Market Lab Report - Premarket Pulse 9/21/16

Published : September 21 2016 at 9:22 ET

Major averages closed nearly flat yesterday on lower volume at the low end of their respective trading ranges. This tentative action came as no surprise ahead of today's Federal Reserve decision on interest rates at 2:15 pm ET and Bank of Japan's (BOJ) pre-market fiscal policy decision.

The BOJ kept key interest rates at a negative 0.1% but caught markets by surprise by introducing a new commitment to keeping the yield on Japanese 10-year bonds at zero, dubbed "yield-curve control". The BOJ is trying to create a steeper yield curve, which fights against their seemingly losing battle with deflation. This decision came following an internal review that their existing forms of quantitative easing (QE) failed to achieve 2% inflation in a promised two-year time frame.

A steeper yield curve offers an incentive for banks to make loans, customers to borrow and the economy to strengthen. It’s an antidote to its negative interest rate program, in place since January, which has hampered profits of their financial institutions. Indeed, financial structures were not meant to operate at negative rates. Perhaps other countries that have adopted negative rates will look to shifting their QE programs into something more constructive.

Futures rallied on the news. Several names on the VoSI Focus List are holding up in constructive fashion, with some tightening up within their structures. This includes AMZN, FB, TWLO, TEAM, BIIB, EW, GRUB, MELI, MOMO, NVRO, and VEEV. Others should be watched for pullbacks to areas of potential support, such as ACIA and PI, for example.


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