Stock Market Early Morning Insights – March 1, 2016

Stock Market Early Morning Insights – Traders who went home short after the afternoon selloff in the major market indexes were more than likely surprised when they checked the overnight futures to find futures sharply up. In this age of market stimulation and easing, market predictions are a waste of time and effort. In my opinion, it makes more sense to concentrate on sectors, groups and individual stocks rather than trying to predict market direction.

All of the major market indexes that I follow generated a negative VSA alert based upon yesterday’s close, as well they should have. All of that is changed this morning, if the futures hold up, and the cash market follows.

Yesterday’s afternoon selloff was swift and brutal on relatively heavy volume as Biotechnology stocks led the market down. The IBB, the NASDAQ Biotechnology Ishares ETF was down 2.8%, and the SPD are S&P Biotech ETF, the XBI was down 3%. The XPH, the SPDR S&P Pharmaceuticals ETF was down a whopping 4.1%.

Valeant Pharmaceuticals led the ETF’s down after it was announced that the SEC is investigating the company. The Canadian company fell to its lowest level in three years. It has recovered five dollars of the loss in the premarket. Back in July 2015, this was a $263 stock is currently trading at $68! So much for buy-and-hold.

Once again, there was strength in gold and oil, and that is continuing this morning. Gold futures on the verge of breaking out to a new high, and crude light is close to establishing that higher high which has eluded it. Metal and mining stocks were extremely strong yesterday with the XME, the SPDR S&P Metals and Mining ETF up 4.3%. All three trends are up for this ETF, and its strength is not waned at all. The 13 day force index turned positive 21 days ago on the same day an effort to rise VPA alert was generated. The ETF has broken past short-term resistance on a Pocket Pivot and looks like it wants to go higher.

Semiconductor Devices and Restaurants continued their positive run joining Precious Metals and Mining stocks as the places to be on the long side.

Money is also flowing into some of the weaker groups. The Steel Producers index continues to move higher and is currently 23.8% above its 52 week low. Its accumulation is now “B”, and it is one of 31 groups whose VPA trends are all green. The “smart money” has been accumulating steel stocks for 1 ½ months even though earnings are extremely poor.

Even though Asian and European markets rallied on stimulus news out of China, and the hope of more stimulus from the ECB, I am very cautious about the overnight turn around in stock index futures. I am more interested in how we end the trading session rather than how it begins.

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