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Market Lab Report - Pre-Market Pulse for Friday, March 23, 2018

Yesterday was a tough day for leading stocks, and in particular Chinese-related names. Impending U.S. tariffs on China combined with severe overnight and early morning weakness in European markets were to blame as major market indexes sold off on higher volume, logging distribution days across the board. The NASDAQ Composite Index gapped below its 50-dma, breaking key support. However, the index was already showing weakness after it failed through its prior new-high breakout point on Monday. As we wrote on Tuesday, caution was advised at that time, as the S&P 500 Index had broken below its own 50-dma the day before as bearish evidence began to pile up.

Futures are trading mixed as the trade war begins between the U.S. and China. President Trump blames China for causing significant damage to U.S. manufacturers. The Trump administration plans to impose tariffs on up to $60 billion worth of Chinese imports. As a starting point, China’s commerce ministry fired back with tariffs against $3 billion in U.S. goods. In a statement, the ministry said the penalties are being imposed in response to the Trump administration’s tariffs on Chinese steel and aluminum products, which it said violate global trade rules. Chinese Ambassador to the U.S. Cui Tiankai said on state television that the country would “fight to the end,” in the case of a trade war.


Focus List Notes:
Focus List names were down across the board, although in most cases the price breaks were not severe with most names down around 3% or less. However, that may simply mean that more downside is in store, and with initial near-term support levels being broken in several of these names, we would remain cautious. If one seeks to buy one of these names near a critical support level, then one should remain nimble and prepared to exit quickly if support does not hold.
AMAT and AMZN traded down near their 20-demas, AMAT on below-average volume and AMZN on slightly above-average volume. The 20-dema would serve as our guide for near-term support for both stocks.
Chinese stocks had an oddly delayed reaction to the stated intention of President Trump when it comes to impose tariffs on that country. Prior to today, most had held up reasonably well, including BZUN, which rocketed to a new all-time high on Tuesday. It broke badly yesterday, nearly 10%, but so far has not broken its 20-dema.
BB failed to hold the 50-dma and is now set to test its 20-dema.
FTNT appears poised to test its 20-dema.
NFLX, NVDA, and TEAM all closed below their 20-demas.
SQ was the one standout among Focus List names yesterday as it held above its 10-dma, but we would not be surprised to see it test its 20-dema if the general market continues to sell off.


 

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