A Quiet Doji Session
by Jerome "Mel" Hickerson
The overnight futures were active with a high near 1081.50 around 3:20am and a low about ten points lower several times overnight. Japan's GDP data showing +0.4% gain year-over-year was well below consensus for +2.3% and raised recessionary fears again. The Empire Manufacturing Index for August rose to 7.1, which was slightly below the consensus expectations for a reading of 7.70 but above the July reading of 5.08. There was some good news in the New York Fed report as the Employment Component of the report came in at 14.29, which was above July’s reading of 7.94.
The Monday session opened with a three point downward gap and continued sharply downward another eight points to put the low of the day on the chart quickly just three minutes into the day. The SPX then bounced upward almost in a straight line until 10:40am. After a brief pullback, the upward momentum resumed and the high of the day was put on the chart 12:36. The next three hours were downward but the index bounced the last 45 minutes to close barely into positive territory in the upper third of the intraday range.
Our Nine Sectors Report shows one change tonight as one sector moves to Neutral from Sell. But looking over the data, I see that several sectors were really close to moving into the Neutral column today so we possibly are nearing a short-term trend change. But we will keep the Sell signal turned on for another day.
Looking at the daily chart pattern, we see a long-tailed doji painted today; a common pattern at the bottom of trends as the trend reverses upward. So we should be prepared for the possibility that the SPX is reversing and heading back higher.
I am not sold on the idea that we are headed much higher here although I must admit that breadth has been pointing higher. But the action of the moving averages has me a bit spooked. I've traded long enough to have learned the hard way that when shorter term averages begin crossing below the longer term averages that it's a bearish sign. And even more so when the crosses occur while the averages are falling.
A couple of things really stand out to suggest that we are not headed higher. First, the small daily range is a characteristic of a topping process, not of a bottoming. The other thing is the low volume. Yes, it's summertime and volume should be low. But for comparison, last year on August 16th the volume was more than twice today's volume (which was the lowest volume of 2010.)
Neither am I entirely sold on the idea that we head down from here. I see just enough within the data to keep me from swing trading short. Ideally we'd see the expected bounce, take a good look at the data at that point, then take the appropriate action.
Today was not an easy day to trade. The range was less than eleven points after the first couple of minutes. Our systems does best with at least 12 to 14 points of range. We managed to make money today but it wasn't a great day.
Tuesday, August 17
Economics
08:30 Housing Starts
08:30 Building Permits
08:30 PPI
08:30 Core PPI
09:15 Industrial Production
09:15 Capacity Utilization
Reserves Bank Board August
Great Britain CPI
Great Britain Core CPI
Eurozone ZEW Survey
German ZEW Survey
Earnings
Before: ANF, BPHX, GKSR, HD, SKS, TJX, VIT, WMT
After: ADI, BOBE, STV, JKHY, LZB
Speeches
Narayana Kocherlakota
New home construction is expected to have risen slightly, with housing permits jumping to a 555,000-unit annualized rate in July from a 549,000-unit annualized rate the previous month. The Commerce Department report is also expected to show that building permits, a measure of builder confidence, fell to a 573,000-unit annualized rate in July from a 586,000-rate in the previous month. The Producer Price index (PPI), a measure of wholesale inflation, is expected to have gained 0.2% in July after falling 0.5% the previous month. The so-called core PPI is expected to have risen 0.1%. The Federal Reserve's reading on factory output is due shortly after the start of trading. Industrial output is expected to have risen 0.6% in July. Capacity utilization is expected to have risen to 74.5% from 74.1% in the previous month.
Mel’s Missives from the Matrix:
- Total tick for the day was 223,000 and the average tick for the day was 145. There were 206 ticks greater than 600 and 56 ticks more extreme than -600. There were 19 ticks greater than 1000 and 5 ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 13.13 points. The intraday trading range - 9:35 to the close - was 10.96. The 5 DMA of daily range is 14.69.
- Evidence of the intraday trend: At 10am volume was 80.55% of the 10 day average. By noon the volume was 80.26% of the 10 day average, and by 2pm volume was 79.62% of the 10 day average.
- The day's volume was 64.5% of the average daily volume for the last year. Volume was 80.5% of the last 10 day average and 100.8% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 14:45 and 15:00 when relative volume increased 37.9% while the SPX was dropping -0.22%. The largest drop in relative volume came between 14:15 and 14:30 when relative volume dropped -49.9% while the SPX was rising 0.05%.
- 1% of the SPX stocks closed with two day RSI above 90. 4% closed with RSI above 80. 42% closed with RSI below 20 and 30% closed with RSI below 10.
- 15.8% of the SPX are above their five day moving average, 10.6% are above their 10 day average, 19.4% are above their 20 day moving average, 42% are above their 50 day moving average, 30.4% are above their 100 day moving average, and 37.6% are above their 150 day moving average.
- 14% of the SPX closed above their most recent previous high.
- 23% of the SPX stocks closed below their most recent previous lows.
- 226 SPX issues advanced and 255 issues declined, a net SPX advance/decline of -29.
- Evidence of the intraday trend: At 10am, 71.8% of the SPX components were in the top half of the range. By noon, 79.2% were in the top half of the range, and by 2pm, 78.6% were in the top half of the range.
- 71.8% of stocks closed in the top half of the day's range. (28% closed in bottom half.)
- 14.4% of stocks closed in the top 10% of the day's range. 28.2% of stocks closed in the top 20% of the day's range.
- 1.8% of stocks closed in the bottom 10% of the day's range. 4.4% of stocks closed in the bottom 20% of the day's range.
- 3.2% of stocks closed within 2% of their 52 week high. 11.6% of stocks closed within 5% of their 52 week high.
- 86% of stocks closed within 50% of their 52 week low. 59.4% of stocks closed within 25% of their 52 week low.
- 20% of stocks closed within ¼% of their high for the day.
- 2% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 20.8% of the SPX components were up since the open. By noon, 49.2% were up since the open, and by 2pm, 49% were up since the open.
- 47.6% of the SPX closed up from the previous close; 79.6% closed higher than the open.
- Sectors stronger than the SPX for Monday:
- Basic Materials -- Outperformed the SPX by +44%.
- Energy -- Outperformed the SPX by +5%.
- Technology -- Outperformed the SPX by +28%.
- Consumer Discretionary -- Outperformed the SPX by +6%.
- Sectors weaker than the SPX for Monday:
- Financials -- Underperformed the SPX by -29%.
- Industrials -- Underperformed the SPX by -21%.
- Consumer Staples -- Underperformed the SPX by -12%.
- Utilities -- Underperformed the SPX by -4%.
- Health Care -- Underperformed the SPX by -70%.
- The $SOX index strength was stronger relative to the SPX Monday by 0.47%.
- The XLF underperformed the SPX by -0.29% Monday.
- The 2 Day RSI of the SPX is 4. The Dow RSI is 2, the NASDAQ is 27 and the Russell is 40.
- Over the last four sessions, the average session closed 37.75% of the range above the low. Monday closed at 70.1% of the daily range.
- Upside momentum decreased Monday, from Friday’s -4.06 to today’s -4.78. The ratio of SPX components giving a crossover sell signal compared to buy signals also decreased to S 5.15 to 1.
- The ISEE Equity 10 day moving average Monday was 164.5. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10 and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 211 SPX components moved upward and 140 components downward during the after hours with 80 million shares traded.
Trade 'em well on Tuesday everyone!
-Mel
