Stock Market Early Morning Insights – June 8, 2016

We saw a hint of distribution yesterday afternoon in the NASDAQ Composite and the SP 500.

The selling began around 12:30 Central time, then accelerated going into the close. The internals for the Comp had been positive all day, but were flat at the close. The SP 500 internals held up better, and closed at 1.49 to 1 positive.

It was a different story for the SP 400 Mid-Cap stocks which were strong all day with the index closing in the upper 2/3 of its daily range. Internals closed at 1.88 to 1 positive. The SP 600 Small-Cap index also closed with a bullish candle. Volume was less than average for all the indexes.

The strength was in Energy, REITs, Precious Metals, Application Software and Homebuilding stocks. Homebuilders had 24 advancers vs. 1 decliner. The weakest groups were the Biotech and Specialty Pharma stocks which had been on a tear. VRX hurt the health sector again with disappointing earnings and earnings projections. VRX was a $263 stock in July of 2105. It closed at $24.64 yesterday. Risk control is everything when investing in stocks; VRX is a great example.

The VIX spiked up a bit yesterday when the SP 500 and the Comp sold off, and this is an indication of a little fear coming back into the market. The trends all remain up, but if we see another selloff late in the day after a positive open, it will be another sign that distribution is occurring. Yesterday was only a hint, and was not market wide.

A partial reason for the SP-400 holding up well yesterday is because it contains five homebuilders which were some of the most in demand stocks in the database on Tuesday. It also contains many REIT’s and Semiconductor stocks with both groups doing well yesterday.

Stock index futures are up slightly again this morning more than likely lifted by energy stocks because oil is up and 1% as I write this. The Dollar Index is down which helps both oil prices. The trend on crude light futures broke above its consolidation area yesterday to establish a higher high, so the trend is up.

If oil stays up for the day, expect more money to flow into the Energy sector. The sector has a “A” accumulation rating, and it has been 39 trading days since the last VPA flag which was an Effort to Rise. The sector chart is now above its 200 day exponential moving average.

STOCK MARKET EARLY MORNING INSIGHTS

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