Stock Market Early Morning Insights – July 6, 2016

Stock index futures are down again this morning for the second day in a row. The massive short covering rally that we saw last week seems to be running out of steam.

The political and financial consequences of the “leave” vote are now being felt as the British Pound continues to lose value, and remorse seems to be affecting many of those who voted to leave. The uncertainty is affecting markets world-wide. The DAX is down another 2.05% as I write this, and many other markets are showing similar losses. The losses have increased since I sat down to do this report.

If you’d like to follow the markets worldwide, I think the best place to follow is at http://www.investing.com/indices/major-indices. The site has real-time data for stock indices, stocks futures, commodities, etc. it is not like many years ago where investors could just focus on the US market; all major markets are now interrelated and interdependent.

Yesterday was another day to seek safety in REITs, Utilities and other conservative stocks. As interest rates continue to fall, more money flows into yielding instruments. The fear-based money is flowing into Precious Metal and Mining Stocks, Gold, Silver and Bonds. A look at the number three folder below, the SPDR ETF Sectors, will give you a great snapshot of where the money flowed yesterday.

The so-called risk trades are off with semiconductors being a good proxy for lack of risk. The SPDR S&P Semiconductor ETF was down 2.6% yesterday, and in the SOX only one semiconductor stock was positive, and 29 or negative. I like to watch the semiconductors as a risk barometer.

Energy stocks and oil futures took a big hit yesterday with a surprising build in oil supplies. The XOP, the SPDR S&P Oil and Gas Exploration and Production ETF was down 3.7%. Crude light futures are down another 1.24% this morning as I write this. Bank stocks were also hit hard yesterday with the ETF’s being down around 3%. Natural gas took a huge hit with the UNG ETF down 7.9%.

The euphoria from the multi-day bounce last week seems to have evaporated. It’s easy to follow the mood of the market by tracking a few bulletin boards. When the market is going up, there is a lot of chatter, but when the market is going down and people are holding losing positions, or giving back recent gains, all chatter stops.

Of course, not all stocks are down yesterday. A stock that I mentioned a few weeks ago, MEET, closed at new recent high. It is an old cliché, but it’s true: the trend is your friend and there are many trending stocks out there especially in the REITs, Precious Metals and Utilities groups. The indexes are not in a confirmed uptrend, but are chopping around in consolidation areas..

STOCK MARKET EARLY MORNING INSIGHTS

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