The major market indexes rose yesterday on lower volume with the S&P 500 closing just under its 50-day moving average while the NASDAQ showed much greater strength with a rally in excess of 1%. The low volume was due largely to the 3-hour Nasdaq-listed-stock halt which affected all exchanges a liquidity dried up. This morning futures are up slightly at the time of this writing, and the NASDAQ is currently in a three-day rally attempt of of the lows of this past Monday. Yesterday's "Flash Freeze" only added to the "Schizofedic" market action following the Fed's release of its prior meeting minutes on Wednesday. The market spun around in maddening fashion for two hours following the release of the minutes, only to close very weak on the day on heavier volume - clearly negative technical action. This is then immediately followed by a big gap-up move in the futures the next morning, which was yesterday, and the strangeness of the day was enhanced by the NASDAQ exchange's "Flash Freeze." Life in the age of QE.
This "Schizofedic" market action action that occurs just after Fed announcements or the release of minutes, is potentially born of market manipulation. Yesterday's rally may have been just that. Overall, quantitative easing has not propped markets higher for about the last five weeks now, and markets have been trending lower for the last three weeks. Markets are forward looking and are perhaps telegraphing the start of tapering, much as the bond markets have been telegraphing this tapering for a number of months. Technically the NASDAQ is in position for a fourth-day or later follow-through type of day
Fleetcor Technologies (FLT) had a pocket pivot/flag breakout move yesterday that might have been exaggerated somewhat by the day's lack of liquidity on all exchanges due to the NASDAQ's "Flash Freeze." Nevertheless, this action comes on the heels of a subtle pocket pivot along the 10-day moving average that occurred last week and which we previously reported on. Institutional sponsorship has grown over the last 10 quarters, pretax margin is 52%, ROE is 29.7%, and earnings remains robust.
Among names that appear to be trying to hold up, investors mght want to keep an eye on Questcor Pharmaceuticals (QCOR), Green Mountain Coffee (GMCR), Qihoo 360 Technology (QIHU), Cubist Pharmaceuticals (CBSDT), Three-D Systems (DDD), Facebook (FB), Nationstar Mortgage Holdings (NSM), Netflix (NFLX), LinkedIn (LNKD), and Tesla Motors (TSLA), all of which have held up well during the market's pullback. While LNKD and TSLA have acted somewhat erratic as they both violated their recent buyable gap-up lows, forcing rules-based investors to sell, the stocks both found support at their 20-day moving averages on their recent pullbacks and have moved back above the intra-day lows of the buyable gap-up moves. While this is frustrating action for those who stick to their selling rules, the stocks are still holding up well, although TSLA received a big boost from a special on the company that was featured on CNBC and is quite extended from its 200-day moving average, as we noted a couple of weeks ago following its buyable gap-up move.
3D printing stocks, led by Stratasys (SSYS), have remained strong, and we note that Exone Company (XONE) has pulled back to its 20-day moving average, a moving average that has served as support for a number of leading stocks on this recent market pullback, while DDD continues to hold tight just above its 50-day moving average. Leading medical name Valeant Pharmaceuticals (VRX) has also pulled back to its 20-day moving average.
While further weakness may prevail in the general market, we do note strength in certain names which should remain on investors' buy idea lists in the event the market is able to find its footing and resume a rally. Otherwise, the Market Direction Model remains on a sell signal until further notice.