Current Focus List
There are currently no names on the VoSI Focus List.
The VoSI Focus List is a compilation and reference list of stocks for which Pocket Pivot or Buyable Gap-Up Reports have been issued and which have been deemed suitable for inclusion on the Focus List. Not all stocks for which a Pocket Pivot or Buyable Gap-Up report has been issued will necessarily be added to the list. It is not intended as a "buy list" or a list of immediately actionable recommendations. Stocks on the list may or may not be in proper buy positions, and investors should exercise discretion and proper judgement in determining when and where stocks on the Focus List can be purchased. The following notes are intended to assist in this process. Please note that members can enlarge the Focus List image by clicking on the body of the email and then holding the Control Key while pressing the "+" key until it is large enough to read.
General Observations:
In a sell-off reminiscent of that seen this past February, the divergences seen the prior week came to ugly fruition this past week as the major market indexes all broke sharply to the downside. The NASDAQ Composite Index, along with the S&P 500 and the Dow Jones Industrials Indexes, broke below its 200-dma. Unlike the S&P and the Dow, however, it was unable to regain the 50-dma on Friday. It has undercut a prior low at 7419.56 and rallied back above that low, which could set in motion a natural oversold reaction rally.
Our caution towards this market as exemplified by the fact that we did not add more names to the Focus List even as the Dow and the S&P 500 made all-time highs was vindicated this past week. In addition, the last three names on the list all broke their final selling guides and were all removed from the list. For the first time since its inception on VoSI, the Focus List is empty. As the market has continued in what has been called the longest bull market in history, the Focus List has always been populated by at least a handful of names. The fact that it now represents a null set may be an indication that this current correction off the recent market highs will develop into something worse, although it is still too early to reach a firm conclusion in this regard.
This past week's action represented the first break off the peak after a sustained uptrend. After the first price break, we would look for traditional short-sale patterns and set-ups to begin showing up, and we would then anticipate issuing Short-Sale Set-Up Reports as these begin to develop. This assumes, of course, that this latest price break is not just another "reset" like we saw back in February and March of this year. If this is truly going to develop into a deeper correction or bear market, then the short side has yet to develop in earnest.
That said, Gil Morales has revealed his latest research and methods on the short side during our live market webinars. The live webinars are intended to add value by providing members with exclusive insights into our latest research and approach to the markets in real-time. Two Fridays ago, Gil discussed his latest short-selling technique, the LSA-Method, which tackles the problem of how to capitalize on the sudden downside breaks off the peak that have at times characterized the action in leading stocks during an unusual, non-traditional QE-influenced market where typical short-selling patterns have only resulted in stocks turning back to the upside after a short period of selling off hard.
Stocks discussed in the October 5th webinar, such as SQ, NVDA, ADSK, and others, that were showing "LSA" signs that fit Gil's latest short-selling models and the action that would trigger a short-sale entry, were discussed. All of these worked quite well on the downside over the past week. Indeed, during the webinar, Gil disclosed that he was taking a position in ADSK in real-time at the 20-dema. The chart below shows what happened from there.
The paradox here is that this type of LSA-Method set-up does not fit the traditional short-selling methods discussed in the two prior books Gil authored on the topic of short-selling, How to Make Money Selling Stocks Short (John Wiley & Sons, 2004) and Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading (John Wiley & Sons, 2015). Traditional short-selling methods dictate that one wait for a set-up to emerge after the first break off the peak in the general market and leading stocks, with short-sale entries often not occurring for at least 2-8 weeks or more after the initial break.
The tremendous downside velocity with which so many leading stocks came apart this past week was sudden and surprising. But it did serve to validate Gil's latest work on the short-side. Nevertheless, the action over this past week represents the first, initial break off the peak in the general market and in a wide number of leading stocks. As this progresses, and assuming that we are in fact entering into a more thematic, trending bear phase, then we expect to issue Short-Sale Set-Up Reports as these situations "ripen."
The Market Direction Model (MDM) went from a sell signal to a cash/neutral signal early on Friday, reflecting the potential for a near-term oversold reaction rally.
Removed from the List this Week: Amazon.com (AMZN), Fortinet (FTNT), and Square (SQ).
Focus List Stocks Expected to Report Earnings this Week: None.
Notable Action:
Amazon.com (AMZN) violated its 50-dma on Monday and broke to lower lows for the rest of the week before undercutting and rallying back above the prior 1739.32 low of late July. It has been removed from the list.
Fortinet (FTNT) showed its first cracks two weeks ago when it broke below the 20-dema on heavy volume. It then violated the 50-dma on Thursday and is currently attempting to stage an oversold reaction rally back up towards the 50-dma.
Square (SQ) violated its 50-dma on Thursday on a massive-volume gap-down and then attempted a gap-up recovery from an oversold condition on Friday. The move stalled a bit, and the stock remains in no-man's land well below its 50-dma.
