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MLR - Premarket Pulse March 15, 2013

The Dow made it ten up days in a row as all the major market averages rose on increased volume that still came in well below-average. While the buying volume continues to come in relatively light, selling volume is mostly non-existent. Thus in the absence of any conviction on the sell side, the market simply continues to move higher.

Leading stocks remain constructive. Data protection and recovery company Commvault Systems (CVLT) broke out of a six-week consolidation yesterday on huge volume. There was no apparent reason for the massive breakout, but CVLT is a stock we've discussed previously when it issued a buyable gap-up back on January 30th.

Homebuilding stocks are attempting to recover after getting hit hard over the last several weeks. A few names had pocket pivots such as RYL and PHM but there are issues with homebuilders so tread carefully. Mortgage servicer Ocwen Financial (OCN) also had a pocket pivot that was characterized by a narrow price range and relatively light volume that did qualify, however, as a pocket pivot voluem signature. The mortgage-servicing stocks in general, however, remain weak, with Nationstar Mortgage Holdings (NSM) testing its 50-day moving average after failing on a recent breakout. Aggressive Obama policies have served to prop up and maintain mortgages to under-qualified lendees which could create a sort of "echo bubble" but is nevertheless favorable for housing stocks in the short-term given that immediate supply is relatively tight.

This morning one analyst is out speculating that Apple (AAPL) "could" imitate Microsoft (MSFT) from the 1980's by tendering to buy back its stock as an expression of confidence in its business. We are not sure what basis in reality such speculation has, but it may only serve to set up another shortable bounce in the stock. As the market has rallied over the past two-and-a-half months, AAPL has not participated in the rally.

Yesterday other big NASDAQ 100 stocks were hit, including Intuitive Surgical (ISRG) and Amazon.com (AMZN) which was with an analyst downgrade. This has led to relative underperformance in the QQQ-based ETFs which have gone nowhere since the follow-through of last week, while the NYSE-based indexes have moved steadily higher. Whether this means that the QQQ-based ETFs will now play "catch up" remains to be seen as Dow stocks such as International Business Machines (IBM) and McDonald's (MCD) help to drive the market's rally. For now, the general market trend remains up.

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