Major averages rose on mixed volume, higher on the S&P 500. Markets had been digesting last week's gains acting unsurprisingly soft ahead of a trio of news events that come today.
First, the European Central Bank decided to leave interest rates unchanged, as expected. However, the ECB dropped language that rates may be cut further, in what may be viewed as a slight tightening. So far, QE continues at full mast. While their action remains more or less a non-event, what is more worrisome are the long term effects QE has had on inflating asset prices while material economic growth remains mute.
Second, former FBI director James Comey will testify but is expected to remain quiet on the burning issue of whether President Trump obstructed justice according to major media news accounts as the full text of Comey’s prepared Senate testimony was released. Another non-event.
Third, while polls indicate a win for Prime Minister Theresa May's Conservative Party, their lead has narrowed suggesting a much closer race at hand against the opposition Labour Party. Should May lose, Labour's stance on higher corporate taxes could trigger a selloff in UK and European markets which could in turn spillover into US markets though such UK issues have rarely caused any serious concern for US markets.
Focus List Review
AAOI has pulled into its 10-dma on light volume. This could present a lower-risk entry using the 10-dma as a tight stop.
BABA is gapping up this morning after wowing investors at its Investor Day conference. Previously, we had discussed the stock as buyable along the 10-dma following the prior shakeout after earnings, and have featured this constructive action in our morning Focus List Notes and our weekend Focus List Review reports.
BOX failed to hold its 10-dma and is questionable here as it closed 2 cents below its 20-dema. We would look for a recovery back up through the 20-dema as a sign that the stock is still viable.
BZUN posted a pocket pivot at the 10-dma on strong volume yesterday. The stock is gapping up further in response to BABA's move this morning.
CC is retesting last week's lows as it just barely undercuts the 50-dma. Watch for a move back up through the 50-dma as a moving average undercut & rally entry trigger.
FB has pulled into its 10-dma on volume that was -25% below average.
JD has recovered back above its 10-dma on increased buying volume yesterday, albeit well below average and not enough to qualify as a pocket pivot. Pullbacks to the 10-dma may present lower-risk entries.
MOMO bounced sharply off of its 50-dma on Monday and yesterday pulled back into the 20-dema as volume declined, This would present a lower-risk entry here using the 20-dema as a tight selling guide.
NFLX remains within buying range of May 25th pocket pivot gap-up breakout, using the 20-dema as a maximum selling guide.
SNAP has been removed from the Focus List.
VEEV found support along its 10-dma today as it works on a new base. Buying along the lows of the current pattern in the 63-64 price level would appear to be the lower-risk approach to take here.