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Market Lab Report - Premarket Pulse 8/7/17

Major averages rose on lower volume. The jobs reports continue to paint a 'Goldilocks' scenario in that they are strong enough, if the data are to be believed, to support the notion of economic growth, but not so strong as to cause rate-hike concerns. Wage growth remains subdued while jobs growth remains strong. The odds for a rate-hike at the December FOMC meeting stand at just around 50%.

Distorted jobs report and inflationary figures are nothing new. To argue that markets should be lower on these distortions which make things look far better than in actuality misses the point. The driving factor behind this aging bull has been quantitative easing. The amount of money printing remains at all-time highs. The European Central Bank and Bank of Japan have bought $1 trillion of financial assets just in the first four months of 2017, which amounts to $3.6 trillion annualized. This is the largest CB buying on record. Central banks print then use the capital to buy stock, thus stock markets are propelled higher. The low rates of interest make stocks that much more attractive than bonds further fueling the rally.

While major indices have corrected just a scant few percent so far this year, a "shallow floor" record of sorts, keep your stops tight as markets are certainly capable of correcting several percent or more as we saw in 2016. And as we have seen this year, when markets stumble just a couple percent, leading stocks often lose three times at much or more.
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