MLR - PMP 12/9/14
Major averages fell yesterday on higher volume. Weak econnomic data out of China spurs on the possibility that additional easy money policies are possible to follow China's recent lowering of interest rates. This counters the recent U.S. unemployment report whose strength may be called into question as it has been believed that some of the figures are distorted.
Oil plumbed new multi-year lows as U.S. production continues to surge thanks to fracking technologies that free up oil trapped in shale formations. For 2015, the EIA expects U.S. crude oil production to set a record since before the first OPEC oil embargo in 1973. Lower oil prices can be good for the global economy.
Futures are sharply lower this morning as China shocks markets by banning the use of low-grade corporate debt as collateral to borrow cash. Years of slower growth are expected out of China, underscoring what the Fed knows about the problematic global economy, so they will have to jawbone to keep interest rates low, and perhaps keep the possibility of further quantitative easing on the table.
Short-sale target Tesla Motors (TSLA), which we first suggested as a short around the 250 price area, has been down seven days in a row and is set to gap down further this morning. The May low at 177.22 remains our longer-term price target as the stock has already undercut both October lows at 217.32.
Short-sale target Workday (WDAY) has continued to move lower following its shortable gap-down move which suggested as being shortable in the 87-88 price area. WDAY closed yesterday at 81.96. Our near-term downside price target for the stock is the October low at 75.23.
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