A Down Session But Support Holds
by Jerome "Mel" Hickerson
Today’s session opened under heavy selling pressure from the futures. The high of the day was technically at the open, but the real trading high happened at 11:50 after the session bottomed at 9:46. After the trading high, the index spent the afternoon drifting downward and bouncing weakly into the close.
Today’s down market was attributed to multiple credit downgrades and talk of downgrading the credit ratings of various countries such as the U.K. and the U.S. Analyst Meridith Whitney was also back to beating up the banks. All of this caused a flight to the safety (?) of the dollar, which again contributes to weakness in the equities.
Two quick bragging points: At 11:51:09 I posted: “A lot of mixed signals. But suggestions that we are range trading today and that this is near the top of the range. I would rather be short therefore than long here.” And just 50 seconds later Gary took his subscribers Short (he types slower than I do. ) We each nailed the trading high of the day almost to the second. Different methods can produce similar results.
Today’s session once again closed between 1084.90 and 1110.31; the 21st consecutive close within that range. Until we breakout and close outside of that range, we are either consolidating or topping out. My instinct says that each is equally possible and that for now, it makes sense to simply trade the range. Think of all the money that has been made over the last month by simply selling 1110 and buying 1090. Traders are trained to milk this pattern until it breaks. Who are we to argue?
Rarely does the market continue in one direction in a straight line and often the market overshoots the target so it bounces back. The question for traders today is whether the market overshot to the downside today or whether it continues in a straight line yet another day. Add in the question of whether you buy at 1090 and I think my thought is pretty obvious; I am looking for a bounce on Wednesday.
But the fact that I am looking for a short-term bounce does not negate the fact that I believe that the continuation of the rally is in doubt unless the financial sector leads the way. But a tradable bounce can happen even if we begin a downtrend. It is important to always remain open minded and trade setups as they occur rather than to become dogmatic in your bias.
Wednesday, December 9
Economics
08:15 Wholesale Inventories -0.6% cons.
10:30 Crude Inventories
Earnings
Before: CHP, JTX, MOV, POWL
After: ALOG, BWY, FCEL, GEF, LULU, OXM, PLL
Auctions
01:00 10-Yr Note Auction
Events
PTV, SEE, CBE, DOW at Bank of America Securities Merrill Lynch Industrials Conference
BDC Analyst and Investor Day
ENOC Analyst Meeting
EHTH Analyst Meeting
VRGY Analyst Meeting
RealtyTrac releases its November foreclosure report. The Commerce Department is expected to report in the morning that wholesale inventories for October fell 0.6% after falling 0.9% in the previous month. The government's weekly crude oil inventories report is also due in the morning.
Mel’s Random Hits:
• Total tick for today was -15,000. 49% of all ticks for the entire day were positive. The open was negative but breadth turned upward after the first hour. Then about 12:45 things turned negative again and stayed negative into the close. But overall, this session was not as ugly under the hood as it may have appeared.
• Today's range was 14.43 points. But the true trading range was much smaller; 9.28 points.
• Today's volume was 83.5% of the average 2009 daily volume. Volume was 119% of the 10 day average.
• 7% of the SPX stocks closed with two day RSI above 90. 12% closed with RSI above 80. 34% closed with RSI below 20 and 17% closed with RSI below 10.
• 46% of the SPX are above their 10 day moving average and 48% are above their 20 day moving average.
• 51% of the SPX stocks closed below their most recent previous lows.
• 6% of the SPX closed above their most recent previous high.
• 41.4% of stocks closed in the top half of today's range. (58.6% closed in bottom half.)
• 20.2% of stocks closed in the bottom 20% of today's range.
• 4.6% of stocks closed in the top 10% of today's range.
• 13.2% of stocks closed within 2% of their 52 week high.
• 26.6% of stocks closed within 50% of their 52 week low.
• 4.8% of stocks closed within ¼% of their high for today.
• 10.2% of stocks closed within ¼% of their low for today.
• 18.4% of the SPX closed up for today.
• Sectors weaker than the SPX today: Basic materials, Energy, Industrials, and Consumer Staples
• Sectors stronger than the SPX today: Financials, Technology, Utilities, Health Care, and Consumer Discretionary
• Today was the sixth consecutive session that the $SOX out performed the SPX.
• The 2 Day RSI of the SPX is 13. The Dow RSI is 10, NASDAQ is 24 and Russell 41. The broader Russell index continues to lead as it has for a few days now. These are oversold number but plenty of room remains for continuing downward.
• Will we continue to be trade within the range of 1084-1111 or was today the beginning of a breakdown? Wednesday’s action may tell us the answer. A failure to bounce before Thursday’s close would be very telling.
• SPX components moved upward moderately during the after hours.
Have a great Wednesday!
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"Mel"
ETF’s we trade:
Ultra S&P500 ProShares (NYSE: SSO)
Ultra Dow30 ProShares (NYSE: DDM)
Ultra QQQ ProShares (NYSE: QLD)
PS UTLRSHRT QQQ (NYSE: QID)
UltraShort S&P500 ProShares (NYSE: SDS)
UltraShort Dow30 ProShares (NYSE: DXD)
PowerShares QQQ Trust (NASDAQ: QQQQ)
Direxion Daily Small Cp Bear 3X (NYSE:TZA)
Direxion Daily Small Cp Bull 3X (NYSE:TNA)
