MLR - Premarket Pulse November 9, 2012

Published : November 9 2012 at 9:11 ET

The NASDAQ Composite and S&P 500 indices both continued their downtrends with the NASDAQ moving further below its 200-day moving average while the S&P 500 has now logged its first close below the 200-day moving average since the summer. The Russell 2000 index also broke below its 200-day for the first time in Thursday's trade.

ECB President Mario Draghi maintained a downbeat outlook on the euro-zone economy Thursday, saying that risks to the outlook remain weighted to the downside as economic indicators signal further weakness in the second half, while survey data offer no evidence of a pickup before the end of the year. Draghi said the ECB's monetary-policy stance has provided underlying support to the economy and said the central bank remains ready to implement its bond-buying program. Earlier, the ECB left its key lending rate unchanged at 0.75%, as expected.

In economic news, applications for U.S. unemployment benefits dropped by 8,000 to a seasonally adjusted 355,000 in the week ended Nov. 3, a number that was distorted by hurricane Sandy. Economists expected claims to decline to 365,000, but they warned that the storm could make the data unreliable for a few weeks as many people who were affected in large states such as New York and New Jersey may not have been able to file claims right away.

The U.S. trade deficit narrowed in September to $41.5 billion after exports rose more quickly than imports, the Commerce Department said Thursday. Economists had forecast a $45.1 billion deficit. August's trade gap was revised to $43.8 billion.

SPDR Gold Shares (GLD) ETF and iShares Silver Trust (SLV) both rallied on lower volume with GLD and SLV still under their respective 50-day moving averages. With the downtrend intact in the major stock market averages, precious metals are acting more like safe havens, and the GLD has managed to rally back up into its 50-day moving average after finding support at the 200-day line, while the SLV has also found support around its own 200-day line as it bounces up towards its 50-day moving average.

Apple (AAPL) continued its downtrend on increasingly vigorous volume. It now trades firmly below its 200-day moving average, and one would have to go back to early 2009 to see the last time that AAPL traded this far below its 200-day moving average. AAPL appears poised to test the lows of its prior base at 522.18, and for those working a short position per the strategies outlined in our live webinars this would constitute a reasonable downside target.

Google (GOOG) also continued lower on increased volume following Wednesday's downside "breakout" from its inverted bear flag formation with a downside target at the 200-day moving average, currently running through the 536.01. Meanwhile the Market Direction Model (MDM) remains on what is so far a profitable sell signal issued three days ago.

Driving another stake into the heart of former market leaders, Michael Kors Holdings (KORS), which had previously been holding tight above its 50-day moving average, crashed through this key moving average on very heavy selling volume despite its technicals and fundamentals looking very strong. This speaks to the nature of this market- there are very few stocks if any worth going long, and those that continue to act well are simply next in line to fall apart. This is the essence of a bear market, and we believe the broad breakdown in market leadership is symptomatic of a potentially sustained bear market type of trend. If you are not short this market, then at the very least cash is king!

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