Stock Market Early Morning Insights – December 2, 2016

The NASDAQ Composite generated a 2nd consecutive day of Effort to Fall VPA flags. Volume was heavy as the tech stocks absorbed another beating with semiconductor devices leading the way down. The SOX was down 4.9% yesterday with all 30 stocks negative. The SOX had been one of the leading groups in this rally, but it has fallen by the wayside as Banking and Financial stocks continue to dominate.

The top 50 GIR is loaded with Bank stocks some of which are out to an all-time high. This is due to the belief that restrictions on banks will soon be eased. Then we can witness more Wells Fargo debacles which occurred even with the restrictions. You can’t legislate honesty, and if banks are permitted to let their leverage get out of control again, another financial meltdown will more than likely occur.

The jobs report was just released and the published employment rate is out in 8 year high with 178,000 new jobs added. Initially the reaction was positive in the futures, but they are now slipping slightly. After the past few days, momentum is now down in the NASDAQ composite, the S&P 500, the S&P 400, and the S&P 600. The Dow Jones Industrial Average is the exception, and since the media only seems to monitor the DJIA, the market appears strong to the public. This of course, masks what is really happening.

Volume was heavy again yesterday, I am combined with the wide spread on the NASDAQ composite candle, it was evident that traders and funds were heading for the exit in the tech dominated index. The spreads on the S&P 400 mid-cap in S&P 600 small-cap indexes was not nearly as great, but were still above average. If we have another down day on heavy volume with wide spreads between high and low on the candles, the indexes may be setting up for a correction. With the strong job numbers, a December rate increase is likely.

In a span of 2 days, I have gone from moderately bullish to neutral on the Indexes. If the indexes trade a rally today, but fail and close near their lows, I expect further downside.

Have a good weekend.

STOCK MARKET EARLY MORNING INSIGHTS

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