Market Lab Report - Premarket Pulse 8/12/15
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 Tuesday’s 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.
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