MLR - PMP 2/28/14
The major market averages were up yesterday on lower volume. Economic data has been mixed with durable goods orders for January and the Kansas City Fed's manufacturing index for February stronger than expected, but first-time jobless claims came in weaker. Fed Chair Janet Yellen testified yesterday that economic weakness may require a slowdown in tapering, which is consistent with out view that the Fed is to a large extent locked into QE for the foreseeable future.
The recent bounce in commodities that breaks its 2 year downtrend on the CRB Index is a sign that either the global economy is recovering or that quantitative easing will continue at its torrid pace or a combination of the two. Precious metals may also have put in a significant bottom as both are now above their respective 200-day moving averages. Market internals also have been strong with a number of quality pocket pivots and buyable gap ups over the last several days as the Advance/Decline lines on both the NYSE and the NASDAQ have moved to new highs along with the market. We are also seeing positive feedback in that a majority of buy signals, particularly among buyable gap-ups, are resulting in higher price movement.
Reports indicate that Tesla Motors (TSLA) is seeing strong demand for its convertible bond offering, originally slated to be $1.6 billion in size. So far the company has raised $2 billion and this may go as high as $2.3 billion based on overallotment provisions, according to the Financial Times. We see any pullbacks in the stock as the offering is finally priced as buying opportunities.
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