD finding resistance at its 20-day moving average on Monday and then moving lower on Tuesday. TSLA has pushed through its 50-day moving average, it's first tight stop-out level, thanks to Tweets from CEO Elon Musk last Friday that made vague reference to "something D" last Friday, helping to spark the rally that came off the top of the prior base. Whether the bounce was justified or not will be proven on Thursday when TSLA actually makes the specific announcement and reveals exactly what "something D" is. This could be a sell-the-news situation and investors should watch for this as a short-selling opportunity that would be confirmed by a reversal back down through the 50-day line.

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