Stock Market Early Morning Insights – November 28, 2016

The overbought indexes continue their upward trajectory, but on declining volume. There is a huge price and volume divergence for the indexes, but the lack of volume is primarily due to the long Thanksgiving holiday weekend.

Today, as traders come back from vacation, volume should increase and we will see if this unrealistic run can continue.

It has been a feeding frenzy as money tries to find a home for fear of missing out. This is where traders and plungers are most vulnerable, if they decide to jump into a rally after sizable gains have already been made. On the other hand, the trends remain up, and I see no weakness in the major market indexes yet.

The top 50 GIR includes several Biotech stocks from Friday. Several of them have generated test for supply flags over the past few days, so if the indexes continue higher, the Biotech group could break out. The index has gained 33% since the low in early November, and is now in a contraction phase. Eight biotech stocks appear in the top 50 today, which could be a preview of what is to come for the industry group.

Steel Producers are also well represented with 5 stocks in the top 50. This is a group I mentioned last week before it took off, and it looks like the group still has momentum, although I would not chase these stocks now. If you already in, great, and I know that several of you are holding positions.

Trail your stops, and hope for continued strength.

I will be looking for stocks that are contracting, but are still in a strong uptrend. OCLR is an example of a stock which is resting after a strong up move. It is currently forming a flag, although there was price rejection at

$10.19 four trading days ago. The stock has held up well on declining volume and generated a low-volume test for supply flag on Friday. The upper and lower wicks and the spinning tops the last 3 days suggest uncertainty about market direction. If I take the trade, it is going to have to come to me with a buy stop at $9.85 with a stop below Friday’s low.

Stock futures are slightly lower this morning, but oil is up 1.40% on hopes of an OPEC deal. Oil futures plunged on Friday as hope faded, but it looks like the Bulls are in control this morning after a sharp gap down.

STOCK MARKET EARLY MORNING INSIGHTS

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