A big gap-up open yesterday morning as a result of "tax reform" euphoria after the Senate passed its own bill early Saturday morning faded badly into the close. The Dow Jones Industrials Index gave up nearly all of its impressive 303-point intraday gains, eking out a 58.46 point gain. Meanwhile, the S&P 500 Index reversed from a more than 0.5% move to close down -0.11%, and the NASDAQ Composite Index continued to diverge in the worst possible way by diving -1.05% on higher volume. It was clear that investors sold into the move, and the urgency of the selling had the feel of obvious distribution. Futures are slightly higher this morning, but we would be leery of a potential up open/down close situation developing.
Focus List Notes:
Focus List names came apart yesterday as sellers ran headlong for the exits. While some pundits explain the selling as being due to the fact that tech, internet, and other growth names won't benefit from so-called "tax reform" legislation as much as other sectors of the market, the selling strikes us as much more ominous than that. In all cases, with CAT being the sole exception. Focus List names have broken near-term support and our initial selling guides. Most did this over a week ago, with the final holdouts like ANET and TTWO coming doing so more recently. 50-dma violations represent the final selling guides for longer-term positions in Focus List names, many of which have been on the list since early 2017 and beyond. For now, only one stock remains on the Focus List. While we might expect that most of these names will, at some point, have oversold bounces, in cases where the 50-dma or another significant level of potential resistance (e.g., a Century Mark price level) lies above the current price this could simply set them up at short-sale opportunities as was the case with FB and NVDA yesterday, for example.
ANET blew apart as it crashed through its 20-dema, which was our maximum selling guide for the stock. It has been removed from the Focus List.
BABA headed lower in a 50-dma violation. It has been removed from the Focus List.
CAT gapped up but stalled out to closely slightly on the downside. The 20-dema serves as a near-term selling guide for the stock in the event yesterday's reversal turns into something worse.
FB gapped above its 50-dma and then reversed sharply to the downside on very heavy selling, violating its 50-dma in the process. It has been removed from the Focus List.
NFLX has violated its 50-dma and has been removed from the Focus List.
NVDA gapped above its 50-dma and the $200 Century Mark but quickly reversed to the downside on heavy selling volume. It has now violated its 50-dma and has been removed from the Focus List.
TTWO got taken to the woodshed, diving over 11 points as it crashed through its 50-dma. It has been removed from the Focus List.
WB closed below its 50-dma on heavy selling volume. It has been removed from the Focus List.
Market Lab Report - Premarket Pulse for Tuesday, December 5, 2017
| Published: | 5 Dec 2017 08:50 ET |
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