Stock Market Early Morning Insights – September 27, 2016

Stock Market Early Morning Insights – September 27, 2016

A few things stand out from yesterday’s market action. Internals were extremely negative with not a single index or sector having more advancing issues than declining issues. The Energy Sector was the strongest sector based upon internals and it was a negative 158 to 114 even though crude prices were up sharply. The crude light rally did not last long because crude light futures are down 2.63% as I write this.

The cause of yesterday’s selloff was supposedly the fear that Donald Trump’s momentum was increasing and the prospect of a Trump presidency is not in the best interest of the financial markets. Once the selling started, there is no reversal to the upside, but the anomaly was that volume was extremely light. Also, most of the damage was done at the open, at least for the NASDAQ composite. The light volume and the small bodied candle combined to generate another No Supply flag, which is a sign of strength. Another positive is that the NASDAQ composite, the S&P 400 mid-cap, and the S&P 600 small-cap indexes all remain above their 10 period volume point of control. Another anomaly was that the arms index was bullish coming in at .6930. This indicates that there was strong buying in some stocks.

Stock index futures were up slightly this morning, but are off of their highs and are currently going down. This supposedly is a reaction to the presidential debate were Hillary Clinton was declared the winner based upon instant polls, and she is supposedly less of a threat to the financial markets. It’s still a long way to the election, but for most of us, it can’t get here quickly enough.
It was a mixed market yesterday with money flowing into conservative stocks like REITs, but on the other hand, the more speculative stocks, Biotechs and Specialty Pharma showed strength. Application Software and Communications Equipment were represented. Even though oil was up, some of the energy related groups appeared at the top of Stocks and Groups Moving to the Upside.

The NASDAQ and the other indexes are back into their congestion areas. I do not believe that either the bulls or the bears hold a distinct advantage here. The VIX shot up 18% as speculators prepared for more downside, but the lack of selling volume yesterday suggests that selling was muted. I am neutral on the indexes for now, and prefer to pay attention to individual groups and stocks.

WB held up yesterday after initial weakness, and it looks like it has support as most of the selling was absorbed. I am long WB with a debit spread, but this is not a recommendation. As always, know your risk, and use your own judgment when entering trades. Also, FNSR is extended, but it should be added to your watch list. It is held up well after the buyable gap up, and it is in expansion mode, and closed strongly yesterday. Once again, use your own judgement in this risky market.


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