Current Focus List
There are currently no names on the 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 and which have been deemed suitable for inclusion on the Focus List. Not all stocks for which a Pocket Pivot or Buyable Gap-Up report has been issued will necessarily be added to the list. 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:
The market correction continued throughout the past week, although day-to-day and intraday volatility remained very high. Volatility with high velocity has become a primary characteristic of the current market micro-environment as the indexes plumb lower lows after peaking in late September and early October. From peak to trough, the NASDAQ Composite Index has corrected -12.71%, while the S&P 500 has corrected - 9.82%. The Dow Jones Industrials have held up the best on a relative basis, correcting -8.97% from peak to trough, while the small-cap Russell 2000 Index has corrected -15.7% from peak to trough.
In general, the current percentage declines in the major market indexes would qualify as intermediate corrections, although the Russell 2000 came within less than 5% of the -20% mark, which most market pundits consider to be "bear market territory." The problem with this labelling of the market as being in "correction territory" is that it is a hindsight observation and nothing more. We were already seeing the dark clouds on the horizon even as the market was seeing fresh all-time highs in the Dow and S&P 500 Indexes. That is why leading into the top we were a) removing names from the Focus List until we reached an all-time low of three remaining names, all of which have since broken down and been removed from the list and b) have not added any new names to the list based on the severe lack of stocks that would fit the criteria for inclusion.
Meanwhile, the indexes and many leading stocks are starting to look like oversold that has become even more oversold. The CBOE options total put/call ratio spiked to 1.29 on Wednesday, then to 1.32 on Friday. When the index spikes above 1.20, this can be a short-term bottom which could set up a potential reaction rally back up towards the 200-dma in any of the major indexes, as the "fat" part of the short-sale game over the past month is likely over. But keep in mind that during deeper corrections, the put/call ratio can spike above 1.20 multiple times. We would thus continue to play things on a stock-by-stock basis and allow the specific technical action of any specific stock to be our first guide in handling it from here. If and as the market rallies, we may begin to see more of these initial breaks off the peak set up as longer-term short-sale patterns, so we will be watching for that. For now, the market is objectively in a continued downtrend, notwithstanding any potential reaction rallies from current levels, until further market evidence tells us otherwise.
The Market Direction Model (MDM) remains on a sell signal.
The Short Side:
We have sent out three Short-Sale Set-Up alerts over the past two weeks, and all of these have moved lower. Netflix (NFLX) became shortable when it broke below its 50-dma the week before last, when we sent the alert out. It has since moved over 10% below its 200-dma on an intraday basis, closing -9.8% below the line on Friday as it undercuts the prior August low of 310.93. This could trigger an undercut & rally move back up towards the 200-dma, which could set up a secondary short-sale entry point while using the 200-dma as a guide for a trailing stop.
Fortinet (FTNT) was shortable up along its 20-dema as it bumped its head against the line several times before finally breaking down. It is now testing its early October low at 76.74. Members who shorted the stock near the 20-dema might consider taking partial or total profits ahead of this Thursday's expected earnings report.
Netapp (NTAP) was shortable on the move up into the 20-dema on Tuesday when we sent out our Short-Sale Set-Up report on the stock. It has since moved over 10% lower and closed Friday just below its 200-dma on heavy selling volume. From here, the 200-dma could serve as a trailing stop. Should the stock regain the 200-dma we might look for a rally up into the 20-dema as a new short-sale entry or re-entry point. NTAP is expected to report earnings on November 14th, after the close.
