Stock Market Early Morning Insights – May 26, 2016

After another opening gap up, the NASDAQ composite pushed up to a high of 4905.45, then backed off to close 10 points lower. The candle finished the day is a Spinning Top, and volume was once again less than normal. Some traders seem to think that not all volume is being reported because of trades that are conducted off the exchanges, but I contend that volume is relative to what we have seen in the past.

When markets were securities are rising, this should be supported with increasing volume, or at least sustained volume. This is not what we’re seeing on the NASDAQ composite, the S&P 400, and the S&P 600. Also, when I look at the equal dollar weighted indexes of the S&P 1500, and the S&P 500, I see rising indexes on falling volume.

This is a word of caution that this four-day rally may not be sustainable. The NASDAQ and the S&P 400 are both approaching major resistance, and if they get that high, breakouts to new highs may be very difficult to attain. The small bodied candles that we see on the indexes from yesterday’s action suggests that there is some resistance to higher prices.

This morning oil has attained the $50 level and that is providing support to stocks. If oil holds the $50 level, more than likely the driving force in the market today will be the energy stocks once again. Yesterday the Energy Sector had 4.43 advancing stocks for every decliner. We should see more of the same today. The Exploration and Production group was dominant yesterday in the stocks in groups moving to the upside SmartGroup.

We are approaching the long Memorial Day weekend and that could have something to do with the declining volume for the indexes. Still, I prefer to see supporting volume as indexes rise. The declining volume combined with the Spinning Tops on the indexes suggests that traders may be reluctant to add new positions going into the long holiday weekend.

STOCK MARKET EARLY MORNING INSIGHTS

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