Market Lab Report - Premarket Pulse 1/11/16
Major averages fell as they could not even manage a weak bounce. The only comfort was the lower volume but it was still above average. The first week of 2016 to the year marks the worst start in the history of the stock market. The devaluing Chinese yuan, slack global growth, divergences in the major averages, the slide in junk bonds, the slippery slide in oil and other commodities reaching multi-year lows, and the prospect of rate hikes all contributed to the market's troubles.
Meanwhile, the popular leading "FANG" technology stocks consisting of FB, AAPL, AMZN, NFLX, and GOOGL are all below significant support points. AAPL sits 28% under its all-time highs, so Newton better watch out. We will be following the FANG and other big-cap NASDAQ names that have started to show signs of breaking down very closely as we progress through earnings season. Some of these may have upside reactions to earnings
that carry into areas of potential overhead resistance, such as the 50-day lines in FB, AMZN, GOOGL, MSFT, etc. Such reactions could provide short-sale entry opportunities, particularly if the market is set to begin a longer-lasting bear phase.
The jobs report came in strong with unemployment holding steady at 5.0% and 292,000 new jobs vs. the 200,000 expected, though wage growth was flat. Futures on Friday first jumped higher, then fell as the odds of a rate hike in March jumped to 45% on CME FedWatch.
Today's futures are currently up more than half a percent. China's Shanghai Composite Index fell more than 5% as it continues its slide on worries about the country's economy and the future direction of the yuan.
You should all have received the announcement of the launch of the VIX Volatility Model. It thrives in both volatile and trending environments thus accounts for its handsome gains since the fail-safes portion of the algorithm was completed as of 12/23/15. The large-into-small gain (from a +14.0% gain down to a mere 1.26% gain) on its most recent 1/7/16 signal once again illustrates the importance of taking partial profits especially when sizable profits materialize in just one day.
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