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Market Lab Report - Premarket Pulse 10/23/17

Major averages rose on mixed volume on news of Trump's tax plan inching closer to getting passed with the NASDAQ Composite closing in the lower half of its trading range. The DJIA is up nearly 30% since the November elections, and central banks are the majority shareholders of Dow stocks which are perceived to be safe havens as they behave like the new bonds, low risk plays in this QE money printing environment. The relative strength on the Dow is outpacing the NASDAQ Composite, S&P 500, and Russell 2000.  

Meanwhile, we have record levels of short interest on the VIX which continues to flirt with all-time lows. We also have % of stocks above their 50-day moving averages at extreme peaks despite the overall lack of thrust observed in leading stocks.

Keep your stops tight, be mindful of upcoming earnings in any of your stocks, and take profits when you have them in context with a stock's price. For those using the 7-week rule for longer holds which a handful of leading stocks have followed such as TTWO and NVDA, one can sometimes use the 50-day moving average as an entry point to establish a new position. That said, the general market often looks the worst along with leading stocks when such does occur. For example, on 8-11-17 after NVDA reported earnings, it gapped just under its 50-day. Meanwhile, the general market had suffered relatively sizable selling the day before then again that day before finding a shallow floor. It takes courage to buy in such a situation but if you keep your stops very tight such as in the 1-2% range, at least your losses will be contained should the general market stage a deeper correction, one which we have yet to see this year.

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