Stock Market Early Morning Insights – July 14, 2016

Stock Market Early Morning Insights – July 14, 2016

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The market took on a defensive tone yesterday as stocks pulled back on light volume. Oil reversed direction from the 5% move the prior day, but this morning crude light futures are back up. Oil Bulls are trying to hold the line here because a break below support from three days ago would confirm an intermediate term downtrend.

After backing off for a few days the defensive groups came back to the top of the lists yesterday with money flowing into Precious Metals and Mining stocks, Utilities, REITs, and bonds. Looking at the futures this morning which are up sharply, it looks like those groups may be weak today. Gold futures are down nearly 1%, 30-year treasury bonds are down .33%, the dollar index is down .34%, and crude light is up 1.85%.

Yesterday was a quiet day on very light volume, or one of those one-day pause to refresh days before going higher. The Brexit shakeout is now in the rearview mirror and market Bulls see nothing but a clear path to higher prices now that overhead resistance has been taken out in the S&P 500 and the Dow Jones Industrial Average. The NASDAQ composite still has work to do before it is into new high territory.

While the defensive stocks came to the top of the lists yesterday, Energy, Biotech, and Specialty Pharma stocks fared poorly. Semiconductor Devices were mixed, but if the futures hold the day, I would expect the Semiconductors group to continue higher since it came off the bottom with such force. The Airline group was also mixed yesterday, but is still trending up.

The psychology of the market has completely changed from two weeks ago when it was all doom and gloom, but now miraculously, traders are extremely upbeat and are looking for further gains. Traders and investors who look at charts suddenly feel that I better get on this, or I’m going to miss out. I too have to go with the flow, but risk control is much more important than chasing any extended stocks or ETFs.

This current rally all seems to be based upon expectations that the Fed, EU, and Bank of England are going to continue to hold off on rate increases, or even ease further. Consequently, the obvious place to find yield is in stocks.

Earnings season has begun with JP Morgan Chase and Blackrock as two notable companies reporting today. JPM beat expectations and is trading higher. BLK met expectations, but is trading lower. Always consider earnings release dates when prospecting for stocks, because when earnings are released it is a crapshoot.


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