Stock Market Early Morning Insights – December 14, 2016

Today we await the Fed announcement on earnings rates, but more than likely they are going to raise rates for the first time in 2016. Volume will probably be subdued going into the rate decision announcement, and then we will see the usual volume spike and volatility as traders get whipsawed before market direction is determined. It’s inevitable that there will be increased volatility around the announcement. It is an interesting article and graphs on how the Fed has performed the 2016 on the Bloomberg website this morning. Here is a link: https://goo.gl/zHbWqM

 Yesterday was a strong day for the large cap tech stocks, but if you take a close look you will notice that most of them close well-off their intraday highs. Google, Facebook, Apple etc. all gave back some gains at the end of the day and this is reflected in the NASDAQ composite and the NASDAQ 100 charts. This type of chart indicates that traders were nervous going into the close and chose to take profits rather than holding overnight.

The Bank and Semiconductor Devices stocks only took a day off before they moved back up to the top of the demand list. This is typical in a strong group as fearful traders take profits, other traders view the pullback in a group as an opportunity. This is why trends persist even after profit-taking. Some traders want to protect the profits they have, so they sell or get stopped out, but other traders are there to support prices in what they view as bargains. This is also why the impulse, which is the move up, and the reaction trades where we wait for contraction after expansion work well. We do not chase, but instead wait for the contraction phase, and then buy the breakout past short-term resistance.

The top 50 GIR was dominated by Banks and Semiconductor Devices along with Pollution Control Equipment and Communications Equipment. The top 50 is completely devoid of Biotech and Specialty Pharma stocks. These 2 groups are not participating in the rally.

The S&P 400 mid-cap in the S&P 600 small-cap charts are nearly identical.

They were flat with black candles and did not participate in the large cap rally yesterday. It looks like many of the banks which did participate were larger capitalization banks.

There are no utilities in the top 50, but every utility stock in the Dow Jones Utility index advanced yesterday. Oil was down 1.60% this morning after being rejected at higher levels the past 2 days. There are 2 consecutive up thrust bars on the crude light futures chart. I think the rally in oil was overdone based upon something that may or may not happen going forward; that is the ability of OPEC to control output.

STOCK MARKET EARLY MORNING INSIGHTS

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