Market Lab Report - Premarket Pulse 1/12/16

Published : January 12 2016 at 9:21 ET

Major averages finished mixed yesterday on mixed but above average volume. China's Shanghai Composite Index finished flat overnight as it was still unable to manage a bounce. It's sharp downtrend remains intact so any bounce that materializes may be a shorting opportunity. The same holds true for other markets including the US markets.

A major top in the US markets has formed but the question is when a more substantial bear market may take shape with averages currently off around 10% for the NASDAQ Composite, S&P 500 and DJIA. The Russell 2000 is off nearly 20%. Of course, should the Federal Reserve step in with a new form of QE, a la QE4, that could also push markets artificially higher once again. But so far, the Fed's dot plot is for 4 rate hikes this year, so the correction could become a full-blown bear. This would clear the decks and thus be a healthy step towards a restoration of perhaps partial normality in the markets.

Futures are up around 1% at the time of this writing on no particular news as the market is due for a bounce. While conditions remain weak, such a bounce may be short-lived and provide shorting opportunities in individual stocks.

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