Stock Market Early Morning Insights – December 1, 2016

The major market indexes had a change of character yesterday from extreme bullishness to caution. The NASDAQ composite is the most obvious example of the change of character from bullishness, to contraction, and then yesterday a long black body candle that closed on its absolute low for the day.

Short-term support was broken on above average volume with internals coming in about 2 to 1 negative. The S&P 400 mid-cap index in the S&P 600 mid-cap index both closed near their daily lows on heavier volume with bearish candles.

Yesterday the positive groups were dominated by oil related stocks as expected with the OPEC agreement. Now we need to wait to see how long that agreement holds, but for now it generated tremendous buying not only in the oil futures but in mostly all energy stocks.

There was short covering after the opening gaps in energy-related stocks, and many closed near their high of the day. As I flipped through many energy stocks this morning, I found many ugly chart patterns. If the Energy stocks are going to continue to move up, they should stabilize and there will be opportunities to get in on the long side. Most of the stocks have terrible earnings, and are well off their 52 week highs. Crude light futures are up again this morning nearly 2%, so there should be followed through in many energy stocks.

The top 50 group inclusion report is dominated by energy-related stocks, Steel Producers, and Banks. The banking industry groups have been strong for quite some time. The Steel Producers were downgraded 2 days ago by some firms, which gave market makers an opportunity to lower bids and shake out long side holders. This is the downside to having stops in place.

If you look at my Broad Market Indices folder below, you’ll see that out of

35 indexes only 4 had more advancing issues than declining issues. The Energy Index dominated was 6.18 advancers for every decliner. The other advancing indexes were not nearly as dominant, but what is most telling for me is the rest of the indexes which were mostly 2 to 1 negative or worse.

I am very cautious for now because of the shift in character in many of the indexes. The indexes will more than likely be propped up by energy stocks for the next few days because oil has reached the $50 a barrel level and is moving up. If you look at the weekly chart of crude light, you will see that resistance is overhead around the $52 level. Oil has been in this contraction range for months, and until crude light futures break above $52 on heavy volume, and uptrend will not be in place.

Stock futures are slightly positive this morning with oil futures now up 2.35%. Most of the charts I looked at this morning are extended and I found very few that I like.

STOCK MARKET EARLY MORNING INSIGHTS

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