Tag Archives: market lab report

Market Lab Report – Premarket Pulse 2/25/16

Major averages finished higher yesterday on higher but below average volume, staging upside reversals. Volatility remains elevated. Oil rallied sending the major averages higher after it was reported that U.S. crude inventories were smaller than an earlier industry report suggested. Production numbers also fell. That said, given OPEC’s stance on not curtailing production, the current bounce in oil may be short-lived. Its overall downtrend on a technical basis remains intact. Oil futures are currently trading somewhat lower as of this writing. The correlation between oil and stocks has been high since the start of the year as the price of oil has been approaching levels that may cause institutions such as J.P. Morgan (JPM) into forced liquidation of stocks. Indeed, JPM may increase its loan-loss reserves by $1.5 billion if the price of oil drops to $25 a barrel. Leadership remains scant consisting mostly of defensive stocks such as food and utilities. A number of groups have shown strength with the current bounce but these stocks have mostly staged bounces off lows. Further, finance-related stocks continue to lag. Futures are currently slightly higher at the time of this writing shrugging off the steep overnight drop of -6.4% in China’s Shanghai Composite on liquidity concerns.

Market Lab Report – Premarket Pulse 2/24/16

Major averages fell yesterday on lower volume as the S&P 500 met resistance at its 10-week line. Oil fell during trading and after the close due to remarks by Saudi Arabia Oil Minister Ali al-Naimi that killed off any lingering hopes of a production cut. Coordinated efforts by the producing nations to stem oil production indeed seem unlikely at this juncture. Thus both the technicals and fundamentals in oil point to a continuation of the downtrend. This in turn will likely serve as a continued headwind for stocks. Last night J.P. Morgan (JPM) announced that it was adding $500 million to its loan-loss reserves. The company has also indicated that another $1.5 billion could be added if the price of oil stays around $25 a barrel. Raising reserves means forced selling in the form of liquidation. Institutions like JPM will sell assets that are easiest to sell, and usually that means stocks first. If JPM needs to raise reserves, then likely the same or similar scenario is playing out at countless other institutional firms. This is the source of forced selling, a concept we discuss frequently in our reports and live webinars. Futures are currently off roughly 1% at the time of this writing.

Market Lab Report – Premarket Pulse 2/23/16

Major averages rose yesterday on lower, below average volume. The S&P 500 closed just below its 50-day moving average which could serve as resistance, especially given the straight-up-from-bottom action in the major indices. A bounce in oversold oil has served as a catalyst for the bounce in the markets, but given the lack of leadership and little to buy, the uptrend may be short-lived. As always, keep stops tight whether on the long or short side in this news driven gap-up, gap-down environment. With respect to our recent Short-Sale Set-Up report on Facebook (FB) members should understand that the stock should be shorted under the conditions of a general market rally failure. Such a failure would also be confirmed by a break below the 50-day moving average in FB. Thus we consider the stock a “go to” short if the general market rally fails.