Stock Market Early Morning Insights – August 23, 2016

I’m seeing mixed messages in the stock market. There was evidence of fear with the VIX rising 8.2% and the TLT 20-year bond ETF up .8%, but this was contradicted by small and mid-cap indexes closing near their highs for the day. Also the Biotech ETF’s were up over 2%. Utility stocks were also higher which is a flight to safety, but on the other hand, another so-called risk group, the Semiconductors continued to rise, and are the most in demand group in the database according to my combo ranking.

So what is it? Are the broad market’s going to continue higher, or are they going to roll over like so many shorts are hoping they do? My pie chart for the index groups are showing that 74% of the industry groups are A or B Accumulation, and only around 18% of the industry groups fall into the D and E Distribution slices. Yes, the accumulation/distribution calculations are not as responsive as some other indicators, and they should not be because they shouldn’t react to every wiggle in the market.

With the indexes in the stock index futures closing near their intraday highs, I do not see deterioration yet in the indexes. In fact, I see just the opposite; I see continuing accumulation. Granted, the indexes, especially the S&P 600 small-cap and the S&P 400 mid-cap indexes have done nothing for the past month, but on the other hand, they are hanging in there, and are showing more accumulation and distribution.

If you take a good look at the top 50 group inclusion report you’ll see that it is dominated by Biotech and Specialty Pharma, and once again, Semiconductor Devices. There are also groups of Application Software, Internet Media, Commercial and Residential Building Equipment and Systems and Packaged Food. I consider Packaged Food a defensive group, but none of the other above mentioned groups fall into that category.

Communications Equipment stocks are also well represented in the stocks and groups moving to the upside SmartGroup. I happen to be in ATEN in the group which I purchased as a trade for my current webinar series. It is extended, but it keeps going up. My current stop is at $9.07 which would stop me out at two times profit for my initial risk on the trade.

Oil futures fell yesterday, and are down another .89% this morning as I write this. The Dollar Index is also lower, but stock index futures are higher, up about a quarter of a percent.

Of course, is everyone is waiting for Janet Yellen to speak in Jackson Hole on Friday, or at least that is what the headlines say. The reality is, we can see accumulation and distribution, demand and supply etc. in HGSI rather than relying upon the news to drive the markets.

STOCK MARKET EARLY MORNING INSIGHTS

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