Stock Market Early Morning Insights – December 8, 2016

A couple of things stand out this morning. On a day when multiple indexes hit a new all-time high, the VIX was up 3.6% and closed at 97.80% of its daily range. This suggests that some traders are buying protection in the form of puts in this overheated market. Another thing that caught my attention is that the NASDAQ composite was up 1.1% yesterday on heavier volume, but advancers only led decliners by a margin of 1.6 to 1. I consider this a narrow rally on a day when it felt like everything was moving higher.

This just was not the case for the NASDAQ.

The S&P 400 mid-cap and the S&P 600 small-cap indexes continued their record-breaking run on extremely heavy volume. The volume numbers are so high, and have been for the past 3 days, I don’t know if I believe them. We are trying to confirm the numbers with the data provider, but for now, we must assume the volume numbers are correct because yesterday was the 3rd day in a row. If they are, this is a feeding frenzy like I have not seen since I have been following the markets since 1983. In the past, I have seen massive volume on a selling climaxes, but never volume like this in a rising market.

It can only mean funds are desperate to chase specific stocks and groups higher, and shorts are having to cover which increases both price and volume.

Many groups were strong yesterday, but the Transportation Index was the leader up 2.5%. This was followed by the SOX, up 2.1%. The Airline stocks started showing up the other day in the top 50 GIR, and the Semiconductor Devices started bouncing about 3 days ago. The Steel stocks continued their run higher along with Bank stocks, but both groups are well extended. Many of the Steel stocks down from their intraday highs. This is no time to be chasing extended stocks. Wait for a pullback in a contraction.

Healthcare, Biotech, and Specialty Pharma stocks were weak yesterday. The SPDR S&P Biotech ETF, the XBI, was down a whopping 4% on record-setting day for many of the indexes. Consumer Discretionary stocks are strong with the sector ending with 4.77 advancers for every decline. The only sector that was negative was the healthcare sector which was nearly 3 to 1 negative.

A few people asked about my webinars after my comments yesterday. I will be doing another series probably beginning in February, but the current one is winding down and I am not going to sell the videos or content. The webinars need to be attended or viewed while they are occurring because I am constantly adding new material.

STOCK MARKET EARLY MORNING INSIGHTS

Stock Market Early Morning Insights is a product of Ron Brown Investing. The complete report and all the charts are produced daily before the market opens and distributed by email to subscribers. Reports published on the HGSI Blog are delayed and do not contain all the charts.  For more information about subscribing use this link. MORE INFO