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MLR - Premarket Pulse October 12, 2012

The general markets and precious metals closed on the low of their trading ranges on Thursday. The markets gapped up strongly in the morning but as has been their habit lately reversed to close flat to slightly down. While volume was mostly less than the prior day, major leaders such as Apple (AAPL) sold off on higher volume, adding to the negative tone. AAPL now trades firmly under its 50-day moving average after violating that key moving average on Monday, a short-term sell signal. Meanwhile, the S&P 500 and Russell 2000 hover just above their 50-day moving averages while the NASDAQ remains well below its own 50-day moving average. Should the S&P 500 and the Russell 2000 confirm the NASDAQ's weakness by breaking below their own 50-day lines we might expect the NASDAQ's 200-day moving average, currently down at the 2955 price level, to come into play. This also coincides with the top of the NASDAQ's very choppy range throughout June and July, a potential area of support.

First-time jobless claims fell to 339,000. This was below what the Street expected, and this number also hit a four-year low. In addition, the government's initial press release failed to mention that an economist from the labor department told reporters that much of the decrease was tied to one state not reporting complete data, so the number could be exaggerated. A larger increase next week when the next jobless claims numbers are reported would confirm this.

Investors should remain cautious here as the potential for the market to move lower remains in force. While technically we are also in a position for a bounce, yesterday's "fizzle and reversal" did not provide much evidence of the market's ability to bounce. Futures are up again this morning, and it remains to be seen whether the same scenario plays out today.

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