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Market Lab Report - Premarket Pulse for Wednesday, January 3, 2018

The NASDAQ Composite Index powered to new highs on the first day of trading in 2018, closing above 7,000 for the first time in its history. The ebullience was helped at least in part by talk from a Citigroup (C) analyst that Apple (AAPL) had a "40% chance" of buying Netflix (NFLX). We had previously issued a pocket pivot report on NFLX last Thursday, when the stock rallied sharply above its 50-dma on heavy volume. The move did not appear to be based on any specific news at the time, but it is possible that some may have known of the Citigroup call ahead of time.

The S&P 500 Index also posted a new all-time high. Both the NASDAQ and NYSE traded higher, but below-average, volume on the day. Gold also pushed through near-term resistance at the 1308 level. Futures are up again this morning. 

During the day, we noted big pocket pivot moves in Alibaba (BABA) and Weibo (WB) (along with Facebook (FB))as Chinese stocks rallied sharply on a strong Chinese Manufacturing PMI number of 151.5 vs. expectations of 150.5. These stocks were starting to look like dead money, but the manner in which they suddenly sprang to life is remarkable, to say the least, and shows how some of the strongest action in stocks can occur when things look the least appetizing. This is what we refer to as the "Ugly Duckling" principle.

Focus List Notes:
Caterpillar (CAT) posted an outside reversal yesterday on above-average volume as industrials took a back seat to the strong action in big-stock NASDAQ names.
Facebook (FB) posted a pocket pivot coming up through its 50-dma. It ended the day at the top of a three-week price range, so technically has not cleared resistance. However, risk, down to the 50-dma is minimal since the stock closed 1.9% above the 50-dma. Keep in mind that earnings are expected at the end of January.

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