Major market indexes remain in freefall as the NASDAQ Composite became the final major market index to breach its 200-day moving average. Positive earnings from Amazon.com (AMZN) and Intel (INTC) on Thursday evening triggered a NASDAQ 100 rally early in the day on Friday that eventually faded and reversed as typical "NDX prop" similar to Bill O'Neil's "Dow prop." This is when money flows into a narrow index like the Dow or the NASDAQ 100 which is highly influenced by a small handful of mega-cap tech names in order to make it look like the market is doing just fine, essentially propping it up.Friday's early rally reversed at the 200-day moving average on weak volume, attesting to a lack of buying interest amid what looked to us like a classic NDX prop. At this stage all of the major market indexes are well extended to the downside as they cascade lower with the potential for a final, climactic panic low rising as long as the market cannot bounce in a meaningful way. As we like to say these days, the market looks butt-ugly to be sure, but butt-ugly can always become butt-uglier.
Short-sale targets we have reported on throughout October have continued to work. Implementing methods discussed in Short-Selling with the O'Neil Disciples (John Wiley & Sons, 2015), it was not difficult to pick off a number of additional short-sale entries as the breakdowns evolved.
Apple (AAPL) was first reported on as a short-sale entry along its 50-dma three Tuesdays ago on October 10th. It again offered short-sellers entry at the 50-dma last week before breaking lower this week. The stock triggered another short-sale entry at its 200-dma on Thursday as it continues to trend lower off its July peak.
Adobe Systems (ADBE) was also reported on as a short-sale on the same day, October 10th but instead rallied back up towards its prior high and eventually evolved into double-top short-sale (DTSS) at the left-side peak in its pattern at 569.98. From there it has broken steadily lower, triggering short-sale entries at its 20-dema and 50-dma on the way down this past week.
Agco (AGCO), Confluence (CFLT), MongoDB (MDB), Qualcomm (QCOM) and TJX Companies (TJX) were reported on as short-sale set-ups on October 11th and have all trended lower since then. This past week we saw fresh short-sale entries in all six of these names. AGCO was a short entry at the 10-dma on Thursday while CFLT triggered a short entry as it broke the 200-dma on Wednesday. MDB was a short-sale entry along 50-dma resistance on Tuesday and broke lower from there. QCOM was a short-sale entry at 20-dema resistance on Wednesday while TJX was a short-sale entry at its 50-dma on Tuesday. All six are now extended on the downside.
Amazon.com (AMZN), Cisco Systems (CSCO), and Workday (WDAY) were reported on as short-sale set-ups on October 12th. AMZN worked well as it came down to its 200-dma on Thursday before reporting earnings that afternoon after the close. An earnings beat led to a gap-up move in the stock on Friday that stalled around the 10-dma and 20-dema. We would this for one of two outcomes a) a continued rally into the 50-dma where it may encounter shortable resistance at the line or b) a clean break below the 10-dma and 20-dema which would then trigger a short-sale entry using the two moving averages as covering guides.
CSCO was a short on Tuesday as it reversed at 20-dema resistance and then broke lower on Thursday while WDAY is now trapped below its 200-dma. Technically, this can be considered a potential short-sale entry spot using the 200-day line as a covering guide, but keep a tight leash on it as WDAY is near-term extended to the downside.
While it is difficult to find fresher short-sale set-ups, on Thursday we did report on cybersecurity leader CrowdStrike (CRWD) as it began to test the 172.65 left-side peak and prior breakout point in its pattern. On Thursday it closed just below 172.65 but on Friday was able to recover slightly amid the NASDAQ 100 prop rally to close at 172.82, 17 cents higher. We would watch for any break back below 172.65 as a possible short-sale entry trigger using the 172.65 left-side peak as a covering guide.
The Market Direction Model (MDM) remains on a SELL signal.