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Market Lab Report - Premarket Pulse 7/15/16

Major averages closed yesterday mid-bar, finishing higher on roughly break even volume. Volume was slightly lower on the NASDAQ Composite and slightly higher on the S&P 500. After sharp recent gains, a brief rest can be expected, indicative of the constructive mid-bar close.

The terrorist attacks in Nice, France leaving 84 dead and counting pushed futures lower but have since rebounded so are slightly up at the time of this writing. This is another sign of the resilience of the US markets, though it could also be argued that the markets are becoming comfortably numb to these attacks, much as they seem to be taking global economic stagnation in stride. Historically, the same type of "bad news" repeating generally has less of an effect each time, and this appears to be the case with yesterday's Bastille Day attack in France.

Central banks continue to print, and as a consequence, the three main credit rating agencies continue to downgrade government debt. The first half of 2016 has seen more sovereign downgrades than the crash of 2008. So far this year, Moody’s has downgraded 24 governments, Standard & Poor’s 16 governments, and Fitch 14. This has included the UK, Saudi Arabia, and Brazil. https://www.ft.com/content/3e6917ea-4371-11e6-9b66-0712b3873ae1 

Much of this QE-capital has been flowing into US stocks and bonds which remain the tallest standing midgets. More recently, commodities such as gold and oil have done an about face after a five year decline and have been trending higher. Other hard assets such as real estate have also benefited.

Numerous headwinds await, so despite US markets growing comfortably numb, expect corrections and heightened levels of volatility. As we said in yesterday's podcast, it is not our job to predict the future but rather to stay focused in real-time on subtle clues as they emerge so we are well-positioned to benefit from a continued uptrend or a sharp correction.

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