Tag Archives: market lab report

Market Lab Report – Premarket Pulse 2/18/16

Major averages rose on higher volume though the number of leading names showing actionable buy points remains scant. Former “FANG”-stock type leaders are barely keeping up with the major averages. FB may be the last standing soldier, but while it has regained its 50-day moving average, its current bounce relative to its recent pullback should strengthen relative to the majors if it wishes to maintain leadership status. This may be a big-stock name to keep an eye on if one wishes to try and capitalize on any potential, continued bear market rally. True leaders are typically the first to maintain new highs when the market undergoes a sharp bounce. The groups that are doing well currently are defensive such as utilities and food stocks, not the type of stocks that can carry a sustainable, strong rally. We would like to see some improvement in the quality of leadership before taking any stronger bullish stance. Federal Reserve minutes showed most members were concerned about the market selloff, preferred to take a wait-and-see approach before hiking rates again, and wanted ‘direct evidence’ inflation was rising before hiking interest rate further. Markets rallied on the news as this implies the Fed is leaning toward a dovish stance, thus is more likely to align with other central banks who have been doing everything they can to lower rates, some which have pushed rates negative. So while the Fed may remain on hold in terms of hiking rates, it can eventually elect to reverse its prior rate hike and even push rates into negative territory despite strong evidence that this could result in indirectly pushing rates higher to businesses as has happened over in Europe as more banks acknowledge they are carrying bad debt on their books. Negative rates are causing banks to charge higher interest rates for loans, thus interest rates are on the rise for businesses, quite the opposite of what central banks were expecting. Major European banks such as Deutsche Bank are now trading below their 2008 lows. The Euro’s days are numbered as it cannot afford another banking crisis. Ultimately, the major downtrend remains intact as further evidence of economic global malaise mounts. That said, bear market rallies can be short and sharp which can provide short-term long trade opportunities while at the same time helping to bring short-sale targets back into optimal short-sale range. Investors should remain nimble, fluid, and alert to this as the current rally evolves or fails.

Market Lab Report – Premarket Pulse 2/17/16

Major averages rose on mixed volume. The higher volume on the NASDAQ Composite was easy to achieve as Friday’s volume was lower than normal given the 3-day weekend. The bounce in leading names such as AMZN and GOOGL on declining volume has been anemic relative to the bounce in the major averages. A wedging pattern is forming for both names, though should the bounce continue a bit longer, such names would likely catch up to the rising market as institutions tend to favor such big cap names as safer places to invest their capital. Nevertheless, the bounce remains suspect thus keeping a close eye on any potential short-sale candidates is prudent. Futures are up almost 1% at the time of this writing as the Federal Reserve’s minutes from their last meeting are due for release at 2 PM EST. The hope is that the minutes will show more evidence of a pause in rate hikes. Meanwhile, other central banks continue to ease as signs of any meaningful economy recovery remain elusive.

Market Lab Report – Premarket Pulse 2/16/16

Major averages rallied on lower volume as oil rocketed more than 10% on Friday in anticipation of OPEC countries announcing cooperation on a production cut. Saudi Arabia, Russia, Qatar and Venezuela today said they wouldnât increase crude-oil output above Januaryâs levels as long as other major oil producers followed suit, in the first coordinated move to boost oil prices in years. The Market Direction Model (MDM) had switched from its sell signal to a cash signal on Thursday as it detected a potential bounce in the majors,thus locked in profits. That said, any bounce may be shorter-lived than expected as the put-to-call ratio has recently spiked a number of times along with bearish advisers persistently outnumbering bullish ones, yet the overall downtrend has been relentless underscoring the inherent weakness in the averages. Further, the market’s recent bounce off of its mid-January lows was the weakest in years. On Monday, Japan’s Nikkei jumped more than 7% as its GDP shrank for the second time in three quarters, spurring the belief that its central bank will ease even further. China’s economic import/export woes further contributed to this belief, and the European Central Bank has suggested further easing is on the way in March. U.S. futures are up almost 1.5% at the time of this writing. The current bounce should offer a good opportunity for shorting the right stock or stocks. We will keep members apprised. Creeping, crippling tipping points are emerging such as the banking crisis which has been brewing over in Europe as more banks acknowledge they are carrying bad debt on their books. The negative interest rate environment, instead of spurring what could be called “spurious” lending, is causing banks to charge higher interest rates for loans, thus interest rates are on the rise for businesses, quite the opposite of what central banks were expecting. This begs the question whether the U.S. Federal Reserve will adopt negative rates if they think it will only cause interest rates to indirectly rise for businesses in general. Major European banks such as Deutsche Bank are now trading below their 2008 lows.