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Market Lab Report - Premarket Pulse for Friday, February 16, 2018

The market continued its rallying way following Wednesday's follow-through, although an early-morning reversal that saw the Dow go from up over 200 points to negative was a bit unsettling. By the close, however, the Dow ended the day up 306.88 points as intraday volatility cointinues to be the order of the day. We have to admit that the action is a bit confounding since the recent sell-off was one of the worst in history in terms of its velocity and rapidity, as we noted yesterday. But this market continues to act in a manner that is somewhat of a "Deus ex machina," where the market seems to be ruled by the action of algo-driven machine-trading that sends the market sharply lower then sharply back to the upside after shaking everyone out when it is least expected. In the process, everything simply travels in a v-shaped move where normal rules no longer apply. As Gil has noted in several live webinars over the past few months, the new "buy signal" is just a high-volume sell-off that in the past would indicate more trouble ahead. If its down big on volume and looks as ugly as it can, it's a buy. This is the essence of the Ugly Duckling Principle that remains a force to be reckoned with in this market.

Futures are roughly flat at the time of this writing. Volatility has not necessary been wrung out of the market as a pullback of some magnitude after this straight-up-from-bottom action would not be a surprise.

Focus List Notes:

While we have only three names on the list currently, they prove the point that when the market is in rally mode, it's not necessary to try and "kiss all the babies. AMZN, NFLX, and NVDA all continued higher yesterday and are now extended as they approach their prior highs. AMZN posted a new all-time closing high, and the other two remain close to doing the same.
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