Stock Market Early Morning Insights – July 20, 2016

The indexes held steady yesterday after a slight intraday pullback. The NASDAQ Composite formed a Doji Star as traders looked for direction. Most of the selling in the E-mini SP futures had been absorbed by the end of the trading session.

Money flowed into REITs, and some of the large cap defensive groups including Packaged Food. Semiconductor Devices did well again with 10% of the Stocks and Groups Moving to the Upside SmartGroup belonging to the group following REITs which were 18% of the group. Package Food stocks were 10%.

The indexes seem to be stalling, but I am not yet alarmed because volume has remained light. Lack of volume can be interpreted a couple of ways, both no demand and no supply. We will just have to wait for a move in either direction to see who has the upper hand.

Biotech, Specialty Pharma, Exploration & Production and Steel stocks were three groups that were weak yesterday. RYI, the steel stock I mentioned a few days ago because of its beautiful chart, went from a strong uptrend to a short term downtrend after announcing a secondary offering of 5,000,000 shares.

Dilution is generally a good way to take the steam out of a strong rally; RYI was down 16.19%, and is down another 6.03% this morning in the pre-market. Their announcement seemed to take momentum away from the entire Steel group where 16 stocks were down for the day. RYI is a great example of company risk when trading individual stocks and why trailing stops are a good idea.

Earnings season is beginning to expand as a number of companies reporting each day increases. Today I am showing around 80 stocks reporting, and about 26% of them are banks. These are the top 10 market cap stocks that are reporting today. Intel is the big dog in the group and their earnings after the market closes could set the tone for the rest of the Semiconductor Devices group going forward. The group has been strong, and good earnings from INTC should add to the momentum.

This morning, stock index futures are slightly higher, but are off of their morning highs. Oil futures continued to fall and crude light futures are at critical short-term support this morning. A clear break below the $45 level would confirm the downtrend. Some news must have just broken because the bottom is falling out of crude light as I write this. Traders are trying to defend the $45 level.

The trends remain up for the major market stock indexes, but lack conviction. I will not be taking on much risk until I get a better sense of direction. Some REITs continue to be the safe play.

STOCK MARKET EARLY MORNING INSIGHTS

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