MLR - Premarket Pulse January 16, 2013

Published : January 16 2013 at 8:21 ET

General markets finished mixed but near their highs for the trading day on lower volume in what is so far a shallow two-day pullback off the highs.

U.S. retail sales grew 0.5% last month, beating the 0.2% consensus forecast, and above the 0.3% increase in November. Some say as much as two-thirds of economic activity is attributed to consumer spending, so this news is taken as another piece of evidence that the economy is not necessariy in free-fall. However, keep in mind that some of these statistics are manipulated, but nevertheless, QE3 manipulation is affecting some of these metrics to give the appearance of an economy that is slightly improving.

The SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) both headed higher towards their respective 50-day moving averages. Fed Chief Bernanke's comments made on Monday continue to help the precious metals. There is no choice but to raise the debt ceiling which, according to Geithner, needs to be raised as early as mid-February. While we are in QE3, expect QE-4ever at a theater near you. All the world's a stage, and this is truly a comedy of errors. Meanwhile, as the precious metals approach their 50-day moving average this sets up the potential for a pocket pivot buy point somewhere along the 50-day moving average, so we continue to watch this closely.

Apple (AAPL) closed below the 486.63 low of mid-February as it attempted to undercut and rally a couple of times during the day, but to no avail. The low in mid-February was a one-day low, so its not clear just how much "support" lies at that price level. AAPL's chart shows a big-volume downside "breakout" through the neckline in a head and shoulders topping formation, no matter how you want to draw it. This is fairly textbook, as the neckline now becomes your maximum trailing stop on the upside, although one can devise a trailing stop level of their own depending on one's risk and trading preferences. After hours yesterday, some analyst babbling away on CNBC declared that AAPL is at or near a bottom, but we would point out that this particular analyst uses reversion-to-the-mean, overbought/oversold methods to determine when a movement in one direction has allegedly run its course. In our view, when the weakness in AAPL is so persistent any severely "oversold" condition can just as easily imply further weakness ahead as it is more of an indication of just how bad the technical situation is. Regardless of whatever gap-up move we might see this morning on the basis of some analyst's overnight call of a bottom, the neckline remains upside resistance and an ultimate trailing stop for the stock on the short side, end of story. For all we know, this morning's small gap-up is a short-sale opportunity.

Facebook (FB) users in the U.S. fell by nearly 1.4 million in early December, according to new data from social media monitoring company SocialBakers. FB has more than 167 million users in the U.S. and 1 billion worldwide, so while the drop is very small, it could be due to the site's experimental fees where they tested charging users to send a message to someone outside their "friends" list. FB is no doubt in testing mode to see how they can effectively monetize their massive following. The stock has climbed off its late-2012 lows but current earnings have been flat. FB will need to prove it can continue to grow its revenues to support its market cap of $65 billion, let alone grow its market cap to well beyond $100 billion, as its current valuation remains very high. One potential bright spot is the new “graph search” feature it unveiled Tuesday as it has great potential as an online matchmaker, the company says. FB demonstrated how the search feature could helps its 1 billion users find people based on their interests, photos and places they’ve been, then showed how singles could search through data on their “friends of friends who are single.” The feature “allows people to use the graph to make new connections,” Facebook said in a statement.

While we have seen a few pocket pivots in stocks over the past couple of days, these are occurring in stocks with less-than-robust earnings and sales, such as Enersys (ENS) which, while growing earnings 59% in the most recent quarter, only grew sales by 1% in a continued five-quarter sales deceleration. Thus we generally pass on these types of pocket pivots unless there is some other overriding technical theme. For now the market remains in an uptrend, and it remains to be seen how much progress will be made from here.

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