A New Closing High for the Year
by Jerome "Mel" Hickerson
The week started with good “news” regarding the Dubai debt default and the futures were green at the start of the session causing a gap upward. While the open was technically the low of the day, the intraday trading low was painted on the chart at 10:20. The rest of the day was mostly choppy trade with an upward bias. The high of the day was at 12:45. The session ended on a somewhat bullish note with some buying near the close.
From the weekend report: “If Monday were to be similar to Friday I would not be surprised. 12 of the last 14 first sessions of the week have closed positive…” The defining characteristic of today was sluggish boring sideways choppy trade; it was very much similar to Friday’s session. Most of the day it was difficult to know if your streamer was frozen.
The only day this year that ended with below a seven point range was the day before Thanksgiving, a day that barely approached 50% trading volume. Today’s volume was actually a bit higher than the 10 day average.
The real question now, as always, is what happens next. The SPX set a new closing high for the year today. We’ve had four consecutive up days. We finally, after 24 sessions, managed a close outside of the range of 1084-1111 (although just by a few points.) The last time we managed four consecutive up days, the SPX opened the next day with a spike, set a new high, then closed down nine points on the day. A similar scenario would not surprise me this time.
Market internals are sending very mixed signals. Breadth is advancing; advance/decline ratios are bullish; up volume is much higher than down volume; the number of stocks setting new highs are up significantly over stocks setting new lows. Yet the XLF continues to lag the SPX; the New York Composite index (the broadest of indices) is not setting a new high with the other indices; the RSI of the indices has reached overbought. While we may yet reach higher, a near-term pullback seems most likely.
Our model has generated a -9 indicator for Tuesday. I look for Tuesday to differ from the last couple days: more volatility, wider range, and more struggle for the SPX.
Tuesday, December 15
Economics
08:30 Core PPI 0.2% cons.
08:30 PPI 0.9% cons.
08:30 Empire Manufacturing 25.00 cons.
09:00 Net Long-term TIC Flows
09:15 Capacity Utilization 71.1% cons.
09:15 Industrial Production 0.6% cons.
Earnings
Before: BBY, FDS, GIGM
After: AIR, ADBE, TTWO
Auctions
11:30 4-Week Bill Auction
11:30 52-Week Bill Auction
Events
MFB at Credit Suisse Group New York Retail Roundup
ANX, CYTR at Lippert/Heilshorn & Associates Life Sciences On-line Forum
MAIN at BB&T Capital Markets Private Finance One-on-One Conference
GENZ, DNDN, HGSI, ACOR at DB-BIOTECH BOSTON CONFAB
DAL Investor Day
CTXS, LSI, DELL, MU at Raymond James IT Supply Chain Conference
GNW Investor Day
HRC Investor Conference
BRCM Analyst Day
ABC Analyst Meeting
GOOG Educational Webcast
ARG Analyst Meeting
1-yr Treasury Bill Auction -- Amount TBA
GE Annual Outlook Investor Meeting
HANS Analyst Meeting
The Producer Price index (PPI), a measure of wholesale inflation, is due in the morning from the Commerce Department. PPI is expected to have risen 0.9% in November after rising 0.3% in October. So-called core PPI, which strips out volatile food and energy prices, is expected to have risen 0.2% after falling 0.6% in October. Also in the morning, the Federal Reserve will report on manufacturing activity. November capacity utilization is expected to have risen to 71.1% from 70.7% in October. Industrial production is expected to have risen 0.6% after rising 0.1% in October. The Empire Manufacturing index, due out in the morning, is expected to show manufacturing activity in the New York area rose to 25 from 23.51 in November. Best Buy is to report quarterly earnings before the start of trade. The retailer is expected to have earned 42 cents versus 35 cents a year earlier. Also on Tuesday, Dow component General Electric holds its annual outlook meeting for investors.
Mel’s Random Hits:
• Total tick for the day was more than 259,000. Breadth was positive the entire day; there were zero negative periods. Today was simply a quiet up day without any sudden moves in either direction.
• The day's range was 6.92 points. Day trading index ETFs profitably on a day like today isn’t difficult; it is impossible. The five day moving average of range is now the lowest of the year at 8.20 and the three day average is 7.21. But the most telling stat is the 10 day average; it dropped under ten for the first time this year and skipped over the nines all the way to 8.20. The trading range has all but disappeared; the movement is all during the off hours.
• The day's volume was 80.3% of the average 2009 daily volume. Volume was 108% of the 10 day average.
• 41% of the SPX stocks closed with two day RSI above 90. 63% closed with RSI above 80. 4% closed with RSI below 20 and 2% closed with RSI below 10. These are short-term overbought conditions; while room exists for upside, the odds would seem to favor at least some kind of pullback.
• 78% of the SPX are above their 10 day moving average and 72% are above their 20 day moving average.
• 4% of the SPX stocks closed below their most recent previous lows.
• 60% of the SPX closed above their most recent previous high.
• 67.6% of stocks closed in the top half of the day's range. (32.4% closed in bottom half.)
• 9.4% of stocks closed in the bottom 20% of the day's range.
• 23.6% of stocks closed in the top 10% of the day's range.
• 28.2% of stocks closed within 2% of their 52 week high. Wow.
• 23.6% of stocks closed within 50% of their 52 week low.
• 28.6% of stocks closed within ¼% of their high for the day.
• 8.0% of stocks closed within ¼% of their low for the day.
• 83.4% of the SPX closed up for the day. Breadth was wide.
• Sectors weaker than the SPX for the day: Financials, Consumer Staples, and Utilities
• Sectors stronger than the SPX for the day: Basic materials, Energy, Industrials, Technology, Health Care and Consumer Discretionary
• The $SOX index rebounded strongly and was stronger than the SPX today.
• The 2 Day RSI of the SPX is 93. The Dow RSI is 92, NASDAQ is 94 and Russell 91. When all the major indices are this overbought we usually have a pullback of some kind within a day or two.
• SPX components moved downward during the after hours.
Have a great Tuesday!
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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)
