Stock Market Early Morning Insights – February 24th, 2016

Stock Market Early Morning Insights  – The S&P 500 index, the SPX, has been unable to break through the 1950 level. It got as high as 1946.70 on Monday when it closed at its high, but yesterday’s Piercing Candle all but negated Monday’s strong performance.

As I write this, the S&P E-mini futures are down nearly 1%, and oil futures are falling after Saudi Arabia and other countries stated there would be no cuts in production. The news was out yesterday, and oil futures took a big hit, and wiped out Monday’s gain to form an Engulfing candle. This morning, crude light futures are down another 3%, and may be heading back down to test the low of $28.17, which was established on February 11.

As expected, with stock futures and oil futures down, gold is rallying and is up 1%, and the 30-year treasury bond futures are up .45%. The US dollar index future has been rallying for the past few days, and is showing strength again today.

Volume was light again yesterday for the major market indexes as traders try to figure out which direction stocks are going to go. Volume was so light that both the S&P 600 Small-Cap in the S&P 400 Mid-Cap indexes generated no supply alerts which happens when small bodies are created on low volume. This simply means that there is no conviction in either direction as Bulls are not panicked enough to sell their holdings.

Yesterday was a choppy session with no one in control, but the indexes did close near the bottom other daily trading ranges. If the stocks indexes cannot rally today, and close near their lows again, the SPX may be heading back down to retest the lows. The VIX shot up again yesterday, up 8.3%, it is now back above 20. The VIX is simply a barometer of the uncertainty in this market environment.

The HGSI top 50 GIR contains several Packaged Food stocks which are clearly defensive stocks. Restaurants are the other dominant group, but Airlines continued to be well represented with four airline stocks in Today’s List. Airline stocks probably need to back and fill if they are going to go higher as a group. Cruise Line stocks have also been strong for the past couple of weeks after generating a couple of stopping volume alerts in the index. They do not show up in the top 50 GIR today, but two Cruise Lines stocks are in the stocks and groups moving to the upside.

Precious Metal and Mining stocks continue to dominate the low-priced stocks and groups moving to the upside. This is strictly a group momentum trade because the earnings and revenue are pitiful for the stocks. I guess this is the old adage that stocks look forward rather than back. The pennant on the gold futures has been broken to the upside this morning, and horizontal resistance is at 1263.90. If stocks tank today, this level could be easily surpassed. As I write this gold is up 1.24% for the day.

Most traders focus on the leading liquid stocks such as Google, Amazon, Tesla, Apple, Netflix, Facebook and others. That’s whether intraday volatility is tremendous. I don’t suggest that you play in that arena unless you are glued to your screen and can react quickly. It’s just too dangerous. Debit or credit spreads are a defined risk trade which will allow you to participate in these stocks if you need to slug it out with the big money.

If you take the time to look at the images provided with this report, you will clearly see that money is flowing into the defensive stocks. Be careful with your capital. There will be better times in the future for the intermediate and long term investor.

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