Stock Market Early Morning Insights – September 23, 2016

Stock Market Early Morning Insights – September 22, 2016


At our webinar on September 20, Gil Morales provided great insight into how he trades, and how he uses HGSI. We have had many positive comments about the webinar, and if you have not yet had the opportunity to view it, this is the link. Gil Morales is a Best Selling author and Stock Trader.  Gil is Managing Director of Moka Investors, llc

The NASDAQ composite gapped open and held its gains throughout the day as it closed at 84.69% of its daily range. The candle body was relatively small which indicates to me that the opening gap was driven by short covering. The small candle body suggests there was profit taking as the index failed to make much progress after the opening gap.

Market watchers spend most of their time and energy looking at the large capitalization leaders such as Amazon, Google, Nvidia etc., but the primary strength was in the small-cap stocks yesterday. The small-cap stocks were led by Banks and REITs.

If you take a look at the S&P 600 index in the body of this report you will see how strong the move was. Both the S&P 600 and the Russell 2000 were up 1.5% yesterday compared to .8% for the NASDAQ composite. The S&P 600 index is challenging its high, and if there is any follow-through today, it may surpass the high. Volume was above average for the S&P 600, and for two days in a row, and Effort to Rise flag was generated. Three Effort to Rise flags of been generated over the past six trading days.

The NASDAQ composite had 2.43 to 1 advancers over decliners while the S&P 600 small caps finished at 9.65 to 1. The Russell was 5.99 to 1. The mid-cap index also did very well finishing with 7.91 advancers to every decliner.

If this rally is going to continue I would expect the small-cap and mid-cap stocks to lead the way because they are more so-called risk on stocks. Risk on is a misleading term because every stock is risky, but the smaller stocks are much more speculative as a rule.

If you scroll down to the industry groups which are sorted by my raw combo ranking you will get a good view of where the industry group strength was yesterday based upon both price and volume. The top group was E-Commerce Discretionary followed by Biotech, Semiconductors Devices, Application Software Casinos and Gaming, Communications Equipment, Internet Media, Specialty Pharma, REITs, Semiconductor Manufacturing and Homebuilders. If you compare this to the top 50 GIR, and the Stocks and Groups Moving to the Upside, you will see a lot of overlap.

Many stocks are extended, and continue to get more extended, but I will not be chasing them, and I suggest that you do not. Yes, the market is very bullish now, but just take a look at the index charts for the past two weeks for a reminder about how quickly sentiment can change. This market is being propped up by the central bankers, but this cannot last forever. Please manage your risk, and enjoy the ride while it lasts.

Have a good weekend.


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