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Market Lab Report - Premarket Pulse 12/28/16

Major averages rose yesterday on mixed, well below average volume. The NASDAQ Composite broke out to new highs, then sold off later in the day closing mid-bar, but still managed to close at new highs. The light trading volumes are not unusual for this time of year. With futures up this morning, the Dow may finally make it to the elusive 20,000 level, although we would remind members that this is just a number, and has no significance as a predictor. In fact, back in 1999, as soon as the Dow cleared the 10,000 level it immediately corrected - 4.6%.

How will the market trade in the New Year? The pink elephant in the room begs the question of how the QE bubble deflates. If the bubble can at all be deflated in a gentle manner, the answer would lie in the tech space. Certain areas are growing exponentially that will have a material impact such as cryptotechnology, AI, VR (virtual reality), DACs (decentralized autonomous corporations) and so forth.

That said, while the growth of certain tech sectors has been fast and furious, such growth rarely correlates 1:1 with the stock market. Many such sectors are still embryonic thus profits are often years off. Further, various areas within tech are on different parts of the growth curve, thus advancements in technology are overall not uniform. This suggests why such growth is often an inefficient metric in terms of making predictions in stock market direction. One only has to remember the bursting of the big dot-com bubble to see how growth in technology stocks can be erratic. Such volatility has included serious bear markets.

This observation implies the QE bubble will burst at some point. Never before has so much debt been generated without serious consequences to the stock market. The question then is when. Follow the price/volume in your stocks. The price/volume in leading stocks today can be the harbinger of tomorrow's action.

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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