Stock Market Early Morning Insights – February 23rd, 2016

Stock Market Early Morning Insights – Yesterday’s strong percentage rally lacked one essential ingredient: volume. Volume was down across the board, and was down 18.44% from its 20 day moving average in the NASDAQ composite. With strong percentage gains for the indexes, I thought volume would have been higher, but the lighter volume suggests that traders and investors are not jumping in with both feet.

Other than the lack of volume, internals were decent with the NASDAQ finishing at 2.44 to 1 advancers over decliners, but this was down sharply from the opening print of over 6 to 1. The NYSE finished the day at 3.61 to 1 after opening the session at 9 to 1 positive.

The Energy sector led the rally with oil prices up around 5%. Groups that participated to the upside were Semiconductor Devices, Managed Care, and Airlines. I mentioned Airlines again yesterday, and have several times during this bounce off the bottom, and they continue to go higher as a group. From the low point to yesterday’s close, the airline group is up around 21%, and according to a Fibonacci measurement, it has regained 61.8% of its losses from the high in December.

Several times yesterday, traders tried to push the S&P minis up through the 1945 to 1950 area, but stalled around 1944. This morning the E-Mini SP Futures are currently trading around 1932, so we’ll have to wait and see if the Bulls can muster enough strength based on volume to breakthrough resistance between 1945 and 1950 to complete the W pattern. S&P futures were down as far as 1924.5 overnight, but rallied to 1936.75 before dropping back a bit this morning. Crude light futures are down slightly, around .25%, but were positive when I first began this report. I imagine the broader markets will follow the energy sector again today.

Gold is rallying begin today and is up around 1% as I write this. Metal and Mining stocks in the SPDR XME ETF were up 4.3% yesterday. The gold futures are currently forming a pennant on the daily chart, which could break either way, but it currently looks like a continuation pattern.

If you look closely at the NASDAQ chart you will see that volume has fallen for the last three consecutive days. The same holds true for the S&P 400 Mid-Cap Index Small-Cap. Higher volume means more conviction, and I’m just not seeing it yet.

Money is flowing back into many of the Canary stocks and the favorites are Amazon, Google, Facebook, and Tesla. Apple is not doing much. Today is a critical day for the indexes to see if they can breakthrough resistance to continue the rally. I believe a close above the 1950 level is necessary to attract more money from the sidelines. Utilities were strong again yesterday which suggests risk aversion. Both the NASDAQ Composite and the SP 400 generated confirmation of strength VPA alerts, but little progress was made in either index after the opening gap up.

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