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Market Lab Report - Premarket Pulse 8/13/18

Profitable Picks

Wyckoff undercut & rally as well as volume dry-up (VooDoo) chart patterns in stocks that meet our rigorous screening criteria remain profitable even in this relatively trendless year. We note that Roku (ROKU) gapped up to all-time highs on Thursday of this past week, breaking out of a 50% deep cup-with-handle formation. This was first discussed as a buy in Gil's VooDoo Reports in early April when the stock was trading at 35 and rounding out the lows of its future cup formation in Ugly Duckling style. Another stock discussed in the VooDoo Report that  posted all-time highs this week after earnings was Funko (FNKO), which was first discussed at $8 a share back in April and closed Friday at 20.84.

General Commentary

With yet another country to face a currency crisis, this time in Turkey, the European Central Bank is getting increasingly concerned about the exposure of some banks in the region -- specifically from Spain, Italy and France. Meanwhile, Asian markets are selling off as the rout spreads. Perhaps Turkey will  become another country to become bitcoinized, much as we have seen over in South America. 

Even though Turkey is a small country, with global markets still on tenterhooks economically, could this provoke a domino effect? 

Yet despite this and the ongoing trade conflict between the US and the rest of the world, especially with China, the US stock market continues to flirt with new highs. Even over in Shangai, blue-chips rose 2.4% the other day with investors in Asia largely brushing off the ongoing trade fight between China and the U.S.

QE has nicely distorted many metrics which accounts for at least some of the aberrant market behavior over the past few years. Analysts at Goldman Sachs project that stock repurchases will reach $1 trillion this year, up 46% from 2017 on the back of tax reform and strong corporate cash flows fueled by QE. This is an all-time high for stock buy backs. Technology stocks are the biggest beneficiaries of this $1 trillion. 

Part of this QE-induced distortion has led super cap tech stocks which include the FAANG names to become what we call the new alt-currencies as fund managers must be on board these names to keep up with their bogies. Plus, they are unlikely to get fired for being invested in such names. Stocks such as AMZN have a powerful network effect going for them. Because of this, AMZN is likely to dominate the market in any new space it enters. AAPL meanwhile has perfected what customers want by data gathering customer needs.

Nevertheless, stocks have been overall reluctant to move higher, powered by QE fumes, without any meaningful thrust, somewhat reminiscent of 1935 before the US government devalued the dollar by 41%. Both periods mark the coming of the end of the long term debt cycle which typically lasts between 50 and 75 years. Ray Dalio of Bridgewater has suggested a major devaluation across major fiat currencies is not a matter of 'IF' but 'WHEN'.

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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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