Tag Archives: market lab report

Market Lab Report – Premarket Pulse 8/12/15

Major averages fell yesterday on higher volume with the S&P 500 bouncing off its 200dma. The sharp selloff was due to China’s devaluation of its currency, sparking concerns about a currency war, though could delay a hike in interest rates by the Federal Reserve. The S&P 500’s 200-dma is considered a “line in the sand” by many market pundits, and a point at which one must “buy the market” based on the fact that the index has held the line on prior pullbacks. This morning the S&P 500 will open below the 200-day line based on current futures action, putting that simplistic thesis to the test. While a number of articles spoke ill of the omen behind yesterday’s Dow Jones Industrial’s death cross wherein its 50dma crosses below its 200dma, both the Dow and S&P 500 have done this a few times since 2009 though instead of it marking the beginning of further damage, such death crosses came near the lows of the market as quantitative easing has put a relatively shallow floor on the major averages. But rather then asking if this time could be different and whether this QE-driven market is running on fumes, it is a far better use of one’s time to stay focused on what your stocks are telling you to do rather than to engage in rampant speculation. We have seen numerous occasions since 2009 where the market looked as if it was going to fail badly yet found its floor faster than expected. But at some point, the market will correct substantially. Continue to take profits where you have them and keep stops tight. Don’t let the market condition you into complacency and remain aware in the present. Futures are lower by about -0.7% at the time of this writing due to China allowing its currency to fall for a second straight day. So while China’s central bank said Tuesdayâs decision was a one-off move, its decision to devalue the yuan for a second straight day spurs concerns that China’s economy is worse off than expected, and that currency wars are afoot where China’s economy battles to weaken its currency in a bid to spur growth and boost exports. That said, China’s yuan has appreciated against major world currencies by 14% in the last year alone so its net 3% devaluation is relatively small by comparison.

Market Lab Report – Premarket Pulse 8/11/15

Major averages rose yesterday on lower volume as institutions continued to express reluctance at putting down big bets before the market’s trendless ways are over. The market is simply in what is so far a short reaction bounce after the S&P 500 found support along its 200-day moving average while the NASDAQ had undercut its prior early July lows, putting the indexes in a logical position for a rally attempt. With futures trading lower this morning, that rally attempt is in jeopardy. Futures are down sharply on the surprise move by Chinaâs central bank by devaluing its tightly controlled currency, triggering the largest one-day loss for the yuan in two decades, in an effort to boost flagging exports and spur growth in the worldâs second-largest economy. China’s central bank stressed the move was a one-off depreciation but seems suspect as Chinaâs Real Effective Exchange Rate (REER), as calculated by the [Bank for International Settlements], has risen by some 14% in the past year making todayâs 2% drop relatively small. Given China’s flagging economy, analysts are concerned it could be the start of a new currency war which could delay the Fed from hiking interest rates. Wearable camera maker GPRO had a pocket pivot yesterday. ROE 59.4%, earnings and sales are soaring, institutional sponsorship has grown over the last 3 quarters. GPRO is trading well off its highs so could experience some overhead resistance as it makes its way higher.

Market Lab Report – Premarket Pulse 8/10/15

Major averages fell again but on lower volume with the S&P 500 bouncing off its 200dma. The majors managed to claw back part of their losses to close in the upper half of their trading ranges. Nevertheless, both the Dow Jones Industrials and Russell 2000 are below their 200dmas while the NASDAQ Composite and S&P 500 are under their 50dmas. Commodities continue to skate on thin ice as many are approaching or are at multi-year lows. Each time the NASDAQ Composite has traded under its 50dma this year, a floor has been found within 2 weeks or less with corrections typically between 4-5%. That said, this is the first time this year both the Dow and Russell 2000 are under their 200dmas, thus technical conditions have worsened. The inability of the major markets to advance in consistent fashion is a sign that, for the first time since 2009, QE is not pushing the markets higher. The bulls would say this is due to the markets, which are forward looking by typically 4 to 6 months, telegraphing a rate hike which, historically, has been a bullish event though has resulted in a correction of some magnitude 4 to 6 months ahead of the first rate hike. The bears, on the other hand, would say it could mean more serious trouble ahead given the unprecedented situation in which the world finds itself. Whatever the reason, staying in the present, watching the markets and your stocks, is key. The unemployment report came somewhat in line with expectations, though average hourly earnings climbed less than expected and the labor participation rate remained at depressing levels not seen since the late 1970s. Still, futures are showing a 60% chance of a rate hike when the Fed meets in December. Nevertheless, the Federal Reserve is concerned about low inflation and won’t hike rates until it sees inflation return to more normal levels, according to Stanley Fischer, the vice chairman of the US central bank.