Stock Market Early Morning Insights – May 25, 2016

The Semiconductor Devices rally that began last Friday continued yesterday as most sectors and groups joined the party. The 4815 resistance level that I was watching on the NASDAQ composite was quickly surpassed as stocks gapped open and shot upward without pausing. The NASDAQ closed at 93.28% of its daily range, with similar closes and the S&P 400 mid-cap, and the S&P 600 small-cap indexes.

Buying and short covering was broad-based with some amazing numbers for advancers versus decliners in some indexes and sectors. The NASDAQ 100 currently contains 105 stocks and 103 of these were up for a 51.5 to 1 ratio of advancers over decliners. These are breath numbers rarely seen. The SOX had 30 advancers and no decliners, the DJI had 29 advancers to one decliner. The Energy and Materials sectors lagged, but were still positive with more advancers than decliners.

The Homebuilders equal dollar weighted index was up 4.5% yesterday on much better than expected housing starts news. That information added fuel to the fire, but as I mentioned yesterday, it looked like the market had an upward bias, and the housing news was a plus for the tech rally that began on Friday with the semiconductors. Yesterday, the technology index of 450 plus stocks had nearly 15 advancers for every decliner. The healthcare index was second coming in around 9 to 1.

Now the question is “are investors being suckered in while the big players unload inventory?” That is something we won’t know until it happens, but what was surprising to me was the lack of above average volume for such a massive up day with strong internals. The 90 day moving average of volume was less than average for the major indexes. Also, there was not a Pocket Pivot on the indexes.

This is the problem with putting too much reliance upon the broad-based indexes. I believe it is better to look at individual groups and individual stocks to get a feel for what is really happening in the market. As we look below the surface in HGSI we get tremendous insight into what is really happening. The indexes are the summary, but the individual parts are the groups and stocks, and that is where we should concentrate our efforts. Still, I am a little concerned about the lack of overall volume.

This morning it appears that we will have a follow-through to the upside, and it looks like much of that lift will be coming from energy related stocks and oil. Crude light futures are currently trading at $49.14 and are attempting to break above the $50 level. There is short-term resistance, but the chart looks very constructive and the trend is definitely up.

I am working on getting the webinar/seminar put together, but I won’t have anything until early June. With the long weekend approaching I won’t accomplish much, and I will be leaving for Colorado and Western Nebraska for the next several days beginning Friday morning. I plan to post early morning reports each market day if my Verizon hotspot works in some of the more remote areas.

STOCK MARKET EARLY MORNING INSIGHTS

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