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Market Lab Report - Premarket Pulse 2/19/19 - Futures Rate Hike Odds Favor Reduction

Economic Slack At Home and Abroad

The UK last Monday Feb 11 reported its weakest economic growth since 2012 due not just to Brexit but also to global stagnation while in January, Germany reported the slowest growth in 5 years. So we have a number of major countries having recently reported weakest economic growth figures in a number of years. QE seems to have done little except increase the size of bubbles and the wealth gap by pushing the value of hard assets and instruments of wealth such as stocks, bonds, and real estate higher. 

Then last Thursday, retail sales in the U.S. sank -1.2% in December, the worst decline in 9 years, sparking recessionary fears. The stock market tanked in December spurring talk of recession which may have hurt sales. Further, unusually bad weather as well as a partial government shutdown did not help sales. The sales slump is likely to weigh on GDP. Economists had estimated GDP would slow to 2.7% in the fourth quarter of 2018, but now that estimate could be revised lower.

CME Fed Futures Rate Hike Odds

This impacts the direction of interest rates. The CME Fed Futures puts the greatest odds all the way out to January 2020 that interest rates will remain the same, though there are also odds that when rates do move, they will move lower, as futures puts 22.6% odds this will happen by January 2020, vs 0.8% odds of a hike by the same month. Odds prior to Thursday’s retail sales data were about even between a hike and a drop in rates. 

The major averages are up against major resistance thus the brief pause we have seen comes as no surprise. If the S&P 500 and NASDAQ Composite can both definitively break above their 200-day lines, this will further cement the rally. Both have closed above this line. 

Actionable Stocks

In stocks, we have had a number of actionable names the last several days. They have either moved to new highs or have constructively traded on lower volume pullbacks then moved or look to move higher. 

=PAYC gapped higher and closed at new highs on Thurs. 

=NFLX had a pocket pivot and is one of the FAANG leaders as it attempts to dominate home viewing as well as Hollywood. It won 5 Golden Globe awards, more than any other network or streaming service, plus a film that was a NFLX-only release was watched by 45 million households. 

=VIAV gapped higher then constructively retraced, and is since moving higher. 

=MEDP retraced to its 20dma and has since moved higher. 


=DXCM was originally mentioned on Jan 7 when it had a buyable gap up. It then had a pocket pivot on Feb 11. Buying breakouts, as we have said, it not the place to buy one’s initial position. Had one bought DXCM on Jan 7 when we sent out our initial report, one could have added to their position in smaller size on the basis of the Feb 11 pocket pivot, knowing that risk is potentially higher since the stock was at new highs. One would then still be sitting at a profit. DXCM so far continues to remain okay as it is getting support at its 10dma. 

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