Current Focus List
The VoSI Focus List is a compilation and reference list of stocks for which Pocket Pivot or Buyable Gap-Up Reports have been issued. It is not intended as a "buy list" or a list of immediately actionable recommendations. Stocks on the list may or may not be in proper buy positions, and investors should exercise discretion and proper judgement in determining when and where stocks on the Focus List can be purchased. The following notes are intended to assist in this process. Please note that members can enlarge the Focus List image by clicking on the body of the email and then holding the Control Key while pressing the "+" key until it is large enough to read.
General Observations:
A strong earnings report from Apple (AAPL) stoked the fire underneath the NASDAQ Composite Index, driving it to new all-time highs on Friday. Volume was heavy but below Thursday's levels. Like the Dow in October, it is now taking on a parabolic look to its chart.
In our view, if this market rally continues, then it will be a matter of "stocks are the new bonds." QE liquidity has continued to pour into this market, and the chart of the monetary base vs. the S&P 500 Index shows the nearly perfect correlation between the sharp growth of the monetary and the market rally over the past few years.
While the money supply grows rapidly, money velocity is reaching all-time lows. This tells us that all the money being printed is not circulating into the economy, but is rather going into assets, including stocks. Thus, stocks are indeed the new bonds. For that reason, we would look to play big-stock leaders into the remainder of the year as these would most likely lead any continued rally.
On the flip side, the CBOE Volatility Index (VIX) is pushing back near its all-time low of 8.84, closing Friday at 9.14, just 30 cents higher. Previously in 2017, when this has happened, a sharp market pullback, especially among big leaders, has occurred. Therefore we would be vigilant for such a pullback. In addition, any pullback that occurs soon would potentially present buyable pullbacks in leading names for a year-end rally, but this is only speculation. We would need to see how any such pullback unfolds before drawing any firm conclusions, however, but with the VIX near lows we remain vigilant for a pullback or even something worse, if that proves to be the case.
The Market Direction Model (MDM) remains on a buy signal as it has since early September.
Removed from the List this Week: FireEye (FEYE) after blowing up following its earnings report. The stock was previously a sell once it broke below its 20-dema, before earnings.
Focus List Stocks Expected to Report Earnings this Week: Weight Watchers Int'l (WTW) on Monday after the close and Take-Two Interactive (TTWO) on Tuesday after the close.
Notable Action:
Arista Networks (ANET) illustrates the "funkiness" that sometimes plagues this market. On Thursday, the stock was hit with massive-volume selling as it plummeted right through its 50-dma like a knife through butter. After the close, ANET reported earnings, sending the stock flying back to the upside in what materialized as a big gap-up open on Friday that took the stock above the $200 price level on even heavier volume than that seen on Thursday's disaster. This is beyond schizophrenic. Nevertheless, the stock is technically a buy here based on Jesse Livermore's Century Mark rule using the $200 price level as a tight selling guide.
Caterpillar (CAT) was added to the Focus List on Friday by virtue of its prior buyable gap-up and subsequent tight price action following earnings nearly two weeks ago. Volume was extremely heavy on that buyable gap-up. Since then the stock has tracked tight sideways and is now meeting up with its 10-dma as volume dried up to -42% below-average on Friday. In our view, if this has any potential to move higher, it should hold support at or just below the 10-dma (1-3%), and then move higher from current levels. A breakdown through the 10-dma and the recent lows would make it a quick sell.
Facebook (FB) was added to the Focus List on Friday after it pulled back into its 10-dma and the top of its prior base breakout. As a big, leading stock, this would seem to have a reasonable chance of moving higher IF the general market continues higher from here. Obviously, a breakout failure from here would be bearish, but the bottom line is that in this position going long the stock carries relatively less risk given the nearby stop-out levels at the 10-dma and the top of the prior base.
Netflix (NFLX) has been buyable on consecutive pullbacks, first to its 20-dema and the top of the prior cup-with-handle base, and then this past week at the 10-dma as volume declined. The stock closed just above the $200 price level on Friday, but we still view pullbacks to the 10-dma as your best, lower-risk entries from here.
