Major averages shot higher Friday on higher volume after the unemployment report was released which was taken by some market participants to mean continued quantitative easing at current levels and by others of a possibly improving economy. Either way, optimism reigned. The NASDAQ Composite closed above its 50-day moving average but the S&P 500 still remains below its own 50-day line.
A follow through day was not achieved because the count begins the day after the market makes a new low. So that would be on February 3. The index then must close higher on that day or on the following day. A higher close starts the count. The Day 1 low becomes the line in the sand so a violation of that low invalidates the pattern as it did on February 5. Thus, Friday, February 7 would be day 2 of the count. Nevertheless, in this QE-riddled environment, the indices may have already found a floor as corrections since January 2013 have been relatively shallow. The bottom line is that the market itself does not know what a follow-through day is in this QE-riddled environment, and thus a minor undercut of the Monday lows on Wednesday may be irrelevant, and it is best to let your stocks tell you what to do. In terms of ETFs, the Market Direction Model remains ready to switch should the markets have found a floor.
Tesla Motors (TSLA) had a pocket pivot. Earnings and sales remain in the triple digit % range. It is currently trading a few points higher in premarket trading.
Priceline.com (PCLN) also had a pocket pivot. It recently undercut its low, trading under its 50-day moving average for several days. Earnings and sales have accelerated, pretax margin 36.5%, ROE 49.8%, group rank 75.
Yelp (YELP), which had a buyable gap-up last Thursday following its earnings report, is pushing nearly 10% higher in pre-open action on reports that it will partner with Yahoo! (YHOO) on local search results.