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Market Lab Report - After the Open 1/4/17

Major averages started the New Year out strong with a big futures-led gap-up at the open that fizzled out around mid-morning. At that point the indexes weakened considerably with the Dow's initial 178-point gain fizzling to about +16. This began to appear as if the indexes would post a complete reversal back into the red on significantly higher trading volume. As the day wore on, however, the indexes managed to finish in the upper halves of their trading ranges on higher, above average volume.

Higher global inflation could spur tighter monetary policy if it picks up enough such that central banks have less room to tighten. On the other hand, higher inflation would put to rest the fears of global deflationary conditions as it implies demand is picking up, a sign of growth, which could counter the QE bubble, at least for a while. 

That said, should inflation start to accelerate beyond expectations, and certainly beyond the 2% mandate, a problem with which the Fed is concerned as such as happened in certain prior cycles, the Fed could be forced to hike more aggressively than expected which could be the pin that bursts the QE bubble. 

Wireless communication solutions designer and recent IPO Quantenna Communications (QTNA) had a five-day pocket pivot yesterday. We like to see clusters of five-day pocket pivots in lieu of a single 10-day pocket pivot, as these can be meaningful, particularly when a stock is holding very tightly along a moving average.

Netflix (NFLX) had a pocket pivot yesterday on various new stories speculating that Disney (DIS) "has to" buy NFLX in order to remain competitive.

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