Stock Market Early Morning Insights – October 11, 2016

Stock Market Early Morning Insights – October 11, 2016

The most striking element of yesterday’s rally was the lack of volume which translates to no demand, or traders unwilling to take on more risk. Volume for the NASDAQ composite was 22% below normal compared to the 50 day moving average of volume. It was even worse for the mid-cap and small-cap stock indexes with the S&P 400 and the S&P 600 nearly 30% below average volume.

Even though the NASDAQ composite looks like it may be on the way to attaining a new closing high, this did not materialize as the index closed at 48% of its intraday range. Internals were good at 2.47 to 1 positive advancing issues over declining issues, and new highs were 128 compared to 17 new lows. The Arms index suggests there was more selling on heavy volume in certain issues with the Arms closing at 1.32.

The mid and small-cap indexes remain weak compared to the NASDAQ and the NASDAQ 100. The S&P 600 small cap index trend is stronger. The strength was primarily in energy related stocks yesterday with crude holding above the $51 level. This attracted money to the Exploration and Production stocks, but the Healthcare Sector was also strong was strength in several of the health industry groups such as Biotechs, Specialty Pharma, and Medical Devices.

Internet Media, E-Commerce Discretionary and Application Software was where the strength was in the tech sector. Semiconductors started the day strongly, but faded as the day went along. REITs and Precious Metal and Mining Stocks were among the weakest. We have seen this for quite some time now.

Yesterday’s lack of volume, or the No Demand flag is a concern. Earnings season begins today with Alcoa reporting and they came in approximately two cents under estimates. Stock futures are down, and with yesterday’s weak close, I am less bullish.

I mentioned two stocks yesterday, VNDA and EXEL. VNDA has a good day, up 4.75%, and EXEL was off to a great start until mid- morning when it was hit hard before recovering much of its losses. A transfer of ownership flag was generated as buyers came into supported on extremely heavy volume. It only closed down 2.63%, but at one point was down around 13%. I would be extremely cautious about it after yesterday’s volatility.


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