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MLR - Premarket Pulse November 15, 2012

The major averages sold off on higher volume yesterday as the S&P 500 broke down sharply below its 200-day moving average where it had been hovering since late last week, while the NASDAQ followed the S&P's cue and broke lower as well. The downtrend remains well intact as the break off the September peak in the indexes begins to take on a parabolic character.

SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) are currenlty holding up though close to resistance at their respective 50-day moving averages and above their 10-day moving averages, but so far have not issued any new valid buy signals. We would not buy into the precious metals until we saw a clear buy signal since continued stock market weakness could negatively impact precious metals prices as a rush to liquidity develop. Given the pace of quantitative easing around the world, precious metals should continue their very long term uptrends at some point, and we believe it is a matter of remaining patient.

While Cisco Systems (CSCO) gapped up yesterday on the open on a strong earnings report announced the night before, it closed near the low of its trading range. CSCO's pre-market gap-up jacked the futures, and as we discussed in our missive yesterday morning, this merely set up short-sale opportunities. Baidu (BIDU) broke down sharply and is now at a 2-year low as a downtrend sets in for the stock. We continue to look for an undercut of the 522.18 low in Apple's (AAPL) prior base formation as well as a test of the 637 level and the 200-day moving average by Google (GOOG). Another short-sale opportunity appears to be presenting itself as LinkedIn (LNKD), which previously broke down hard through its 200-day lne several days ago, is building a small bear flag just under the moving average that we think is shortable on rallies up to or near the 200-day line between its current close and the 102.78 level.

After Michael Kors Holdings (KORS) reported a seemingly strong earnings report on Tuesday, it gapped up, but has sold off sharply since as it heads toward its 200-day moving average. KORS was a former leader that bucked the downtrend of the general markets up until the last several days, which speaks to the underlying weakness of the current market environment. The Market Direction Model remains on a sell signal.

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