MLR - PMP 3/10/15
Major averages rose yesterday on lower volume. The bounce so far has thus been weak as institutional support was lacking in yesterday's trade. The increasing number of distribution days is of concern though the number of actionable leading names in the last several days has been pronounced. As we wrote yesterday the potential for further downside existed in the fact that the NASDAQ was still well above the top of its prior range breakout point while the S&P 500 was approaching its 50-day moving average. This morning futures are down sharply as this possibility becomes more of a reality in real-time.
The question is whether the economy is truly improving as some of these reports have arguably produced questionable statistics, especially when it comes to unemployment and inflation. That said, psychology drives markets, so the bulls could argue as long as the Fed continues to print money, the bull market will continue. The bears could argue the current bull market is now 6 years old which is equivalent to an aging bull, plus the Fed has acknowledged rates may have to rise as the economy improves, though Yellen is a known dove thus will err on the side of caution before the Fed raises rates.
With all these cross currents, it is imperative to watch your stocks, keep stops tight, take your profits when you have them in context with the overall chart, and stay fluid as these markets can change on a dime.
Retailer Ulta Salon (ULTA) had a pocket pivot. It announces earnings after the close on March 12. Earnings and sales have been consistent, ROE 22.8%, group rank 33.
Photonic IC maker Infineon (INFN) had a pocket pivot. Earnings are soaring, sales are accelerating, institutional sponsorship has grown 3 quarters in a row, group rank 21.
Keep in mind that such buy signals in the form of pocket pivots do not imply automatic buys, but during a market correction can help identify stronger stocks that could outperform if and once the market finds a bottom and begins a new rally phase. For now, most of these pocket pivots should be made note of as stocks to play on a buy watch list.
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