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MLR - PMP 11/6/14

Major averages finished mixed on roughly flat volume though the S&P 500 managed to close at new highs. Republicans won back control of the Senate which is considered good for markets as Republicans are known to be pro-business politicians. A dearth of actionable names in recent days despite the sharp bounce from market lows and weak, tentative action in many leading stocks show investors are still somewhat reluctant to commit substantial capital. Another potentially cautionary sign is the fact that the NASDAQ Advance-Decline line has made a series of lower highs and lower lows since July. Indeed, the market may need a few more days to digest its recent sharp gains as well as overcome the issue that there is currently no QE safety net. That said, the Bank of Japan increased its pace of QE which sets the tone for further central banks to follow suit, including the Federal Reserve, so markets may assume QE4 is in the offing.

Specialty drug manufacturer Jazz Pharmaceuticals (JAZZ) had a pocket pivot breakout after a strong earnings report but reversed and closed near its low. If you bought this and haven't sold it yet, keep your stops extra tight, preferably just below Wednesday's intraday low of 166.35. Institutional sponsorship has increased over the last 4 quarters, pretax margin 54.5%, ROE 32.1%, group rank 17. JAZZ demonstrates the danger of buying into obvious breakout type moves that can be considered somewhat late-stage.

Tesla Motors (TSLA) is gapping up this morning after announcing earnings yesterday after the close. After approaching the 250 level in after-hours trade yesterday, TSLA is back below 240 in pre-open trade. We consider the stock shortable here, using the neckline of TSLA's fractal head and shoulders formation at around 243-244 as a quick upside stop. Our expectation, however, is that the stock will reverse today and move lower, assuming it doesn't do so before the open.

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