MLR - Premarket Pulse May 6, 2013
A BLS jobs report that was neither too strong nor too weak, thus not an indicator of the bottom falling out of the economy nor too strong to jeopardize continued QE from the Fed sent the major market averages higher on mixed volume. This is the first time in 17 years that the market has not had at least a 5% pullback this far into the year. Quantitative easing continues to put a floor under the market. Thus following political posturings and letting one's emotions dictate what the market "should" do often fails. While price/volume trend following methods have been the most challenged since October 2011, such weakly trending and trendless periods always come to an end as other variables come into play which create new trends. Patience is key and has eventually been rewarded in years past as the Market Direction Model has shown in decades past, and even in entirely different eras which have been thoroughly backtested such as in the roaring 1920s, the depressionary 1930s, and the stagflationary 1970s.
Housing stocks showed strength on Friday. Fortune Brand Home & Security (FBHS) had a buyable gap-up move on a strong earnings report. Keep in mind this stock as well as others in the group can violate their 50-day moving average with regularity which makes staying in such a stock that much more challenging. Synthetic building materials maker Trex (TREX) had a BGU/pocket pivot also on a strong earnings report.
Biotechs continue to lead as the industry group is ranked 4th. Gilead Sciences (GILD) and Regeneron Pharmaceuticals (REGN) both powered higher on strong earnings reports. Meanwhile, social networking leader LinkedIn (LNKD) gapped down from Thursday's all-time high close on huge selling volume Friday, a move that is in almost all cases an urgent sell signal. Investors who elected to hold through Friday's action are now faced with a stock that has closed below the 50-day moving average for the first time since it began its move in January, and a move below Friday's intra-day low would constitute a 50-day moving average and a final sell signal for the stock.
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