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Market Lab Report - Premarket Pulse 8/28/17

Major averages finished mixed on lower volume, closing near the lower end of their trading ranges. Both the S&P 500 and NASDAQ Composite closed just under their 50-day moving averages. Given the lack of strong leadership and the pronounced number of distribution days in recent weeks, odds seem to favor a continuation of this choppy downtrend. Keep in mind that quantitative easing (QE) is at record levels thus is responsible for creating a pattern in the S&P 500 that has never been observed since it began in 1957, namely, the shallowest of floors so far this year when compared against any prior year. Singularly, the corrections in the S&P 500 have been contained to within 3% all year.

Consequently, the standard measure of volatility known as the VIX has been trading at near or at record low levels for most of the year. Meanwhile, the market pushes on a string in baby-stepping fashion to new highs thanks to QE. Gains are then reversed in often just a day on a negative news event, but instead of the markets correcting more meaningful, it's QE to the rescue which prevents any further material damage. While the Market Direction Model continues to perform well, the VIX Volatility Model (VVM) which thrives on volatility is back to the drawing board as a result of this unprecedented type of environment. I will be sharing signal changes with members so they can track its performance though I have suggested not trading the VVM while it is back in beta. It is rigorously testing out various strategies including the UVXY 620 buy signal strategy in terms of optimal entry and exit points.

  • Markets showed little concern over North Korea's latest missile tests, which took place on Saturday. Japan's government said the three short-range missiles launched by Pyongyang did not pose a threat to Japan. 

  • Bank of Japan central bank said during the Jackson Hole annual meeting last week that BoJ policy will remain very accommodative and that the second quarter growth rate of 4.0% is not sustainable. An accommodative monetary policy is typically characterized by lower interest rates which makes money cheaper for businesses to borrow. Thus, expect record levels of QE to continue.

Futures are up about 0.3% at the time of this writing.

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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. ©2018 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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