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Market Lab Report - Premarket Pulse 9/22/17

Major averages fell on lower volume.

Equity markets across the Asia-Pacific region traded lower on Friday following threats from North Korea. North Korean Foreign Minister Ri Yong Ho said late Thursday in New York that the country may consider a nuclear test of “unprecedented scale” in the Pacific Ocean. Those comments came shortly after North Korean leader Kim Jong Un said he was considering the “highest level of hard-line countermeasure” in response to President Donald Trump’s warning that the U.S. would annihilate North Korea if forced to defend itself or its allies.

Meanwhile, China-related stocks declined on a credit-rating downgrade. Futures are consequently trading lower.

The VIX is set for the calmest September in its entire history even though September is one of the worst months for stock market performance.



And this despite September having a number of news breaking events such as the serious issues with North Korea, a lagging global economy, and Cat 5 storms in the U.S. With the VIX under 10, keep a close eye on UVXY using the 620 as we have mentioned in prior reports. With the VIX near all-time lows, the odds grow of a correcting market and spiking UVXY.

Focus List Notes:

As we discussed in yesterday's notes, the deterioration and failure of many names on the list as well as those added to the list recently is likely a clue as to the underlying condition of the market.

Futures are down sharply this morning, confirming our assessment and initial words of caution to members in our morning comments two days ago. For this reason, we see no reason to take new positions at this time. At the same time, members should heed their stops and selling guides as a matter of playing a strong defense in the face of further potential market weakness.

EA has dropped below its 20-dema on light volume, and appears set to test its 50-dma. We would avoid this stock for now.

JD closed below its 50-dma on heavy selling volume. The 50-dma serves as a selling guide for the stock following last week's move back above the line on strong volume when it was put on the list.

NFLX closed at an all-time high yesterday as it attempts to break out of a cup formation without forming a handle. We would not be surprised, however, if this turns out to be a double-top for the stock, so we would maintain tight trailing stops if long NFLX currently.

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