Stock Market Early Morning Insights – May 17, 2016

Oil, Energy, Biotech and Apple were the dominant forces driving the stocks higher yesterday. Oil was up over 3% on the Goldman Sachs report, and Apple moved up 3.71% because of the Berkshire Hathaway stake. Biotech and Specialty Pharma stocks moved up from oversold levels from for the second day in a row.

So what really changed yesterday? Not much. The stock indexes remain in trading ranges and directionless, and have to prove their direction, they must either break support or resistance, rather than remaining in a trading range.

This morning stock indexes are slightly negative, so there is no follow through so far. As you can see in the charts below, volume was less than impressive, and without more participation, I believe it will be hard for the indexes to break through resistance. Yesterday was a news driven session primarily based on oil hitting a seven month high, and Apple’s move. Breadth was decent coming in at 2.39 to 1 for the NASDAQ, but not overly impressive.

I mention USCR a few days ago. I believe it is still setting up to go higher if this market has an upward bias. At the moment, it is stuck in a tight trading range.

Other than energy related stocks, Semiconductors had a good day yesterday, but this is a beaten down group attracting bargain hunters. The group rank of the equal dollar weighted index is only 22, but still, there is some accumulation going on there.

As I mentioned on the BB after the market closed yesterday, there was a surge in stocks breaking out to multi-year or all-time highs. When the day began, there were 15 stocks that passed my Perfect Speculator screen, and by day’s end, the number was up to 66. This is the distribution of the group and is heavily dominated by REITs with Utilities coming in second. Both are conservative groups and dominate the list. The second image is the EPS Rank distribution. Note that only 1/3 of the stocks have EPS Ranks above 30. Too much emphasis is placed on EPS.

I am neutral on overall market direction.

STOCK MARKET EARLY MORNING INSIGHTS

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