Stock Market Early Morning Insights – February 29th, 2016

Stock Market Early Morning Insights – February 29th, 2016

Stock Market Early Morning Insights – Friday gave mixed messages about the strength of the current rally. The S&P 500, the SPX, looked like it was well on its way once it broke the 1950 level, but the breakout failed and the SPX closed at 1948.05 after hitting a high of 1962.96. The candle was clearly negative with the body of the candle closing inside Thursdays extremely bullish candle. Volume was nearly identical to Thursdays volume which suggests that selling her profit-taking was not widespread.

The NASDAQ composite gapped open, but closed near its low of the day. The S&P 400 mid-cap, and the S&P 600 small-cap indexes were more bullish on above average volume. The short and medium-term trends remain up for the indexes, but Friday’s reversal on a stronger than expected GDP number sent the bond market down and lifted financials. Gold futures were down on Friday, but have firmed this morning as the trading range narrows. The long and medium term trends are up for GLD, the ETF, and a break about 1264 for the gold futures will change the short term trend from down to up.

The so called riskier trades for stocks seemed to have the upper hand on Friday with the Biotech ETFs doing well along with the Semiconductors. As I mentioned above, the small cap stocks held up well which also confirmed that riskier stocks were in favor. The more conservative Utility stocks were negative, but that coincides with bonds falling back after the hot GDP number which spooked bond traders into believing that the Fed could be raising rates soon. Higher interest rates devalue bonds and interest rate sensitive instruments. Friday’s reaction in the bond market may have only been a knee-jerk reaction, because the 30-year Treasury Bond futures are up slightly as I write this.

The S&P E-mini futures just turned positive, and are well off of their overnight low of 1927.75. They are gaining momentum as we head for the opening bell as volume spiked. In spite of Friday’s reversal in the SPX, the bias remains to the upside, but after seeing the intraday reversal, I am cautious.

Earnings season is winding down, but 118 stocks are reporting today. Several Specialty Pharma stocks are reporting including Valeant (VRX) and Horizon Pharma (HZNP) a former leader that is rebuilding a base.

I hope you are enjoying the new version of HGSI which was released last night.


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