MLR - PMP 9/29/14

Published : September 29 2014 at 8:10 ET

The S&P 500 and NASDAQ Composite rebounded on weak volume though are currently sitting just above their respective 50dmas. It is still premature to say leading stocks are looking ready to continue their uptrends thus the correction may continue, but the market has been known to reverse to the upside on a dime on underwhelming, unconvincing volume right after putting in a shallow floor as it did June and October of 2013 and February and April of 2014, another factor that makes timing the market more challenging in this manufactured and manipulated environment. Part of the reason behind this market behavior besides QE is that institutional fund managers continue their struggle to keep up with the major averages so are quick to jump back into the market after the correction which establishes a floor sooner than later. Some also buy into the correction hoping to get better prices as they play performance catch up. Nevertheless, it is important to balance risk and safety measures by guarding against losses when the market does fall through a shallow trapdoor as it did in Jan-Feb and April of this year since a shallow trapdoor could turn into a more substantial one without much warning.

Futures are down sharply this morning as the market appears set to test last Thursday's lows. Gil likes Tesla Motors (TSLA) as a late-stage failed-based (LSFB) short-sale set-up here using the 50-day moving average as an upside guide for a stop. TSLA is looking to open below 244.71 which would constitute a violation of its 50-day moving average. LinkedIn (LKND) also looks shortable using the 20-day moving average as a guide for an upside stop. LNKD has already broken down through its 20-day moving average on heavy volume, and rallies into the moving average appear shortable as LNKD begins to form what may turn out to be the right side of a POD short-sale set-up. We have positions in both stocks.

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