Stock Market Early Morning Insights – August 25, 2016

Stock Market Early Morning Insights – August 25, 2016

Yesterday was the first real distribution day we have seen in the NASDAQ composite, but volume was below average as we have experienced in August.

Isn’t it interesting that a presidential candidate, in this case Hillary Clinton, can make a statement about the greed at Mylan, and the entire Health Sector sells off? She holds no position of power, and even if she did, she would be working with the Congress who would do nothing to try to regulate the predatory pricing, but yet it was a great excuse for market makers to start lowering their bids as supply came to the market. It is just another example of market manipulation through the news media, the way I see it.

Was any real and lasting damage done yesterday to the bull market? It is still too early to tell, but the bears are licking their chops after yesterday’s selloff. They have been wrong so many times recently, that they eventually have to get it right. It was a painful day for those who were holding healthcare and biotech stocks that got caught in the selling. Oil and Energy stocks also took a hit as unexpected supply came to the market, and the Metals and Mining stocks took a beating with the SPDR ETF, the XME, down 5% for the day!

Another sign that the market may be changing is that the leadership groups, the NASDAQ 100 and the SOX were two of the weakest groups in my broad market indices folder. On the other hand, internals were slightly less than 2 to 1 negative for the NASDAQ composite, common stocks.

If you use long-term moving averages is your basis to determine the broad market direction, the major market indexes, with the exception of the Dow Jones Utilities and the Dow Jones Transports, remain in strong uptrends. Of course, it takes time for the moving averages to break down, and the moving averages I use to determine long-term direction, the 20, 50, 100 day, and the 200 day exponential moving averages are still in strong uptrends.

There’s no question that risk is high because of the extension of many stocks, so be careful about initiating new long positions and make sure your stops are in place. Long-term gains can disappear quickly.

There is an interesting article on Bloomberg’s about investors fleeing hedge funds because of poor performance.

These so-called experts have not been able to come anywhere close to matching returns in the passive index funds.


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