A hot Consumer Price Index number on Friday that saw core CPI rise 0.6% month-over-month vs. expectations of 0.4% sent the major market indexes gapping sharply lower on Thursday morning. That led to a sharp outside reversals to the upside where the NASDAQ Composite, S&P 500, and Dow Indexes all posted undercut & rally (U&R) moves through their June lows. But the strength was short-lived as the indexes gapped up on Friday morning but quickly reversed back below their June lows as the U&Rs failed immediately.
The rally on Thursday only served to bring our short-sale targets stocks back into short-sale range. Punchbowl of Death short-sale target Celsius Holdings (CELH), a purveyor of energy drinks, rallied right into its 20-dema on Thursday, and on Friday offered shorts a clean entry along the 20-dema as it reversed at the line in a bearish outside reversal to the downside. Rallies back up into the 20-dema would bring CELH back into short-sale range from here, but the opportunity to short the stock in an optimal position at the 20-dema was there Friday morning for those alert to it. It has been a recent mainstay in our weekly Focus List Review reports so should have been on members' radar if they are oriented towards the short side.
First Solar (FSLR) also rallied into shortable resistance on Thursday and Friday as it barely cleared its 50-dma on Thursday and then rallied right into the 20-dema on Friday. At that point, in conjunction with the morning market reversal to the downside, FSLR offered a clean short-sale entry at the 20-dema and then promptly reversed, breaking back below the 50-day moving average in the process and triggering a second short-sale entry at the line. It now remains in a short-sale position as close to the underside of the 50-dma as possible while using the line as a covering guide.
We have also focused on big-stock lithium producer Albemarle (ALB) in recent Focus List Review reports. Last weekend we indicated that the stock was in a short-sale entry position along the 50-dma. It then rewarded short-sellers who took a position along the 50-dma early in the week with a sharp break on Wednesday as the stock made a break down to its 200-dma. It then bounced sharply off 200-dma support on Thursday amid the big market turnaround rally but reversed on Friday on a retest of the 200-dma. Any rallies that carry up as far as the 10-dma and 20-dema, which are now below the 50-dma, would bring ALB into short-sale range again, but we can also watch for any break below the 200-day moving average which would trigger a fresh short-sale entry if it occurs, using the 200-day as a covering guide.
Some members, mostly newer ones, expect us to issue intraday buy and sell signals for the Market Direction Model (MDM) as they fail to understand that the MDM is not a short-term day-trading or even swing-trading system. It is designed to capture intermediate-term trends, and has maintained a sell signal for several months as the 2022 bear market continues. This market is fraught with extreme short-term volatility at times, as was certainly highlighted by the market action on Thursday and Friday. The idea that the MDM should issue intraday signals in order to capture what is often bizarre and spontaneous volatility in both directions is an absurd premise at best. For that reason, as the NASDAQ Composite ends the week at new bear market lows, and until concrete evidence to the contrary is forthcoming, the Market Direction Model (MDM) remains on a SELL signal.