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Market Lab Report - Premarket Pulse 10/29/15

Major averages finished strongly higher yesterday on higher volume after selling off just after the Fed released their statement. The Federal Reserve concluded its two-day meeting leaving rates unchanged but kept the door open for a rate hike in December. The problem is that the economy has slowed over the past six weeks, and Fed Chair Yellen is dovish. Indeed, the third quarter GDP number was just reported at 1.5% compared to the 3.9% in the second quarter, whereby futures rallied mildly on the news from their depressed levels, as they are still off about half a percent. Nevertheless, the Fed must maintain their stance that rates could be hiked in December as they had originally said there would be a rate hike by the end of the year.

That said, at this point, central banks must generally move in unison when it comes to quantitative easing since economies worldwide are fragile thus have little room to move. For example, a good portion of the UK economy depends on exports to the Eurozone. If the UK raises rates while the ECB prints more money, the exchange rate will soar and exporters will get stung which will impact the UK economy. On the other hand, while the US is not as dependent on exports, its corporate profits are dependent on overseas earnings, thus puts pressure on the US Fed to keep rates steady, though a token 25 basis point hike for political reasons to keep to their "word" would not be a complete surprise. After the Fed's statement, CME FedWatch pegs the odds of a rate hike in December at 43%, up from 35%.

The eurozone economy is about $13 trillion, just a few trillion shy of the US economy, so with the ECB recently adding even more "ease" to its easy money policy, central banks are not likely to hike rates any time soon, especially given the weakness in the Eurozone's economy. So while US and UK central bank officials may warn of impending rate hikes, this is most likely political jawboning. Expect rates to stay near zero well beyond what central bank officials say.

Inphi (IPHI) had a buyable gap up on a strong earnings report. This comes after the pocket pivot report we sent out on October 15. Earnings and sales continue to soar, group rank 41.

Apple (AAPL) had a pocket pivot/buyable gap up on a strong earnings report. Its base is rounding out as it approaches its 200dma. Pretax margin 31%, ROE 46.3%, earnings and sales are robust.

Integrated IT management service company Tyler Technologies (TYL) had a pocket pivot. Pretax margin 23.6%, ROE 25.4%, group rank 4. It's prior pocket pivot four days ago closed in the lower half on a strong day so was invalid. Today's pivot makes this stock actionable.

Beauty store retailer Ulta Salon Cosmetics and Fragrances (ULTA) had a pocket pivot. ROE 22.7%, earnings and sales have been strong and steady.

Web-based payroll management software company Ultimate Software Group (ULTI) had a pocket pivot/buyable gap up on a strong earnings report. ROE 26.9%, earnings and sales are accelerating, institutional sponsorship has grown over the last 9 quarters, group rank 20.

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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