Stock Market Video 11/18/2011

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In this week’s Stock Market Video, Cabot Market Letter Editor Mike Cintolo says that the market took a step back this week and it appears that in the near-term, the sellers are taking some control. However, in the intermediate- and long-term, the story hasn’t changed that much. We’re still transitioning from a bearish phase to a bullish phase, but it could take a while for that to materialize. Stocks discussed: Baidu (BIDU), Apple (AAPL), (AMZN), (PCLN), Lululemon (LULU), Chipotle (CMG), Estee Lauder (EL), GNC Holdings (GNC), Spreadtrum Communications (SPRD), MercadoLibre (MELI), Tesla Motors (TSLA) and Nuance Communications (NUAN).


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--- TRANSCRIPT Stock Market Video 11/18/2011 ---

[ Music ]

Hi, I'm Mike Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Trader, and I'm here with your Cabot Weekly Review.

Well, the market definitely took a step back this week and at least in the shorter term, it does appear that the sellers are starting to bare their teeth a little bit. Although in the intermediate to longer term, not that much has changed. We think you should take a little bit of a step back here. But we don't think the big picture has changed all that much.

So let's start as we usually do here with the NASDAQ composite and we'll start with the short term. And as you can see here, you know, notice two things. One, we had the rally off the October lows. But just in a past a few weeks, the market really hasn't been able to tighten up at all. Now, I will say a lot of individual stocks have or had been able to tighten up which was a good thing. But just now you're seeing some distribution creep in. The NASDAQ starting to test its 50-day line kind of breaking through the bottom of this range. The other major indexes, excuse me, looked similar. So my guess is in the short term, the sellers are taking some control here, they might drive the indexes lower, they might come after some of these resilient stocks depending on what comes out in terms of the news flow.

But bigger picture, you know, not that much has changed. We still see a couple of major bottoms here in August and October, each one had you know, panic selling 1,200 stocks, hitting new lows, that sort of thing, you know, everything was going down. Right now, you know, we still think we're transitioning from a bearish phase to a bullish phase. But right now, we're not in either. We don't think there is massive selling pressures at this point. But there's clearly not the buying pressures either that are gonna take stocks, push them to new highs and then keep pushing them higher and higher from there.

So the big picture is really that we're still in this kind of large trading range. We think the odds favor the worst of the selling has passed, but it's important not to get too far in front of yourself which is what we've been saying for a while because the buyers might not step up for another week or month, or two months or three months, you know. We might need the uncertainty in Europe to clear up and who knows how long that's gonna take, okay?

So in the short term, we do think backing off on some of your stocks. If you threw a few lines on the water or maybe take one or two off, anything that you have a loss in or that isn't acting well, or maybe it didn't react well to earnings and now it's fading again, you know, you probably wanna take some of that and build up a little bit more cash. But you really never should have been that heavily invested to begin with 'cause not much money was being made.

In terms of sell candidates, I just wanna say, I don't wanna get in this super specific, but Apple (AAPL),  has come under pressure. Apple is not that volatile, it's only 11 percent off its high but you can see it sort of broke its 50 day in volume picking up as it sells off, you know. (AMZN) had a bad reaction to earnings, had a nice balance but now that's coming off too on volume, price line, okay.

Lululemon (LULU), Chipotle (CMG), I'm not saying all these stocks are gonna go the way of Netflix or Green Mountain Coffee and fall you know, 50 or 70 percent, but there is no question that right here, just seems like their over own, they're acting very soggy, they're almost water logged. They really can't get going, there's not enough demand for them. So we would try to avoid those. If you have positions in them just watch them closely or maybe consider selling some of your shares even if it's a big winner 'cause it just feels like these old leaders are really kind of what's weighing on the market, there is still distribution going on there.

The good news is that a lot of the nascent leaders of these events really haven't been damaged that much even during the last couple of days. Whether it's a steady stock here like Estee Lauder (EL), big earnings gap, and yet it's come down since the earnings but really it's held up well. It wouldn't surprise me if it broke down a little bit here, but you know, there's plenty of support up here in the mid 100s to 110 range.

Names like the GNC Holdings (GNC), it's the new name. It's come down for a couple of days but it barely looks like there is any market pressure at all. I mean it's still well above all its moving averages.

Spreadtrum Communications (SPRD), this is a Chinese chip maker. Again, some gyrations here in the last couple of weeks, but you know, it's above even a shorter term 25 day moving average, that's a great sign. Even as a lot of chips stock did come under pressure yesterday.

MercadoLibre (MELI), again, what you see is the stocks that have had powerful earnings gaps or powerful earnings moves anyway on huge volume. They so far, really haven't been hit to too hard, okay? Here's a huge gap on MercadoLibre. It followed through a little bit. But notice, it was actually, you know, it's really been more up than down recently even as the markets come under pressure, and it's holding very tight, that's encouraging.

Tesla Motors (TSLA), I mentioned this last time, you know, it's really revved up here, volumes picked up. And again, it just, if anything it's extended and it's due for a pullback and maybe it will get one. But at this point, a lot of this sort of leaders, Nuance Communications (NUAN) is another. Now, they have earnings next week. But here was a huge volume breakout, a huge advance. I know it's coming down a little bit but still well above the 50 day line.

So, if all these leaders can kinda hold together and maybe just flatten out a little bit while the market hits some rough seas that will be a very positive sign going forward. I think you can do a little bit of buying, but again you gotta watch your overall portfolio and make sure you don't have too much money at work at a time when, let's face it, not much money is being made alongside, at least not yet.

Well, that's all the time I have for today. Thanks for listening and be sure to come by again next week for another Cabot Weekly Review.

[ Music ]


Mike CintoloMichael Cintolo
Vice President of Investments, Editor of Cabot Market Letter and Cabot Top Ten Trader

A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Trader. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times. Cabot Market Letter is one of only nine newsletters included in Hulbert Financial Digest's 2010 Honor Roll for performance in up and down markets, and Timer Digest Top Ten Long-Term Timer.

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