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Market Lab Report - Premarket Pulse 3/14/16

Major averages continued their moves higher Friday on lower volume. Both the S&P 500 and Dow closed above their respective 200-day moving averages. As the bounce continues, the saying "Don't fight the fed" certainly applies as central banks around the planet gang tackle their respective middle classes, penalizing savers with naught to negative rates of interest.

Central banks seem to think such low rates will force banks to lend and entice people to borrow, but they fail to see that lower rates rob savers of income, destroys pension and insurance funds, and leverages debt to dangerous levels. Indeed the sovereign debt crisis is upon us. People will not borrow or spend, and businesses will not hire or expand when they have no confidence in the future. You cannot stimulate the economy with lower rates while crushing it with taxes.

Nevertheless, as the printing presses roll on, hard assets and equities are the winners. Indeed, capital seems to have rotated back into cyclical groups which were out of favor earlier this year. Still, defensive groups and junk off bottom names are also participating in this rally, not a sign of healthy internals. 

One interesting note was the ECB said it will start buying debt issued by companies as well as governments. While this would normally be good news since corporations have to pay back their debt unlike government, the debt they will buy will be riskier debt of entities that are in trouble. So it will be sending good money after bad.

Despite these cross-current the Market Direction Model has remained on a buy signal since March 1st, and a number of new pocket pivots that we've reported on recently are making progress. Ultimately it is the action of individual stocks that investors must rely upon if progress is to be made.

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