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Market Lab Report - Premarket Pulse for November 17, 2017

The Ugly Duckling came a'calling yesterday as the indexes gapped up sharply and kept going, with the NASDAQ Composite up 1.3% on higher volume to post a new all-time closing high. The Dow and the S&P 500 Indexes posted lesser moves of 0.8% and 0.82%, respectively, on lighter volume. Interestingly, and particularly in light of our comments in yesterday's Pre-Market Pulse report, breadth made a sharp rebound, as illustrated by the chart of the NASDAQ Advance-Decline Line, below. As we noted yesterday, the ugly, deteriorating breadth could just as easily represent a broad number of stocks simply waiting in the wings ready to suddenly spring back to life to assist a market rally. To a great extent, that's what we saw yesterday as breadth improved sharply.


The rally was ascribed to the House of Representative's expected and eventual passing of its own version of tax reform legislation. While the House's passing of tax reform legislation was widely anticipated given the Republican's strong advantage in the number of seats occupied by members of their party, it will not be such a slam-dunk in the Senate, where the Republicans do not have a similar advantage. Not a single House Democrat voted in favor of the tax reform legislation, and defecting Republicans in the Senate could help the Democrats block passage of the Senate version. Near-term, this could add some news volatility to the market, but it all comes down to watching individual stock set-ups, and taking the lower-risk route of looking to enter long positions at the most opportunistic, lower-risk entry points at logical support.

This morning futures are roughly flat as the market awaits the Senate outcome on its own version of the tax bill.

Focus List Notes:
ANET made strong upside progress yesterday but was already in an extende position. It has been a stellar performer since its last buy point near $200 on the basis of a) a buyable gap-up after earnings and b) Jesse Livermore's Century Mark Rule on the long side once the stock cleared the 200 price level.

BABA gapped up through its 20-dema after finding support at the 50-dma on Wednesday. It is near-term extended.

CAT rebounded back up through its 20-dema after undercutting the lows of its current three-week price range and the 20-dema. This would represent an undercut & rally set-up coming up through the prior 134.65 low of six days ago.

FB missed posting a pocket by one day, as it gapped up and off its 20-dema and then cleared its 10-dma by the close on increased volume. The 20-dema still represents the primary reference for the lowest-risk entry from here.

NFLX rebounded strongly yesterday early in the day but stalled to close in the lower part of its gap-up price range. The 50-dma remains maximum support for the stock.

NVDA held support at its 10-dma as volume declined, closing three cents below the intraday low of last Friday's buyable gap-up. This remains in a buyable position using the 10-dma as a tight selling guide.

TTWO remains within range of last week's buyable gap-up after earnings. The 10-dma at 114.42 would serve as your maximum selling guide.

WB remains on fire, up another 5.89% yesterday on above-average volume. It was last buyable near the 105 price level per our comments in this past weekend's Focus List Review piece, and is now well-extended.

We would note that in some cases, getting the most out of the moves in individual stocks yesterday would have necessitated buying into Wednesday's weak close, which may have been psychologically difficult to do. This type of action, however has become a well-worn trademark of the Ugly Duckling market environment.






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