MLR - PMP 8/13/13

Published : August 13 2013 at 8:16 ET

Major averages finished mixed on lower volume. They have been trading sideways more or less over the last four weeks. The question remains when the Fed will slow quantitative easing which would occur when the economy shows signs of a true turnaround. But because the Fed does not want to taper too quickly, odds are that they will be dovish with respect to slowing QE so as to not upset the fragility of the recovering economy, thus the uptrend could well be intact despite the large number of distribution days on the NASDAQ Composite. Leading stocks continue to act well, more or less. The Market Direction Model is on deck for a possible switch back to a buy signal should the sideways action resolve to the upside.

Netflix (NFLX) had a weak pocket pivot as recent price/volume action is slightly wedging so keep stops tight and positions small if you decide to trade this name at this time. Earnings and sales are accelerating in this turnaround play, but forward P/E is 170 so it is questionable whether this stock can keep its uptrend at its current pace.

Infoblox (BLOX) had a pocket pivot. Earnings and sales are strong and institutional sponsorship has increased every quarter since the company went public 5 quarters ago. BLOX offers automated network control and appliance-based solutions.

iShares Silver Trust (SLV) had a pocket pivot in Monday's trade as it firmly moved above its 50-day moving average. Knowing that SLV can be volatile and sloppy, position size accordingly. Precious metals bounced due to a potentially recovering global economy which exerts renewed demand on silver and gold by countries such as China, then European nations, UK, and the US, since economies somewhat correlate. Meanwhile, should the US economy recover sufficiently, the Fed would slow quantitative easing, which is bad for precious metals. Thus, a tug-o-war ensues between these two issues. Since the Fed will not be slowing QE until September at the earliest, and even then, they are likely to hold off any slowing of QE because they dont want to be hasty in unsettling the fragile economy, silver and gold may enjoy a brief uptrend.

Exone (XONE) had traded sufficient volume for a pocket pivot. XONE's price/volume action is wedging but in exceptionally strong cases, the stock can still launch from such a pattern. Due to the added risk and volatile nature of this stock, position size accordingly. Meanwhile, other 3-D stocks such as SSYS are hitting new highs and DDD is looking to break out of its current consolidation.

Tesla Motors (TSLA) undercut the low of its buyable gap up day by more than 2-3%, prompting a sell, but then gained support at its 10-day moving average. It is best to be cautious with such volatile names. That said, assuming it has not topped thus is still a leader, it should set up again for reentry.

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