MLR - PMP 3/26/14

Published : March 26 2014 at 8:57 ET

The major market averages rose yesterday on lighter volume. The NASDAQ Composite has taken most of the damage, but has still managed to close above its 50-day moving average after nasty intraday reversals two days in a row. In January of this year, both the S&P 500 and NASDAQ Composite took heavy damage which led to further downside. This time, the S&P 500 has held up rather well partly due to the financials outperforming while biotechs have weighed down the NASDAQ. The question is whether the current damage which has been appreciable in leading stocks will result in further downside. History shows this to be likely but quantitative easing which is still alive and well should prevent any steep correction from occurring. With market averages only off only a few percent or less, odds favor market averages correcting a few more percent before finding a floor given the amount of damage done to leading stocks. Keep your stops extra tight in the current environment. The models sit in cash but are ready to switch signals in the days ahead as warranted.

Taser International (TASR) had a pocket pivot yesterday coming off of its 50-day moving average and up through the 10-day moving average. Earnings and sales have accelerated but the stock tends to violate its 50-day moving average routinely so selling into strength may be a better strategy should the stock move back up to its highs. As well, in this market, taking long positions carries more risk given the broken down state of many leading stocks.

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