MLR - Premarket Pulse November 27, 2012
The market remains in what we consider to be an oversold bounce with the NASDAQ Composite now within a heartbeat of its 200-day moving average while the S&P 500 remains above its own 200-day moving average but still a little over 1% below its 50-day moving average. So far we consider the action to be normal for an oversold bounce given the market's undercut of the July lows two Fridays ago, setting up a logical poiint from which the market could rally after becoming somewhat "parabolic" to the downside.
Leadership remains scant, but we note that two pocket pivot buy points we have cited in recent reports in Regeneron Pharmaceuticals (REGN) and Commvault Systems (CVLT) have borne some fruit. Apple (AAPL) continued its bounce after undercutting the 522.18 low in its prior base, and so far has retraced about 1/3rd of the its downside move off the 705.05 all-time high of late September. This appears as normal, and as the stock approaches its 200-day moving average at 598.38 we might look for the stock to form the peak of a possible right shoulder within an overall head and shoulders topping formation. The situation, of course, remains fluid, but we would not expect the stock to simply launch to new highs from its current position, and consider the oversold bounce and retracement of the prior, steep downside move to be within the realm of normal technical action following the break off the peak.
Both the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) are holding above their 50-day moving averages after recently moving back above this key moving average. While one can extrapolate out a possible pocket pivot based on Friday's short trading session, we would prefer to see a bona fide pocket pivot buy point emerge here along the 50-day moving average in both or either the GLD and SLV as confirmation of the metals' recent constructive action. Investors should keep a close eye out for this.
Investors who seek to play the long side of this current bounce should stick to the select few stocks that have remained in constructive bases and which have issued bona fide buy signals, such as CVLT, for example, while remaining patient and allowing the market to provide further confirmation that a true rally phase has indeed begun.
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