MLR - PMP 4/23/14

Published : April 23 2014 at 8:23 ET

Major averages rose on higher volume as the bounce continues. Leading stocks are participating but actionable buy points remain to be seen. With S&P 500 on the sixth day of its rally and nearing new highs once again, it is potentially repeating prior bounces since January 2013 which led to a continuation of the uptrend. The difference this time is that far more damage has been done to leading groups, and when such groups fall, it usually bodes badly for the general market. That said, quantitative easing is what led to pushing the market higher after corrections of less than several percent since January 2013. So the question is whether QE history will repeat once again despite the more pronounced damage done to leaders. Price/volume action will show the way.

Netflix (NFLX) found resistance at the 380 price area which roughly coincides with the peak of its left shoulder within a potential head and shoulders formation that remains in-process. This occurred after a gap-up move following its earnings announcement Monday after the close. This morning Gilead Sciences (GILD) is gapping up following a "blowout" earnings announcement, but so far the move in after-hours trade yesterday and pre-open today has taken the stock up to a point near its 50-day moving average. Like NFLX, GILD may also simply be forming a right shoulder within an overall head and shoulders complex. The action in these stocks over the next few days should provide some clues in this regard.

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