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Market Lab Report - Premarket Pulse 9/7/17

Major averages rose on mixed volume. The major averages have been trading in a QE-driven artificially compressed range for much of the year, plunging briefly on negative news then recovering in unconvincing fashion.

The European Central Bank on Thursday, as expected, left interest rates unchanged. The ECB Governing Council left the rate on the bank's main refinancing operations at 0%, while the rate on deposits left overnight at the ECB was maintained at minus 0.4% and the rate on the marginal lending facility was left at 0.25%. The ECB repeated that it expects rates to remain at present levels for an "extended period." The ECB also reiterated its plan to buy 60 billion euros a month worth of bonds through the end of December and that if the outlook deteriorated, it could increase the size of the program.

It was originally expected that the ECB would begin to taper its QE bond buying program in 2018, but they are now leaving open the possibility that they could actually increase levels of QE should the economy worsen. Negative interest rates have been shown to cripple financial structures, so the ECB really has no room to move. Neither do the other central banks. 

Focus List Notes:

As we expected, ANET has tested its 20-dema, holding the line yesterday after breaking below the 10-dma. This puts the stock in a lower-risk entry position using the 20-dema as a selling guide.

BABA is testing its 20-dema on above-average selling volume, which could put it in a lower-risk entry position. However, we would prefer to see volume drying up on a pullback to the 20-dema rather than increased selling volume. Watch for volume to dry up along the line if the stock is to remain in a constructive entry position.

EA has broken below its 20-dema on light volume, but this is putting last week's pocket pivot base breakout in jeopardy.

NFLX posted another pocket pivot move, this time on news that T Mobile (TMUS) would be providing the service as part of their family mobile phone plans.

VRTX is pulling into its 10-dma as volume came in at -30% below average, not low enough for a "voodoo" pullback, but if volume continues to dry up along the 10-dma on this pullback then it would put the stock in a lower-risk entry position here usig the 20-dema as a reasonable selling guide.

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