Stock Market Early Morning Insights – November 10, 2016

Banks, Biotech, and Infrastructure stocks were the dominant groups moving to the upside yesterday. Conversely, the large tech stocks took another beating as fear of Trump’s threat to bring tech manufacturing back to this country supposedly was the catalyst.

We all know that’s not going to happen because, in my opinion, most Americans would not work 12 hours a day doing piecemeal assembly for minimal wages. If you think an iPhone 7 is expensive at $750, wait until it’s assembled in the United States. You might as well figure on the price doubling, and consumers are not going to stand for that. A few years ago, Motorola opened and assembly plant in Fort Worth Texas for their Moto X line of phones. Initially, it looked like it would work, but the manufacturing costs made it impossible to continue. I applaud them for trying, but it just wasn’t feasible.

Banks are benefiting because the assumption is that banking restrictions based upon the Dodd-Frank legislation will be eased or eliminated. The regulations are burdensome, but I don’t know how many times do we have to go through a financial collapse to know that a few bad apples in the financial industry can bring the whole system down. I’m sure most of you remember Charles Keating, and we all remember the financial collapse of 2008 based upon unrestricted lending and speculation, and outright theft.

Take a look at the S&P 600 chart below and you will see that the index which was on the verge of collapsing is now within a few points of breaking out to a new high. This is primarily due to bank and biotech stocks surging. Most of the charts are not constructive at all, but are out right speculation, and of course, benefit from short covering.

The big tech stocks like Facebook, Amazon, Apple, Microsoft etc. sold off hard yesterday, but the charts suggest that stopping volume and transfer of ownership occurred in these stocks. The money was being transferred from weak hands to stronger hands. This does not mean the stocks are going to shoot up to their old highs, but it does mean that the strong hands are absorbing much of the selling. These stocks have been the leaders of the rally, and if they continue to roll over, new stocks will need to emerge to keep this market propped up. NVDA reported greater earnings after the bell yesterday and is up sharply. Maybe this will help sparkly turnaround in the large tech stocks.

At the moment, it looks like the short-term leadership is coming from the Financial Sector. Take a look at JPM, MS and BAC as a few examples. These 3 stocks were already in long-term uptrends based upon the moving average fans, but they have skyrocketed during the past 2 sessions. They are not candidates for purchase now because they are too extended.

Bonds have been a disaster over the past couple of sessions. The bond market is closed today for Veterans Day. Oil and gold continue to sell off. It’s too early to tell if the Trump rally has legs. Have a good weekend.

STOCK MARKET EARLY MORNING INSIGHTS

Stock Market Early Morning Insights is a product of Ron Brown Investing. The complete report and all the charts are produced daily before the market opens and distributed by email to subscribers. Reports published on the HGSI Blog are delayed and do not contain all the charts.  For more information about subscribing use this link. MORE INFO