Market Lab Report - Premarket Pulse 10/9/15

Published : October 9 2015 at 8:41 ET
Major averages rose yesterday on lower volume with the S&P 500 breaking and closing above its 50-day moving average while the NASDAQ Composite closed about 1% away from its 50-day moving average.

Fed minutes showed that turmoil in the stock market and economic concerns out of China kept a rate hike on hold. The Fed will wait until global economic conditions improve to hike rates. This is a change from the Fed's earlier view that they would be able to hike rates before the end of the year as the US economy was showing strength while economic concerns regarding China would not much affect the US economy. CME FedWatch puts the odds of a rate hike at 5% in October and 38% in December.

Markets rallied after yesterday's release of the minutes as easy money policies tend to be bullish events. Nevertheless, the market had recently undergone a sharp correction as a result of serious concerns about the global economy. So the question is whether the current bounce has run its course or whether the easy money environment can push it higher. Regardless, pay close attention to what stocks are telling you. So far, there have been only a few stocks setting up on the long side this week despite the rallying markets with almost no actionable new names on the long side since Tuesday. Still, some of the recent stocks that we have alerted members via email are doing well such as EPAM, LGIH, and FLTX. 

Both models are in cash at present though the Volatility Model will probably issue a buy signal close to the open. Dr. Kacher has worked into the Volatility Model a series of fail-safes tested out which appreciably improve the model's risk/reward characteristics. For example, yesterday's cash signal would have come sooner resulting in a minimal loss.

Cloud-based commerce platform for businesses Shopify (SHOP) had a pocket pivot on a breakout from a cup-with-handle base. It had previously gapped higher on its prior earnings report. Note, the other day, it closed in the lower half of its trading range despite a strong market, thus invalidating its pocket pivot. Sales are growing strongly, group rank 21.

Netflix (NFLX) had a massive-volume pocket pivot on an upside reversal after announcing a price increase for its services. NFLX is expected to announce earnings next Wednesday.

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