MLR - Premarket Pulse November 2, 2012

Published : November 2 2012 at 9:09 ET

The NASDAQ Composite rose 1.44% on higher volume after a spate of positive economic reports came through. This rise would normally be enough for a follow through day, or a buy signal on the Market Direction Model (see for complete details), but it was the market's third day at an attempted rally so there was no follow through. The S&P 500 meanwhile rose 1.09% on lower volume. The Market Direction Model, however, did trigger a cash signal yesterday.

Economic news on Thursday was overall strong, spurring the markets into rally mode:

=The ADP private payroll numbers and Institute for Supply Management (ISM) manufacturing index were encouraging, surpassing the Street's expectations, though Q3 productivity and auto sales disappointed.

=The final reading for the U.S. manufacturing purchasing managers index in October was 51.0, worse than the flash reading of 51.3 and down from 51.1 in September. This is a new three-year low reading for the Markit PMI index. Readings above 50 indicate expansion.

=Consumer confidence jumped in October to the highest level since February 2008. The consumer-confidence index increased to 72.2 in October from a downwardly revised 68.4 in September. A prior estimate for September pegged the level at 70.3. Economists had expected an October level of 73. Generally when the economy is growing, confidence readings are at least 90.

=Outlays for U.S. construction projects rebounded in September, with construction spending rising 0.6% in September, close to analysts' expectations of a 0.5% gain. Spending is at its highest level since 2009. The government also revised spending higher for the last two months.

=Jobless claims were unreliable because the storm in the East closed offices in New Jersey and Washington, D.C. Factory orders will be released a half-hour after the open. The Street's consensus view is for a 4.9% gain.

= The Bureau of Labor Statistics (BLS) released its monthly jobs report this morning. Non-farm payrolls increased 175,000 vs. expectations of 125,000 while the unemployment rate rose .01% to 7.9%. Futures are reacting somewhat positively pre-open.

Precious metal ETFs, the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) remained weak as the market may be anticipating future weakness in the Euro after the elections. European leaders may be intentionally keeping negative news quiet until after the elections in the U.S. as this would increase Obama's chance of being reelected.

Michael Kors Holdings (KORS) just barely missed qualifying for a pocket pivot buy point as volume fell about 30,000 shares short of the level required for a pocket pivot volume signature. We have previously discussed KORS as occuping the #1 spot on our buy watch list and we continue to look for a concrete buy signal in the stock should the general market turn and follow-through. It is trading slightly up pre-market and looks as if it will breakout of its recent consolidation which would be a buy signal.

Apple (AAPL) could not rally yesterday despite the strong general market rally and closed roughly even, a hair away from its 200-day moving average. Should AAPL break its 200-day, it will be the first time since 2009, and this $560 billion juggernaut would no doubt have a negative impact on the NASDAQ-100 and other related key markets.

Among short-sale targets, Baidu (BIDU) continues to cling to the 106 area which has served as support within the range the stock has formed over the past month, roughly. Stock remains shortable using a 110.50 stop. Google (GOOG) moved just above the high of its recent range within its current bear flag, closing at 687.59. We might view another 2-3% rally beyond this level as part of a normal reaction rally, and short-sellers should set their stop with this in mind, depending on their own risk preferences. (PCLN) which had previously stopped out after moving up through the 571.70 peak of its prior range, may come back into play as it gaps up to the 650 level, roughly even with the peak of mid-September from which it declined down to the 553 level into mid-October. Depending on how this acts from here, as well as the general market action, the stock may become shortable again, but we will simply monitor the situation for now. If the stock can plow through the 650 level it could simply attempt to come up the right side of a new potential base.

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