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Market Lab Report - Premarket Pulse 4/18/16

Major averages continue to consolidate gains as they finished close to break even on higher options expiration volume. Leading stocks continue to remain unimpressive in their showings with the big cap FANG stocks continuing to lag the major indices somewhat, or at least are failing to put in a leadership-quality showing.

Indeed, projected GDP numbers have been revised sharply lower by the Atlanta Fed while S&P earnings continue to decline. Meanwhile, economic data such as CPI, PPI, Retail Sales, Business Inventories, and Industrial Production and Capacity Utilization among others all fail to meet consensus estimates.

So while the fundamentals remain poor both at home and abroad, central banks are so far winning this tug-o-war as they continue to print money which finds a home in equities. "Don't fight the Fed" has become "Don't fight the Feds." Still, some notable headwinds include slowing global growth, downside earnings surprises, and the failed oil producer meeting in Doha.

Despite all the noise, our Market Direction Model has stayed with the trend and has remained on a buy signal since March 1st. Of course, this could change as the market's reaction to news is more important than the news itself. 

Futures are lower by about -0.4% after the failure of key oil producers to agree on a production cap that could have tightened up the supply market. Hopes for a deal were a main catalyst in a rally that lifted U.S. crude prices more than 50% from their February lows. Oil is currently off about 4%.

That said, helping oil prices is the declining production in the form of shale players in the U.S. Crude production in the U.S. is forecast to fall to an average of 8.6 million barrels a day in 2016 and 8 million barrels a day in 2017, said the U.S. Energy Information Administration. Also, Kuwait will slow its production as workers strike by roughly 1.5 million barrels/day.

“Now it is a question of speed to see if the rate of U.S. production decline can offset the growth in OPEC production. If not, the oversupply will linger longer and prices will stay depressed,” said Nelson Wang, an energy analyst at CLSA.

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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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