Stock Market Early Morning Insights – December 12, 2016

This report is out a day early because I am out of town and wanted to get it to you.

The buying frenzy continued for stocks on Friday, primarily once again in the Financial Sector. Banks were the leading group in the Top 50, and in the Stocks and Groups Moving Up SmartGroup, and Airlines did well too. In the Industry Groups in the body of this report, Airlines were the most in demand group followed by banks. The Bank group is a much larger group than the Airlines group, so for banks to be second on the list is impressive.

A close look at the Top 50 GIR shows that all but one bank closed in the upper part of their daily trading ranges. Volume remained heavy for the group which is driving the SP 400 mid-cap and SP 600 small-cap indexes higher. Internals did subside on the mid and small cap indices with decliners leading advancers in the mid-caps, but the small cap indexes were around 1.5 to 1 positive advancers over decliners.

I mentioned Thursday that the Steel Producers were extended, and the group did pull back on Friday giving back 2%. The Steel Producers dropped all the way down to #90 with the Demand Combo after falling all the way from #5 on Wednesday. My Demand, or Stocks and Groups Moving Up combo ranking is responsive, and is a great tool to keep us on the correct side of group rotation. Steel Producers may pull back slightly, then go higher, but if you have steel stocks in your portfolio, watch them carefully as to not give back too much of your profits just in case rotation continues out of the group.

For the first time in several days, I am seeing limited rotation into the Healthcare sector. Eleven of the twelve Healthcare industries had more advancing issues than decliners with Large Pharma leading 11 to 0, advancers over decliners. BMY, NVO and JNJ look to be under accumulation. This is clearly a bottom fishing group, but watch these stocks because we rotation may be beginning for the group. BMY has been trading sideways for weeks, but it generated an Effort to Rise on Friday.

In the Airlines group, SKYW looks like the best candidate to me, although the best time to buy it was three days ago when the VPOC 10/10 turned positive. The indexes are extremely overbought, so be careful.

STOCK MARKET EARLY MORNING INSIGHTS

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