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Market Lab Report - Premarket Pulse for Tuesday, August 28, 2018

Major indexes rallied yesterday on higher volume, with the NASDAQ Composite, S&P 500, and Russell 2000 Index all posting all-time highs. Futures are mildly higher at the time of this writing. Markets were soothed by China's central bank signalling it wants to avoid a full-scale currency war. China wants to stop capital outflows which can negatively affect its economy. Further, by China supporting its currency, it extends an olive branch to the U.S. President Trump complained that China had been intentionally weakening its currency to make its goods more attractive relative to U.S. goods.

Focus List Notes:

Baozun (BZUN) has rallied back up into its 50-dma, a move we noted as something to watch for in our weekend Focus List Review after the stock pulled back on Friday on light volume. Chinese names have been attempting to come up from deeply oversold positions, and BZUN is one of them. We would watch for a move back above the 50-dma as confirmation of the stock's viability. A reversal at the 50-dma, however, could trigger the stock as a short-sale target at that point, using the 50-dma as a guide for a tight upside stop.

Netflix (NFLX) was removed from the Focus List after a sharp rally back up to the 50-dma. Two weekends ago in our Focus List Review report we discussed the possibility of an undercut & rally (U&R) long entry signal developing on any move back up through the 322.43 low. That occurred last Monday, August 20th, and NFLX then posted three more U&R long entries and one pocket pivot as it shot up to its 50-dma and an intraday peak of 374.89 yesterday. That represented a total move of  16% in six trading days, a high time-value trade. With the stock running into resistance at the 50-dma and reversing back below the moving average, it is setting up as a short, as we reported yesterday in a Short-Sale Set-Up Report. If NFLX is able to regain the 50-dma, then it may be able to set up and move higher, but short-term we must view it as a potential short-sale entry at the 50-dma, using the line as a guide for a tight upside stop. The situation remains fluid.

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