A Quiet Monday Rally
by Jerome "Mel" Hickerson
As the pattern has been since Labor Day, the week began with a positive session. Futures were up, leading to an immediate gap upward with a follow-up surge. The SPX was up more than 11 points within five minutes of the open. At 9:36 the SPX was within .2 of a point of where it closed. While technically the low of the day was at the open, the trading low was established at 9:50 on a minor pullback; the rest of the day traded within a 5.6 point range. The high of the session was put on the chart at 12:07; the rest of the day was a sluggish slow downward drift that covered almost no ground. The session closed bullishly in the upper third of the daily range.
Overall, this day belonged to the bulls. But there was little technical damage done to the bearish case, either. We remain enmeshed within our tight trading range. Yet it must be noted that today’s SPX close was the closing high for 2009. As we continue to trade within the tight rectangle, the bias keeps moving upward. The closing highs keep moving upward and the lower end of the range also keeps getting higher. The last dip only took us as low as the 1094 area whereas the previous dip bottomed near 1086 and the dip prior to that around 1084. When you look at the lows from each dip and the high closing highs, it does begin to appear that we are watching bullish consolidation rather than a bearish topping pattern.
For reasons posted here over the weekend, I still believe we are likely to top out soon. But a strike above the 1119 high seems quite likely, and very soon.
A few words about the stats included near the bottom each evening. This data can give you a good idea of what’s happening inside the SPX. Particularly, looking at how many components are breaking above their 52 week highs is vital information if you are thinking of shorting this beast. Shorting the SPX when a quarter of the components are breaking above their highs is dangerous business. The other stat that should only be ignored at your financial peril is the number of components above their various moving averages, for the reason posted below. Certainly, any trade at any time can succeed or fail; but if you put odds consistently on your side, over time your success ratio is bound to be better than if you consistently bet against the odds. I believe strongly in placing odds on my side.
For Tuesday, we are generating a -6 indicator. This suggests that this upward cycle may be coming into a bit of a struggle.
Tuesday, December 22
Economics
08:30 GDP- Third Estimate 2.7% cons.
08:30 GDP Prices- Third Estimate 0.5% cons.
10:00 Existing Home Sales 6.30M cons.
Earnings
Before: CMC, LNN, PRGS
After: CTAS, FINL, MU, RHT, TIBX
Auctions
11:30 4-Week Bill Auction
The Commerce Department will release its final revision of third-quarter Gross Domestic Product before the opening. Economists expect GDP to have risen at an annual rate of 2.7% in the three months ending in September. Shortly after the market opens, the National Association of Realtors will release a report on existing home sales in November.
Mel’s Random Hits:
• Total tick for the day was almost 189,000. Almost the entire day was positive; there were brief negative stretches at the bottom of the lunch hour and around 3:00.
• The day's range was 12.37 points. This is still a very narrow range day but the reality was even tighter as half of the range was gap.
• The day's volume was 70.3% of the average 2009 daily volume.
• 25% of the SPX stocks closed with two day RSI above 90. 48% closed with RSI above 80. 5% closed with RSI below 20 and 3% closed with RSI below 10. Welcome to short-term overbought territory.
• 76% of the SPX are above their five day moving average, 77% are above their 10 day average, and 75% are above their 20 day moving average. These numbers are important because many investors use this as a buy signal; three quarters of the SPX is giving a buy signal. This has to be considered bullish. Rarely will you see these numbers higher.
• 2% of the SPX stocks closed below their most recent previous lows.
• 58% of the SPX closed above their most recent previous high.
• 60.6% of stocks closed in the top half of the day's range. (39.4% closed in bottom half.)
• 13.0% of stocks closed in the bottom 20% of the day's range.
• 10.6% of stocks closed in the top 10% of the day's range.
• 25.4% of stocks closed within 2% of their 52 week high. 125 of the SPX components are breaking above their 52 week high. Think about this.
• 26.4% of stocks closed within 50% of their 52 week low.
• 15.4% of stocks closed within ¼% of their high for the day.
• 10.2% of stocks closed within ¼% of their low for the day.
• 87.4% of the SPX closed up from the previous close; 75.8% closed higher than the open.
• Sectors weaker than the SPX for the day: Industrials, Technology, Consumer Staples, Utilities, and Health Care
• Sectors stronger than the SPX for the day: Basic materials, Energy, Financials and Consumer Discretionary
• The $SOX index was again stronger than the SPX.
• The 2 Day RSI of the SPX is 80. The Dow RSI is 70, NASDAQ is 85 and Russell 87. A big move by the DOW today. These numbers are overbought but they have plenty of room to run further if the market wants to do so.
• Since mid September (13 Mondays since then), December 7th is the only Monday to gap down. The average gap up has been more than 4.5 points. The average net gain for the 13 Mondays is more than 9 points. Today’s gap was six points and the gain was 11.58. We were long over the weekend; I hope you were, too.
• SPX components moved downward insignificantly during the after hours.
Have a great Tuesday!
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"Mel"
Today we closed out of:
Ultra S&P 500 ProShares (SSO) +2.12%
