Despite alllegedly "promising" meetings yesterday on the "fiscal cliff," the Obama Administration continues to beat the war drum as it pushes for tax increases of $1.6 trillion. As the U.S. government plays a game of chicken and the Administration takes a hard line, markets responded yesterday by reversing hard on heavier volume with the NASDAQ getting hit the hardest. The S&P 500 reversed back down through its 200-day moving average. The major averages have not been able to muster a bounce so some sort of capitulation may be necessary before we see a substantial bounce materialize. The market remains in a downtrend and our Market Direction Model remains on a sell signal. Investors should shun the long side of this market.
We continue to monitor the precious metals ETFs as they attempt to consolidate their respective bounces off of their respective 200-day moving averages. We are looking for some sort of pocket pivot buy point to develop here along the 10-day moving average where the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) are currenlty holding up. We advise remaining patient here as any continued sell-off in stocks could easily drag the precious metals down with them if a rush to liquidity ensues.
After the close, CSCO had a strong earnings report, causing the stock to gap up 7% and sent NASDAQ futures higher by a similar amount. With futures looking to gap higher at the open, shorting opportunities abound.
Apple (AAPL) reversed off the 550 price level yesterday while Google (GOOG) could not get above the 670 level before turning tail and closing below 660. Baidu (BIDU) continued its downside breakout as it pierced the critical $100 price level for the first time in many, many months. We believe BIDU has likely topped and will continue to move lower, reaction rallies notwithstanding.
Trip Advisor (TRIP) held up yesterday but we continue to view any rally up towards the 200-day line as shortable, using that line as a guide for an upside stop per our comments in yesterday's missive.