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MLR - Premarket Pulse September 26, 2012

The general market had a high volume down day of distribution yesterday as Fed heads talked down QE3. In a Tuesday speech, Federal Reserve Bank of Philadelphia President Plosser said the central bank’s latest round of monetary easing was unlikely to help growth. Indeed, the number of jobs has shrunk by 2 million since QE1 was initiated in November 2008. While Obama claims that he created 4.5 million new jobs, this number only refers to the private sector. Meanwhile, public jobs are actually down 1 million. Further, Obama's count on this 4.5 million claim starts when private employment hit bottom in January 2010, a year after he took office. The distortions in gaming these numbers are alarming. During Obama's first year in office, he actually lost 4.3 million jobs.

This is all to say that quantitative easing has not helped jobs growth and may be tenuous in terms of helping economic growth. Nevertheless, while central banks continue to print money en masse, gold and silver should continue their uptrends as should other hard assets. This would include real estate and some stocks. Both gold GLD and silver SLV fell yesterday on slightly higher volume. This is not surprising given the overall tone of the day and that both have had good runs over the last few weeks. However, as we discussed in yesterday's market missive, violations of the 10-day moving average by the GLD or the SLV would be reasons to cut back or sell positions in these precious metals ETFs.

Apple (AAPL) is failing at the $700 price level and has declined 4% off of its recent peak of 705.07. This may be a cautionary sign for the general market given AAPL's status as a major, big-stock leader. Amazon.com (AMZN), another big-stock NASDAQ leader in the current market rally phase violated it 10-day moving average yesterday, which is a short-term sell signal.

Michael Kors Holdings (KORS) flopped badly after pricing its 20-million-share secondary offering yesterday, closing at 52.30, well below the $53 offering price and well below its $57.35 high achieved this past Friday. As we discussed yesterday, the 54.40 intra-day low of Friday's buyable gap-up served as a nearby selling guide, and investors should have adhered to that in terms of handlng any portion of a KORS position purchased on the basis of Friday's gap-up at higher prices. In any case, KORS serves as a sign of a faltering leader, and hence a cautionary sign for long investors in this market.

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