By: Kent Engelke | Capitol Securities

Tech stocks rallied after China ratcheted up stimulus to combat slowing growth.  The pound erased a decline against the dollar after British lawmakers overwhelmingly voted down a Brexit deal and planned a confidence vote on May’s government.

The potential stimulus in China and the weak data in our trading partner’s economies is spurring the belief of potentially looser monetary policies.

Earnings season accelerates today with the release of Bank America, and Goldman today and Netflix tomorrow.

To remind all, NFLX’s summer bombshell was the beginning catalyst for a selloff of the FAANG issues which in many regards abated at year end.

Stanford Bernstein issued a stark warning yesterday.  The company stated momentum stocks — those rising the most in the recent month and are closely connected to mega-sized technology companies — now display a valuation gap relative to losers, a gap that widened to levels not seen since the dot-com era of 2000 when this strategy tumbled 53% in the following six months.

The data is a sign of heightened risk in the popular strategy of chasing winners as money piles into the same names meaning a reversal could mean trouble.  Stanford Bernstein stated the spreads are much higher than they were in February 2009, a “catastrophic career-costing period for momentum.”  Additionally, the firm stated the PE ratios of high-momentum stocks are now double the price to earnings ratio of low-momentum shares.

What will happen today?

Last night the foreign markets were mixed. London was down 0.53%, Paris was up 0.17% and Frankfurt was down 0.17%. China was flat, Japan was down 0.55% and Hang Sang was up 0.27%.

The Dow should open flat. The 10-year is off 6/32 to yield 2.74%.