The Gilmo Report

November 13, 2016

November 13, 2016

The market has taken on something of a sloppy character as we see groups of stocks moving helter skelter in either direction. What is most interesting to see is that we have another narrow, major market index leading the market to new highs in the Dow Jones Industrials Index. The venerable old Dow broke out to all-time highs on Thursday, a fact that was trumpeted (no pun intended) by the financial media.

The last time we saw a narrow major market index rocket to all-time highs, it was the NASDAQ 100 Index grabbing all the headlines back in October. That breakout to all-time highs was also the last up day before the index and the general market embarked on a nine-day sell-off.

 

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The move in the narrow Dow to new highs is somewhat balanced by the fact that it has been joined by the Russell 2000 Index in new-high price territory. While this might give the impression of a risk-on move in the market, the reality is that it has been driven mostly by small financials and small bio-techs. Both of these groups have gone nuts on the upside as President-elect Trump’s policies are seen as beneficial.

 

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Meanwhile, the NASDAQ Composite and S&P 500 Indexes are singing the old Steeler’s Wheel tune, “Stuck in the Middle with You,” as they each hover about their 50-day moving averages without themselves moving into new-high territory. The NASDAQ remains just below its 50-day moving average after getting hit with a brutal, high-volume reversal and distribution day on Thursday.

This move resulted from a whole slew of big-stock NASDAQ names getting smashed as sellers bolted from these names. So while the Dow was up over 200 points on Thursday, the NASDAQ was down just over 42 points or 0.81% in a stark divergence.

 

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The S&P 500 Index is, conversely, on the topside of its own 50-day moving average. On Friday the index closed down on lighter volume but held above the 50-day line as it found support off of the intraday lows. This looks constructive. Whether the NASDAQ or the S&P 500 will join the Dow and the Russell in new-high ground soon is subject to debate.

The action of big-stock NASDAQ names doesn’t look all that healthy for the market in general. If this Trump Rally is to continue then it might have to continue to be driven by what is essentially a massive rotation into stocks that are perceived to benefit from the President-elect’s policies.

 

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In general, the action is somewhat confusing and full of cross-currents. Does the instantaneous and somewhat knee-jerk move into Trumpkin Stocks turn out to be a temporary allocation shift that runs its course rather quickly, leading to a market rollover? Or do Trumpkin Stocks become the new darlings of the market that will drive a major new bull market trend? Or do we see some of these beaten-down tech names revive in classic Ugly Duckling fashion? This is difficult to figure out in a macro sense, so I simply revert to what the stocks are telling me.

In this case, the message has been mixed and so I have responded with a bifurcated approach, whereby I simply operate according to the specific set-ups I see in individual stocks. A mixed message dictates a mixed approach, and being willing to short that which is going down while going long that which is going up strikes me as a practical solution.

Viscerally speaking, over the past week I’ve been able to make money on both the long and short sides of the market, depending on which stocks and what day I was playing. Thursday was a very profitable day on the short side as a number of big-stock names that we’ve been following on the short side came apart in the face of a 200-point Dow rally.

Among them, Amazon.com (AMZN) didn’t benefit much from the big index rally on Thursday as it also closed down on the day after failing at its 10-day moving average early in the day. That big-volume break to the downside came after last week’s undercut of the prior 756 September low, resulting in a logical undercut & rally move from there.

AMZN helps to illustrate the undercut & rally concept as a way of determining short-term cover points, which is how I originally began using it. The idea was generally to look to re-enter on the short side into the rally once it runs into an area of potential overhead resistance. We can see that after rallying on Monday and Tuesday, AMZN then failed at its 10-day moving average and moved to lower lows.

Now AMZN has undercut the prior lows in the pattern from July at 728.72. The stock is now 12% below its all-time high and 8% below its 50-day moving average. It is currently out of position for any kind of lower-risk short-sale entry, as the last entry point would have been Thursday at the 10-day line. From here rallies into the 10-day line at 768.88 might present your next lower-risk short-sale opportunities. How this plays out, however, will likely be dependent on what we see in the general market this coming week.

 

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Facebook (FB) also came apart on Thursday, busting below its 200-day moving average in what was essentially a bear flag breakout to the downside on very heavy selling volume. By the close, however, FB was able to hold above the 200-day line, and held the line again on Friday as selling volume declined.

In this position I would be watching for either a shortable bounce off of the 200-day line or a clean break below the 200-day line. In that case the stock would become shortable on the breach of the line, using the line as a tight guide for an upside stop.

FB is now 10% below its all-time highs of late October, and 7% below its 50-day moving average. In this position, it’s difficult to say whether any immediate downside will be forthcoming, as this would likely depend on what the general market does this coming week. For now, I’m just keeping an eye on the stock for further developments that might become actionable.

 

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I’ve discussed in recent reports that Netflix (NFLX) could be vulnerable to a right-side POD (Punchbowl of Death) failure, and that the first sign of this would be a breakdown through the 20-day moving average. That is precisely what we saw on Thursday as the stock got hit with the rest of the big-stock NASDAQ names.

NFLX was a short at the point of impact as it crossed the 20-day line on Thursday, using the line as a guide for a tight upside stop. The stock ended the week below its mid-October buyable gap-up (BGU) that occurred after earnings, so that BGU is also in failure mode.

If you bought the October BGU and didn’t take your profits when the stock was up 10%, you were probably asking for too much. And now those gains have evaporated as the stock morphs into a short-sale target.

From here, rallies up into the 20-day line at 118.81 would present lower-risk short entry opportunities, should they occur.

 

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Alphabet (GOOGL) completes the tooth decay we are seeing in the so-called FANG stocks. On Thursday the stock broke down from a point just above its 50-day moving average, where it was shortable, and cleared to lower lows.

The move undercut the prior week’s lows and brought the stock ever closer to its 200-day moving average. GOOGL also serves as an example of how an undercut & rally move from the prior week’s lows that took the stock back up into the 50-day moving average merely set up a re-entry point on the short side.

That would have led to a profitable short-sale trade on Thursday in the midst of a 200-point Dow rally. From here, only another rally up into the rapidly declining 10-day moving average at 793.87 or the 20-day moving average at 800.97 would represent potentially lower-risk short-sale entry points.

 

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Just looking at these four charts, AMZN, FB, NFLX, and GOOGL, you’d think the market was in a full-blown correction. Confusingly enough, it isn’t, but these stocks certainly are. I have seen the market correction, and its name is FANG! However, with some of these stocks so deep down in their patterns, it is possible a rebound rally in any or all of them could help fuel a recovery in the NASDAQ Composite Index to new highs.

That is the interesting wrinkle here as other NASDAQ names in the financial and bio-tech area keep the index from coming completely apart. On its face, this is an interesting and very serious rotation out of these names, and it is not clear whether it represents a bearish divergence for the market.

We could also potentially see money that is coming out of big-stock NASDAQ names continue to flow into other areas of the market. That’s what I’ll be watching for closely this coming week, and not just in these knee-jerk Trumpkin Stock moves. If we’re going to start a big market rally, then I want to see something thematic develop in terms of new leadership.

Before moving on, herewith are my notes on other big-stock NASDAQ names we’ve been following recently:

Apple (AAPL) broke to lower lows on Thursday, but held up on Friday as it sits on top of the short flag base it formed between August and early September. The stock is now well below the prior 112.38 breakout point of that particular flag base, closing Friday at 108.43. Optimal short-sale opportunities would occur on rallies up to the 10-day line at 110.39 or the 20-day line at 112.03.

Microsoft (MSFT) broke down to its 50-day moving average on Thursday as its October buyable gap-up move following earnings has now failed. The stock is also sitting below its 20-day moving average, which it rallied up to on Friday. This is starting to look like a breakout failure, and so would be shortable here using the 20-day line at 59.25 as a guide for a tight upside stop.

Priceline Group (PCLN) is wobbling around the intraday low of Tuesday’s post-earnings buyable gap-up (BGU) move. That intraday low is at 1540, and the stock ended Friday a mere 65 cents above that low. This keeps it in a low-risk buy position, actually, with the idea that it should at least hold the 1520 low of Thursday.

Qualcomm (QCOM) is similar to PCLN in that it did not come completely undone on Thursday when the big-stock NASDAQ names were hit with heavy selling en masse. QCOM took some heat as it broke below its 50-day moving average in what looked like a bearish development, but by the close bobbed back up above the line in a show of volume support off of the intraday lows.

This actually looks to be in a constructive, buyable position, using either the 50-day line at 65.61 or the Thursday intraday low at 64.32 as a selling guide. If the market is going to sustain this current Trump Rally, some of these big-stock NASDAQ names will likely have to assist in the move. As a non-FANG name, QCOM might be a stock where money coming out of these other big-stock NASDAQ names finds a new home.

 

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ServiceNow (NOW) flashed a very bearish signal on Thursday when it posted a big outside reversal to the downside on above-average volume. I was actually looking for the stock to hold the 10-day line as a sign of its continued viability on the long side per my discussion of the stock in my mid-week Wednesday report.

On Thursday morning the stock was up nearly three points in what looked like a strong move developing off of the 10-day moving average. In fact, early in the day it looked to have pocket pivot potential. But that was not to be as the stock suddenly reversed course when the big-stock NASDAQ names all started to get hit.

At this point the stock is now in no-man’s land, but did manage to close just above its 20-day moving average on Friday as the selling pressure dissipated. A clean breach of the 20-day line would be our first clue of an impending, potential late-stage breakout failure, but so far that hasn’t happened.

I’m not sure if the stock simply got caught up in the panic among NASDAQ tech names on Thursday, or whether there is something seriously wrong with the stock here. The litmus test will probably be its ability to hold the 20-day moving average, which gives it little room for error at this point.

 

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Thursday’s breakdown in NASDAQ names also got to Adobe Systems (ADBE), which was looking like it wanted to recover and set up to move higher on Wednesday. On Thursday, however, the stock was weighed down by the additional news of ADBE buying out Tubemogul (TUBE) on a sharp break that carried it well below its 50-day moving average.

This now looks like a confirmed late-stage failed-base short-sale set-up. Rallies up into the 50-day moving average at 106.17 would present potential short-sale entries. ADBE helps to illustrate the uneven action evident under the hood of this market, and the fact that what looks good one day can quickly change its color the next.

 

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But not all tech names are subject to the carnage seen in the FANGs and other big-stock NASDAQ stocks. Finisar (FNSR), which I had blogged about as a name to buy into the weakness on Wednesday’s open, has acted very well over the past three days. A small pullback on Thursday as the stock tested the highs of its current base formation provided another entry opportunity before the stock broke out to new highs on Friday.

That Friday breakout traded enough volume to qualify as a pocket pivot breakout. I like the stock on any pullbacks to the 20-day moving average at 28.98 from here.

 

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Gigamon (GIMO) has continued to move higher since its post-earnings gap-up pocket pivot of two weeks ago. On Friday the stock pushed to a new closing high on light volume. This could set up another test of its 10-day moving average at 55.64, which has served as steady support since the pocket pivot.

Along with FNSR, another telecom/network-related name, GIMO has continued to act well as this area of the market shows strength.

 

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With the telecom/network area of the market showing positive action, I’m starting to get interested in former hot-stock IPO Acacia Communications (ACIA). The company reported earnings on Thursday after the close and posted some strong numbers. Earnings came in at $1.01, 15% better than the 86 cent estimate, and up 288%. Sales were up 107%, representing a four-quarter acceleration.

ACIA sells at 21 times forward estimates, so it is not one of these infinite P/E names losing money. At some point something known as fundamental support might come into play as the stock is now 44% below its recent all-time highs and still showing strong earnings and sales growth. The stock has actually recovered a bit after getting quite oversold at one point when it got as low as 52% below its all-time high of 128.73.

I feel sorry for the investors who bought the stock up near the $100 level and sat there in the hopes of playing for a big move. But for those investors who understand the Cinderella Principle, and took profits into the extended upside, or at least when the stock began to show signs of breaking down through the $100 Century Mark, a new opportunity could be brewing.

ACIA became quite oversold last week, as we can see from the very thick gray oversold Bingo indicator bar, but has now regained its 10-day moving average. As we can see from the blue-highlighted volume bar of three days ago, that retaking of the 10-day line came on a five-day pocket pivot.

Normally I’d like to see a cluster of five-day pocket pivots in lieu of a single 10-day pocket pivot, but the stock is actually in position for a pocket pivot move. After earnings on Thursday, ACIA rallied and sold off and then rallied again to close roughly flat on the day as it held the 10-day line.

In my view, this might be worth a short here, using the 10-day line as a tight selling guide if the stock simply continues lower. Admittedly, the stock doesn’t look all that appetizing to those who only buy breakouts. However, we already know that in this market the Ugly Duckling set-ups can work for those open-minded enough to implement them while understanding how to set tight risk-management for any such trade.

 

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Other new-merchandise, hot IPOs of August are starting to show more concrete signs of life after some brutal declines. In some cases, we are seeing Ugly Duckling set-ups emerge as they bottom and attempt to come up the right sides of potential, new bases.

On Monday I blogged that Impinj (PI) looked to be setting up following a pocket pivot on the prior Friday. A small pullback into the 10-day line on Wednesday once the election results were out set up a nice entry point, and the stock rocketed over 11% higher on the day.

This has taken it right up into the underbelly of its 50-day moving average. While the stock is still just below the line, it is tracking tight sideways after a sharp move on Wednesday. Volume has declined to -63% below average, which tells me that sellers aren’t all that interested in unloading into Wednesday’s 11.29% upside move.

While the stock could simply hang tight right here and then move up through the 50-day line, any pullbacks to the 20-Day line at 28.23 would present the most opportunistic entries. With its earnings report out of the way, PI is now free to trade on the merits of its continued strong fundamentals and rapidly improving technical action.

 

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In a blog post that I put up on Monday after the close, I noted that we should keep an eye out for Airgain (AIRG) as it could attempt to pull off an undercut & rally type of move. I was actually looking for such a move to potentially develop after the company announced earnings on Thursday after the close, but it decided to take off on Wednesday on a big 11.91% upside move.

What is more constructive, in my view, is the fact that AIRG held that move and more once earnings were reported by posting a pocket pivot on Friday off of the 50-day moving average. AIRG reported earnings of 16 cents a share vs. analysts’ estimates of a one cent loss. Revenue rose to $12.4 million as compared to estimates of $9.65 million.

This is AIRG’s first real base since coming public back in August, so I think its current action needs to be taken seriously. From here I would look for any pullback to the 50-day line at 14.04 as a potentially opportunistic entry point, should that occur.

 

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In my Monday after-hours blog post I also indicated that we wanted to keep an eye on The Trade Desk (TTD), which was in position similar to AIRG after undercutting prior lows within what looks like its first IPO base. TTD came out with earnings on Thursday as well, beating earnings estimates by three cents with a hard number of 24 cents a share. Revenues came in at $53 million vs. estimates of $49.07 million.

In its comments on Thursday the company gave some insight into their business: “Media buyers find enormous value in the ability to look at millions of ad opportunities every second across devices and formats, using data to make the best decisions in real-time. We are excited to share today that we exceeded our own expectations for the third quarter. Because of our significant growth in international expansion, mobile, video, and television, we have significantly outgrown the industry and are massively outpacing the growth of the overall market.”

On a technical basis, we see that TTD posted a bottom-fishing type of pocket pivot as it pushed off the 10-day moving average and up through the 20-day moving average on strong volume. This puts the stock in a buyable position, using the 20-day line at 25.01 as a tight selling guide.

It’s fairly easy to see that TTD could be forming the second low of a possible double-bottom base. A breakout through the peak of the double-bottom’s “W” pattern at 29.47 would confirm this. If you’re a strict breakout buyer, then this is what you are looking for.

Otherwise, those who follow the Way of the Ugly Duckling can act on the basis of Friday’s bottom-fishing pocket pivot. Notice also that Friday’s move helped to create an undercut & rally move as well as the stock pushed back above the first low in the potential double-bottom formation.

 

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Nutanix (NTNX) was a hot IPO name for all of two days after it came public on the last day of September. After that it was all downhill from there as investors who just couldn’t control themselves and bought so soon after the stock began trading immediately felt the pain of their buying indiscretion.

But after a period of time spent declining back below the intraday lows of its first day of trading, NTNX is trying to round out the lows of its first possible IPO base. I actually bought this at the lows on Tuesday, and traded out of it too quickly as I didn’t want to hold anything through the election results.

My reason for buying the stock at that point was based on a bottom-fishing technique I’m trying to work out currently. The basic idea is that a hot IPO that starts to correct after a big upside move will eventually see selling dry up sharply as it approaches a potential low. In this case, on Monday volume had dried up to less than -82% below average.

Interestingly, not long after I closed my eyes and bought the stock right there around the 24 price level on Monday, it popped on a nice volume increase on Tuesday. On Wednesday the stock pulled in slightly as the Trump Sell-off Fakeout hit the market to test its 10-day moving average before popping again.

This time it pushed above the 20-day moving average on a nice roundabout/bottom-fishing type of pocket pivot. Over the past two days NTNX has pulled into its 20-day line as volume dries up to -79% below average. This puts it in a lower-risk buy position using the 20-day line at 27.94 as a tight selling guide. Note that volume on Friday declined to -79% below average.

Keep in mind that NTNX is expected to announce earnings on November 29th.

 

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The situation with NTNX also brings up similar possibilities in Twilio (TWLO), which is now 55% below its late September high of 70.96. This pattern is about as ugly as you can get, and at this point is probably only loved by its mother and, of course, potentially the Ugly Duckling.

I’ve been watching this thing keep descending in an unrelenting submarine dive for the past month or so, waiting to see if and when it will bottom. On Friday, volume dried up to -60.1% below average. There are a couple of things I’m looking for here, which is first and foremost a very deleterious decline off the peak of 45% or more.

Another thing I want to see is at least a handful of days where the stock tries to hold tight sideways. At the same time, I want to see volume dry up to the lowest levels seen in what is so far the bottom half of the total decline. In other words, the decline has to reach deep, oversold levels first, and then we watch for volume to decline sharply as the price descent begins to slow up.

In this position it has a reasonable chance of trying to post some sort of bottom-fishing pocket pivot coming up through the 10-day line. That is what I would be watching for closely here, similar to what we saw in NTNX. Once a low is put in, however, it can take a while for the stock to finish building the rest of the base, but if you can peg the low you can catch a decent trade from there.

 

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There are a lot of other details behind what I’m looking at here, and I’m not inclined to give away all of my research on this right away anyway. But in a highly rotational market, you can see a lot of these hot names go through several life cycles as they range up and down over a multi-year period. In this regard, a good example to study would be something like Mobileye (MBLY).

As we can see on the weekly chart, MBLY has so far had three big uptrends and let’s say 2½ big downtrends since coming public in August of 2014. Each of those moves has been significant on a percentage basis, even as the stock swings up and down within a wide-ranging price consolidation.

There are many non-technical factors that help create the major inflection points that you see on a chart like MBLY’s. They can include things like earnings surprises, short interest, company news, product news, etc. These in turn provide a context against which current technical action can be viewed.

Capturing a big chunk of these moves can be a very profitable way to spend one’s time in an otherwise choppy and highly rotational market environment.

 

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To the trained eye, or at least that of one who has read Short-Selling with the O’Neil Disciples, we can see that MBLY has formed two big punchbowl formations. With the stock rolling over in early September, we can conclude that each punchbowl has become a Punchbowl of Death (POD).

Back in August of last year we caught the right-side POD breakdown in MBLY as it started to come apart (the second red arrow), as I blogged and discussed in the reports at that time. That was an extremely profitable move. The ensuing upside move (the third green arrow) was not exploited as well since I didn’t start picking up buy set-ups in the pattern until it was about 2/3rds of the way off the bottom.

So naturally when I start considering all of this I become interested in figuring out if it is possible to peg the inflection points to capture a bigger chunk of the ensuing move. Usually, by the time the rally off the lows has become obvious, a good deal of it can be over.

My view is that it can indeed be figured out. In support of this I would point out that the great Jesse Livermore’s “pivotal points” were often major price reversals. Thus the methods fall within what I refer to as the O’Neil-Wyckoff-Livermore (OWL) philosophy. In this manner I like to think I’ve advanced well beyond being a CAN SLIM® parrot and more of an OWL Disciple! J

In search of more long set-ups, I note that Square (SQ) is setting up in what is now a two-month base. The two-month base speaks to the fact that the stock has been a go-nowhere situation since its buyable gap-up move in early August of this year.

More recently, after earnings, SQ popped off of its 200-day moving average and back up through its 10-day, 20-day, and 50-day moving averages in a strong roundabout pocket pivot move. That took it to the highs of the two-month price range where it ran into resistance and pulled back into the 50-day moving average.

For the moment SQ remains in character as a go-nowhere stock. But I have to think that by now the stock has put enough time in building this base that if it is going to have a move up and out of here it is probably going to happen soon.

For that reason, the stock can be considered to be within buying range of the prior roundabout pocket pivot of eight days ago on the chart. In this case the 50-day moving average at 11.54 would serve as a reasonably tight selling guide.

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Among what I would call the Trumpkin Stocks, or those that were seen as benefitting from Trump’s policies, there were a number of gap-up types of moves. Interestingly, big bank stock J.P. Morgan (JPM) posted a pocket pivot the day of the election, well before the polls closed.

The next day JPM gapped up with the mass of other financials as Trump’s intention to roll back Dodd-Frank was seen as a massive positive for the group. One could have piled in on the gap-up right at the open, as with most other financials. It is notable, however, that JPM’s breakout on Wednesday was a move to all-time highs.

 

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We will see how sustainable these moves are once the stocks have had a chance to pull back and consolidate. The same goes for other gap-up types of moves in bio-techs like Biogen Idec (BIIB) and Celgene (CELG), materials stocks like Martin Marietta Materials (MLM) and Vulcan Materials (VMC), and defense names like Raytheon (RTN) and General Dynamics (GD).

While I don’t show charts of these stocks here, they represent the big-stocks among these groups which are expected to benefit from the policies of a President Trump. Each one can be watched and potentially played by looking to buy them within range of their Wednesday intraday lows.

My guess is we will get to see some sort of consolidation/pullback action in these names this coming week. The initially powerful reaction in these names will likely give way to the process of figuring out just what kind of business opportunities exist and what their precise impact on earnings and sales will be. The reality is that all of this remains entirely unclear until specific policy initiatives are actually passed and their details become fact.

The fertile field on the short side this past week was mostly found in the big-stock NASDAQ names I discussed at the outset of this report. For those oriented toward the nimble and flexible approach required for short-sellers, all of these could have been played on the short side, and profitably so, after the election results.

This was also the case for other names I’ve discussed as short-sale targets in recent reports. Some notes herewith:

Activision Blizzard (ATVI) was last shortable near its 50-day moving average last week and on Friday finally met up with its 200-day moving average, which would serve as a near-term price target. From here I want to see whether the stock is able to rebound into an area of potential resistance or simply continue down through the 200-day line.

Electronic Arts (EA) has continued to move lower since finding resistance near the 20-day and 50-day moving averages. It is now extended on the downside, so I’d be watching this for any rallies back up into those two moving averages

Salesforce.com (CRM) got hit in the big tech wreck on Thursday, but rebounded up toward its 200-day moving average on Friday. Earnings are expected to be announced this coming Thursday.

Tesla Motors (TSLA) looks to be in position for at least some sort of short-term reaction rally as it undercuts several lows in the pattern. Should that occur, it could carry into the 10-day, 20-day, or 50-day moving averages, so that should be watched for with respect to finding lower-risk short-sale entry points. My longer-term target for TSLA remains the August 2015 low at 141.05.

When we think through the action over the past three weeks we also have to consider the bizarre news reactions we’ve seen surrounding the election. The nine-day sell-off that began right after the NASDAQ 100 Index made an all-time high in late October was attributed to the FBI re-opening the investigation into candidate Clinton’s emails. This was seen as crippling to her election chances.

Thus this fed into the simplistic consensus reflected by the algorithm of “Clinton = good, Trump = bad” for the market. So it was no surprise that the massive gap-up rally on Monday was then attributed to the FBI announcing that there was nothing new to see here, so they were moving along.

This ensured, apparently, that Clinton would win the election handily as the media and political intelligentsia had been trumpeting all along. After all, it was only a few short weeks before that many were talking of Trump being the first candidate to drop out of a Presidential election. The crowd consensus was further reinforced by the massive futures crash overnight on Tuesday once it was determined that Trump had pulled off the impossible.

But once the markets opened up on Wednesday, the overnight crash that saw Dow futures dive nearly 900 points turned out to be a figment of the futures’ imagination. The Dow proceeded to sell off all of 80 points before stabilizing and rallying over 515 points, or 2.8%, to the upside for the rest of the week.

I had previously discussed my view that any sell-off following a Trump election victory would likely present a buying opportunity. I had no idea how quickly that buying opportunity would show up. In fact, it wasn’t all that much of a buying opportunity to begin with, because the indexes never really sold off that much on Wednesday.

And if one bought into dips in stocks like AMZN or NFLX or GOOGL, for example, by the end of the week one was rewarded with instant losses! We also saw a number of Chinese names, from BIDU to BABA, from MOMO to NTES, all get smacked after the election.

So in many ways this market remains far from clear-cut and somewhat bifurcated. Thus the only way to handle it is to focus on the precise set-ups we see in individual stocks. Since I will go with long or short set-ups as I see them, this means I am willing to take a bifurcated approach that is consistent with what the individual stock set-ups are telling me.

The $60 million question is whether a Trump presidency is going to lead to a bold new bull market. Certainly, the indexes have put in enough time chopping sideways for a meaningful breakout to develop. As well, the action in the Dow Industrials and the Russell 2000 Indexes clearly meets the definition of a new uptrend as they make new highs.

Confirmation of such a bold new market uptrend will certainly be found in the NASDAQ Composite and S&P 500 also joining in the party. Based on the fact that both indexes are hovering about their 50-day moving averages, an upside move is certainly possible.

The coming days will certainly be interesting as we see how the initial reactions, both positive and negative (after all, bonds and precious metals are getting slammed), pan out. In the meantime, there have been or are actionable set-ups out there, so you take your shots and see what drops into the basket. That is all.

 

Gil Morales

CEO and Principal, Gil Morales & Company, LLC
Managing Director and Principal, MoKa Investors, LLC
Managing Director and Principal, Virtue of Selfish Investing, LLC

At the time of this writing, of the stocks mentioned in this report, Gil Morales, MoKa Investors, LLC, Virtue of Selfish Investing, LLC, and/or Gil Morales & Company, LLC held positions in ACIA and TWLO, though positions are subject to change at any time and without notice.

Gil Morales & Company, LLC (“GMC”), 8033 Sunset Boulevard, Suite 830, Los Angeles, California, 90046. GMC is a Registered Investment Adviser. This information is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to GMC, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Gil Morales & Company, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2008-2017 Gil Morales & Company, LLC. All rights reserved.