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MLR - Premarket Pulse November 5, 2012

The NASDAQ Composite and S&P 500 both staged bearish price reversals on Friday, closing lower but on lighter volume compared to Thursday. The 50-day moving average served as resistance for the S&P 500 and the NASDAQ Composite logged an outside reversal as it retested its 200-day moving average for a sixth time. When an index tests a moving average multiple times it is more likely to eventually bust through rather than bounce. With Tuesday's presidential elections looming, volatility is a possibility in either direction. That said, a Romney victory is liable to spur a rally in equities as he is seen as pro-business and an advocate of smaller government, although in an era of $1.5 trillion budget deficits, this is a relative term. An Obama victory could spark a move in either direction. A continuation of the Obama Administration is viewed as negative for business and economic growth, sparking a sell-off, but it will also likely continue to fuel the need for quantitative easing that might be seen as pushing asset prices higher. In any case, an Obama victory would potentially be disastrous for the markets in the long run.

In economic news, the U.S. economy gained a better-than-expected 171,000 jobs in October and the unemployment rate ticked up to 7.9% from 7.8% as expected. Economists expected a 120,000 increase in jobs, with an unemployment rate of 7.9%. Two positive revisions: The number of new jobs created in September was revised to 148,000 from a prior estimate of 114,000, while August's figure was revised to 192,000 from 142,000.

Precious metals ETFs, the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV), both sold off on increasing volume due to a spike in the U.S. dollar as the market may be anticipating future weakness in the Euro after the elections. The GLD is testing its 200-day moving average while the SLV has bearishly pierced through its own 200-day line. European leaders may be intentionally keeping negative news quiet until after the elections in the U.S. as this would increase Obama's chance of being reelected.

Apple (AAPL) closed below its 200-day moving average for the first time since June 2011, and it did so on higher volume. The weekly chart of AAPL shows heavier volume in its recent downtrend off its peak, yet another sign that AAPL has potentially topped, at least for the intermediate term, although given AAPL's eight-year price run it would not surprise us to see that its "life-cycle" is taking a bearish turn.

On the long side, cash is king, while the short side continues to develop, and we expect to continue to flag potential short-sale set-ups in our real-time reports as any further potential correction unfolds.

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