Market Lab Report - Premarket Pulse 10/20/15

Published:

20 Oct 2015 12:39 ET

Major averages rose yesterday on lower volume with the NASDAQ Composite a kiss away from its 200-day moving average.

Expect a continuation of the tug-o-war between signs of economic strength which determine the future of quantitative easing (QE) and rate hikes:

Key variables that can push the market higher:

1) QE
2) Global economic strength - if it is believed this is a sign of a sustainable recovery, the onset of higher rates will be considered a bullish event
3) U.S. economic strength - if it is believed this is a sign of a sustainable recovery, the onset of higher rates will be considered a bullish event

Key variables that can push the market lower:

1) Global economic strength - if it is believed this is not sustainable, the onset of higher rates will be considered a bearish event
2) US economic strength - if it is believed this is not sustainable, the onset of higher rates will be considered a bearish event

We have been at inflection points on a number of variables this year which accounts for much of the market's trendless, sideways action. The global economic slowdown, especially in China, created the first correction exceeding -10% that the U.S. market has seen on the S&P 500, since 2011. But such economic slowdowns have central banks fueling markets with additional QE, further kicking the can down the road, and the road is a long one having started in late 2008. But this year's trendless market action in the U.S. and downtrends in global markets shows QE has a limited lifespan.

As always, keep a close eye on your stocks and watch lists. Despite this year's trendlessness, profit opportunities in stocks have been present as can be seen in this year's Pocket Pivot and Buyable Gap-Up reports. Of course, a deft hand of taking profits when you have them in context with the stock's chart relative to itself and to the general market have also been key.

Telecom infrastructure company Dycom (DY) had a pocket pivot. Earnings are skyrocketing, sales are accelerating, group rank 7.

Supply chain management software company Manhattan Associates (MANH) had a pocket pivot at near breakout point. Pretax margin 28%, ROE 48.5%, consistent and robust earnings and sales, group rank 23.

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