MLR - PMP 11/24/14
Major averages gapped up Friday on news from the European Central Bank that stepping up easy money policies are potentially the way forward. China was in sync with this as the People's Bank of China lowered their interest rates the same day, despite the fact that China's economy grew at a 7.3% annualized rate in the third quarter. Nevertheless, averages weakened for the remainder of the day, and volume rose as is typical on options expiration day.
Central bankers around the world are painting themselves into a corner as global economic growth remains stubbornly grim despite mass money printing since 2009. Europe may have its third recession since 2009. Japan has had two and a half lost decades even with the recent "Abenomics" aggressive QE money policies. China remains stuck as all world economies are more connected than ever before, thus a drag on economic growth in major debtor countries impacts even a creditor nation such as China.
The number of leading stocks remain scant though the longer the uptrend persists, the greater the number of actionable names. Further, as some members have said, shorting stocks can be profitable even in this uptrend due to the highly manipulated nature of the current environment where rising indices cover up profit potential on the short side.
Tesla Motors (TSLA) is rallying back above its 50-day moving average this morning after a heavy volume outside reversal took the stock below the line on Friday. News that the company is in talks with BMW about swapping BMW's advanced materials technology for access to Tesla's battery production in Europe (expected in five years) has helped to bump the stock up this morning but in our view likely puts the stock in a shortable position, using the 151-152 level as a tight upside guide for a stop. We currently have a position in the stock.
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