Stock Market Early Morning Insights – March 29, 2016

Stock Market Early Morning Insights – March 29, 2016

The broader markets stalled yesterday after Thursday’s hammer reversal.

The E-mini futures formed a Spinning Top/Doji which indicates uncertainty, but volume was extremely light which indicates lack of selling pressure. The light volume suggests that traders were extending their Easter weekend, and also lack of conviction for traders who participated.

At one point during the day it looks like the Bulls had it as the indexes and the futures built upon Thursday’s reversal, but volume and conviction were missing. Today we should get a better sense of direction as more traders return. The NASDAQ composite and the S&P 400 both generated no supply flags due to the light volume. At times like this I am always reminded of the old cliché, “never short a dull market”.

The short-term trends did turn down for the NASDAQ, the S&P 400, and the S&P 600 and I am seeing a loss of momentum. You can see this in the Force Index 2 and 13-day indicator, and in some of Ian’s indicators. The lack of volume says that traders are not too concerned about this yet. Internals were positive for most of the day yesterday, but turned negative at the end on the NASDAQ. The NYSE internals remained in positive territory.

I noticed that the VIX was up 3.4%, but the VIX futures were down for the day. This seems unusual, since if fear is building, I would expect them to move in the same direction. I did notice that several of the defensive groups and indexes did move to the top of the list based upon advancers versus decliners. Money flowed into REITs, Consumer Staples, and dividend yielding stocks.

The Biotech and Specialty Pharma along with most of the Healthcare stocks seems to be failing. After a short burst to the upside last week, the Biotech ETF’s fell back. The leadership in the market remains in the Airlines, Packaged Food, Semiconductors, and Utility Networks. The oil rally, and oil related stocks have lost their momentum as oil futures stalled around the $42 level last week.

Stock index futures are weaker today following yesterday’s uncertainty. After yesterday’s failure to follow through on Thursday’s bullish reversal I am becoming more cautious. Today should give us a better feel for who is in control of the indexes. Volume will need to pick up to confirm movement in either direction.


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