Market Lab Report - Premarket Pulse 8/16/16
Major averages rose yesterday on higher but below average volume. The NASDAQ Composite, S&P 500, and Dow Jones Industrials all sit firmly in new high territory. The risk-on small cap Russell 2000 has yet to achieve new all-time highs but has outperformed the other major indices since Brexit lows.
Quantitative easing certainly comes in many flavors and side effects. Negative interest rates in Europe and Japan means they have to buy US stocks and bonds, making the US the tallest standing midget since early 2009 when QE began.
As we mentioned in a prior report, a number of Chinese names have been outperforming. Buying on constructive weakness has been necessary in sideways markets, but with markets firmly in new high ground, should this uptrend continue, leading stocks may give less opportunity to buy on weakness.
Chinese provider of a mobile-based social networking platform Momo (MOMO) had a pocket pivot breakout. Pretax margin 23%, earnings and sales robust, group rank 11. MOMO just reported strong earnings before today's open so is trading higher by almost +10% at the time of this writing. While we cautioned one may wish to avoid playing earnings roulette by avoiding such names altogether, everything is contextual: 1) Chinese names have been doing well, 2) the market is in new high ground and could continue its uptrend, 3) MOMO exhibited strong behavior on the day prior to earnings.
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