Good And Bad For The Week

Good:

  1. Stocks enjoyed large gains in October as Central Banks continue their easy money stance
  2. Stocks enjoyed large gains in October as Central Banks continue their easy money stance
  3. Stocks enjoyed large gains in October as Central Banks continue their easy money stance

Bad:

  1. Stocks enjoyed large gains in October as Central Banks continue their easy money stance
  2. Even with rates at Zero – economic and earnings data remains less than stellar
  3. Even with rates at Zero – economic and earnings data remains less than stellar

Anatomy of a top revisited – Valeant Pharmaceuticals $VRX

More bad news continues to come out from the Valeant Pharmaceuticals (VRX) story. We have no idea how this ends up but the writing has been on the wall for months for the stock. Due to popular demand here is another look at Gary’s article from last week, promptly titled, “Anatomy of a top.”

Originally Published on 10/21/15

As we write this, Valeant Pharmaceuticals (VRX) has dropped from $264 down to a current price of $88 and change in just two months. There has been issues with this company in the last few weeks as a few are accusing them of accounting chicanery as well as other things. In another chapter of our “Anatomy of a Top,” a keen eye would have taken you out in the 220 to 240 range, never having to deal with this carnage. Keep in mind, when something tops, one never knows how bad things can get but one needs to know what a good top looks like. The stock was a classic case. The following chart shows a break of the 50 day moving average on August 20 (POINT A). This is the first break below that important level since last October 2014.

But one can blame the bad action in the market at that time. It is the rest of the action that told us that the stock was topping. Notice how for four weeks the stock could not get going. Volume contracted indicating no interest in buying the stock back up. Notice how for four weeks the stock stayed below the all-important 50 day moving average, a complete change of what had been done for the prior 10 months. That brings us to (POINT B) on September 21. That day, the stock showed distribution right off the 50 day moving average which turned into the first stair step to the downside. The stair step completed just a couple of days later on September 25 (POINT C) when the stock did the one thing a bull does not want to see and that’s a break of the longer-term 200 day moving average. If the 50 day didn’t get you out, the 200 day  must get you out. As you can see, since that day the stock is now been cut in half. To repeat, there is no way of knowing how bad something is going to get.  But there is a way of knowing when something is topping out and risk has picked up.  Valeant was a classic leading stock topping out, breaking down and then breaking down badly.

No positions

Time for the Mets to wake up!

Alright boys…time to wake up those bats as we head to Citifield.

We will have our usual award winning, in-depth, over-the-top weekend report to you on Sunday. Do not miss it.

Lots of jello moving on the plate as housing tops, retail stinks, biotech blah, commodities still aint happening and small/midcaps continue to underperform but if you notice anything about the overall markets, there is a clear lack of selling going on right now. Of course, that can change but the good news this second is we do not have to hear from the Fed until December. We like quiet. We like when markets do not have to deal with the constant interference of central banks. Whoops, we still have to deal with other central banks.

GO METS!

 

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http://www.bloomberg.com/news/articles/2015-10-29/these-charts-explain-why-china-scrapped-its-one-child-policy

Time Warner Cable, Charter expect deal closing in first quarter 2016, not 2015

http://www.reuters.com/article/2015/10/29/us-twc-results-idUSKCN0SN13N20151029

As Oil Outlook Dims, Industry Slips into the Red @FoxBusiness

http://www.foxbusiness.com/industries/2015/10/29/as-oil-outlook-dims-industry-slips-into-red/?intcmp=bigtopmarketfeaturesside

Third Quarter GDP Missed Estimates

The Commerce Department said Thursday that third-quarter GDP expanded at 1.5% annual rate (annualized and adjusted for inflation). That’s less than half the 3.9% growth rate in the second quarter, and slightly below the Thomson Reuters estimate of 1.6%. GDP represents the total value of goods and services produced in the U.S.