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Market Lab Report - Pre-Market Pulse for Friday, March 2 2018

Major market averages continued to cascade lower on increased selling volume, logging their third distribution day in a row. The sell-off was attributed to President Trump reiterating his intention to impose stiff steel and aluminum tariffs, although a final decision is still pending. The news did, however, create a number of pocket pivots in steel names like X, NUE, RS, STLD, and TS. It remains to be seen whether these lead to further, substantial upside price moves in these stocks. Meanwhile, leading stocks are coming under pressure, particularly big-stock NASDAQ names (see our Focus List Notes, below) which have represented a large leadership component of the oversold rally coming up from the February 9th lows.

Futures are off around a percent at the time of this writing. Trump's proposed tariffs are a bearish move as it may spark a global trade war. Trump proposes a 25% tariff on steel imports and a 10% tariff on aluminum. In the 1930s, the Smoot-Hawley Tariff Act was disastrous to U.S. equities as shown in the chart below.

Tariffs shot higher as shown below:


World trade severely declined as a result of this act:


If Trump's tariff proposals pass, this could be the straw that popped the QE sovereign debt bubble as it could derail the fragile economic recovery.

Focus List Notes:
Focus List names all pulled back yesterday, but as we noted in yesterday's notes, they were all quite vulnerable to selling off based on their extreme v-shaped patterns that consisted of moves that were straight-down-and-straight up into or near new high price ground.

AMZN sold off below the 1500 price level but found intraday support near its 20-dema.
NFLX pulled back but found intraday support at its 10-dma.
NVDA broke below its 20-dema and is now testing its 50-dma.

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