Tag Archives: market lab report

Market Lab Report – Premarket Pulse 2/9/16

Major averages cratered once again on higher volume with oil and junk bonds continuing their respective downtrends. A late afternoon oversold rally ensued putting the majors near the midpoint of the fall. As we stated in a prior report, when a distribution day occurs the day after a follow through day, the odds drop to 3% of the follow through day working. This one clearly has failed. One area of the market that continues to flash strong warning signals are the banking stocks. Names like Bank America (BAC) and Citigroup (C) are selling at just over half of their book value. This likely indicates that there are bad assets on the books of these banks, such that the currently cited book values are in question. This has shades of 2008, and one of the first warning signs of that precipitous bear market was the persistent downside movement in the banking sector.  The Japanese Nikkei plunged more than 5% overnight as worries about global growth continue and its 10-year benchmark bond slipped into negative yield territory. While negative yields are unnerving to investors, should the U.S. Federal Reserve follow suit at some point later this year as opposed to hiking rates which is becoming increasingly unlikely, it could put a floor under equities as capital would have little choice but to flow into stocks and various hard assets such as commodities and real estate. However, empirically speaking, negative interest rates have done little to bolster European markets, so it is surprising that Japan is now trying it too. Negative rates could also usher in a whole host of other issues in the U.S. with pension funds and the like, so the Fed may be limited in terms of pushes rates down that far.  Futures are currently down more than 1% at the time of this writing.

Market Lab Report – Premarket Pulse 2/8/16

Major averages tumbled on mixed volume with former leading “FANG” type technology stocks FB, AMZN, NFLX and GOOGL giving up significant ground as their respective downtrends remain intact. In addition, high PE names like LNKD, DATA, WDAY, SPLK, CRM, and others are getting hit hard as the market moves into an environment of contracting PE-ratios. This is generaly typical of a bear market. Consequently, the tech-heavy NASDAQ Composite was off more than 3% on heavier volume while the S&P 500 was off less than 2% on lighter volume. The NASDAQ now sits 16% under its peak while the S&P 500 has fallen less as it sits 11% under its peak. The robust wage growth in Friday’s jobs report worried investors as this gives the Fed more room to hike rates at some point later this year, though should markets fall further, the Fed will more than likely reduce rates by eventually adopting negative interest rates as have other central banks. This could put a floor under markets once again as the Fed attempts to manipulate markets higher since with negative rates, capital will have no choice but to flow into equities and hard assets thus providing a boost to stocks. This could create a slingshot effect skyward as we have seen many times before. Federal Reserve Chairwoman Janet Yellen testifies on Wednesday and Thursday about the economy and monetary policy. Last week’s jobs data showed slower jobs growth, but decent wage inflation. In the meantime, we remain in a downtrend and the Market Direction Model remains on a sell signal. With sharply narrowing leadership, no QE, and the Fed still leaning on neutral to higher rates later this year, there is little to support this market. Futures are currently off about 2% as oil falls further and big-stock techs across the board look set to gap lower by more than 2% at the time of this writing.

Market Lab Report – Premarket Pulse 2/5/16

Major averages moved fractionally higher yesterday on mixed volume with the S&P 500 logging a third accumulation day since its weak follow through day on Jan 26. Leadership, however, remains scant. The market continues its struggle in finding direction.  On weekly charts, both the NASDAQ Composite and the S&P 500 Indexes are forming what appear to be three-week bear flags after rolling over in January. This may portend further downside to come. That said, while MDM remains on a solid sell signal as further evidence accrues of the downtrend being intact, VVM (VIX Volatility Model) may switch to a sell signal (market moving higher) if it senses a brief window of opportunity on the upside. VVM is more sensitive to subtle, short–term changes in market direction than is MDM, and since VVM deals with volatility-based ETFs, sharp intraday moves can occur.  Today’s BLS labor report came in mixed, with average wages higher, unemployment at the lowest rate in 8 years down to 4.9%, but the economy only added 151,000 non-farm jobs below the 180,000 expected.