MLR - PMP 6/18/13
Major averages rallied on higher volume, but pulled back later in the day off highs losing much of its gains when a Financial Times piece said Fed Chairman Ben Bernanke might scale back on quantitative easing, but then recovered some when the author of the piece tweeted that the Fed does not provide information to journalists, much less during a quiet period preceding tomorrow's meeting. Indeed, until signs the economy is truly recovering are present, QE is here to stay. Central banks don't want to prematurely slow QE only to see the economy take a nasty slide. The Fed meeting starts today and ends tomorrow with the policy announcement and Fed Chief Bernanke's press conference. This could result in a bit of market volatility, so investors should be prepared for this.
The Market Direction Model has remained in cash for almost the past month as the market struggles to find direction. With leading stocks waking up once again, and with two days of accumulation out of 3 on the S&P 500, with one of those days being a follow through day, the model is close to switching to a buy signal. The Fed is likely to give market solace when Bernanke talks further about slowing QE but not until clearer signs are present that the economy is truly recovering. So far, the signs are not there, so QE could continue on full measure for at least a few more months, allowing the market to continue its uptrend.
Chinese developer of software distribution websites, Qihoo 360 (QIHU) flashed a continuation pocket pivot buy point yesterday. While earnings were down in the most recent quarter, earnings overall have been strong, and institutional sponsorship has grown over the last 3 quarters. This stock has a tendency to violate its 50-day moving average routinely and is a Chinese company which carries higher risk. Position size accordingly.
Invensense (INVN), the leading provider of MotionTracking™ devices, had a buyable gap up in last Friday's trade. It has an excellent story, one that we've reported on many times in prior reports over the past two years, and may soon win Apple (AAPL) as a customer, a development that would likely cause it to gap up again, offering a second entry point. Talk out of Silicon Valley that AAPL has no choice but to use INVN's product as it is the most advanced technology and also the most cost effective. INVN's technology is also going to be used in "intelligent headsets" made by NG Store Nord which will sense head movement so they can emulate an environment of real sound coming from different directions. This has a number of potential applications and the developer of the headsets is already offering to provide the code to app developers.
“InvenSense has a large and fast growing developer community of 7,600 developers who recognize the broad application opportunities of motion sensors. These developers can now leverage the Intelligent Headset to develop game-changing audio augmented reality, contextually-aware and location-based applications,” said Ali Foughi, Vice President of Marketing and Business Development at InvenSense.
Earnings and sales continue to accelerate strongly, with earnings up 114% and sales up 67% in the most recent quarter, and institutional sponsorship has increased since it went public 6 quarters ago. That said, it is still within its basing pattern, has come straight up off its bottom, so may need to do a bit more work before it can enjoy a constructive uptrend. Position size accordingly, but this current gap-up may provide a very early entry point in anticipation of further news-related upside price moves.
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