Stock Market Early Morning Insights – July 22, 2016

Intel killed the momentum in the Semiconductor Devices group yesterday. They beat earnings expectations, but revenue was light. INTC gapped down at the open, but by the end of the day was finding support and close near the upper part of its daily range on extremely heavy volume. I will be watching today to see if it can hold because the Semiconductor have been such an important part of the recent rally.

The NASDAQ composite showed some distribution yesterday on slightly heavier volume, but the internals were only about 1.7 to 1 negative. The charts of the S&P 400 mid-cap and the S&P 600 small-cap indexes held steady, and continue to form flags. The NASDAQ composite did generate a negative VPA flag, so we are now on alert to see if there is a follow-through to the downside. The VIX shot up 8.2%, but is still only trading at 12.74. The VIX futures ETF’s were both up 2.7% as traders try to position themselves in case the rally ends.

The VPA flag is a high-volume down bar after an up move on high-volume. In other words, the bullish breakout above the flag on Wednesday was negated by yesterday’s weakness. The index is trading well above support, and until that support is challenged, the trends remain up. There is no doubt that the indexes need a rest, but a rest and consolidation does not mean they are rolling over yet.

Money flowed into the conservative groups yesterday as you would expect. REITs and Utilities were among the strongest groups, and we saw a resurgence in some of the Precious Metal and Mining stocks. Healthcare and Biotech stocks also had a good day. The weakness was primarily in the Energy sector with Exploration and Production stocks dominating the stocks in groups moving to the downside.

I don’t see a lot of fear in the futures this morning. Gold futures are down .54%, bond futures are down .27%, the VIX is down .94% etc. Maybe yesterday was just a one-day shakeout, and the indexes will move higher today. It is way too early to be thinking we’re going into correction mode. There is just too much momentum behind the indexes at the moment, but as we all know, that can change in a hurry. Picking tops is one of the hardest things to do in market timing, but that does not deter traders from trying nearly every time there is a slight pullback in the indexes.

It’s a relatively light earnings day announcement day, but GE, and some larger banks are reporting.

STOCK MARKET EARLY MORNING INSIGHTS

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