A Slight Pullback - the Beginning of More?
by Jerome "Mel" Hickerson
Before the open we got the news that orders for durable goods fell in June. The Commerce Department reported that Durable Goods orders declined -1.0% during the month, which was well below the consensus expectations for an increase of +1.0%. When you strip out the volatile orders for transportation, orders also fell by -0.6%, which was below the consensus for +0.5%. Stock futures moved a little lower after the report.
The session opened with a very small gap down, quickly moved into positive territory and put the high of the day on the chart at 9:37am. The rest of the session was really just slow downward drift that accelerated after the Beige Book was released until about 3:20 when the index bounced weakly into the close.
Today’s session felt more like consolidation than a real sell-off; seemingly more bullish than bearish. While my system remains on a swing Sell signal, I am thinking that any pullback here may turn out to be small. We certainly had nothing close to a crescendo of selling that often marks a bottom; this will either be a meaningless pullback or it really is just beginning. The tick action today was more neutral than bearish.
Our Nine Sectors Report shows more movement tonight as three more sectors moved from Buy to Neutral, further suggesting that a short-term trend change is taking place. We did step aside of our swing short position as we want to watch Thursday carefully for signs of a bounce or of accelerating downside; we will be open minded and trade either direction, but taking profit today seemed wise because the market internals were simply not as bearish as we expected to see, although breadth was quite negative.
But the potential for further downside is very real; the market did receive a catalyst today when the Beige Book data showed that the economy is expanding but at a slower rate.
Our trade systems were pretty quiet today. We exited our overnight short early this morning then reentered SDS again a bit later somewhat cheaper than our exit. Overall, we continue to play small-ball and simply take what the market offers while adding to our bottom line.
Thursday, July 29
Economics
08:30 Initial Claims
08:30 Continuing Claims
02:45 France PPI
03:50 German Unemployment Rate
08:30 Canadian IPPI
07:30 Japan CPI
07:30 Japan Household Spending
07:30 Japan Unemployment Rate
07:30 Japan Industrial Production
Earnings
Before: ARE, AMSC, AUO, ABX, BDX, BCO, BBW, CAB, CRR, CRI, CME, SCOR, CNX, DBD, DIN, DPS, EGO, EVVV, EZCH, BEN, GR, KBR, KBW, K, LIFE, LZ, MED, MCO, MOT, BABY, NOV, NBL, POT, PDE, RYN, RDS.A, SHOO, TRI, TYC, UFI, WM, WMB, WEC, XEL,
After: PAR, APKT, AMGN, NLY, AUTH, CSTR, DRYS, BOOM, EXPE, DAVE, GSIT, HOKU, KLAC, LVS, MFE, WFR, MWW, SGMS, SWIR, STMP, SUN, TTES, CLUB, VLCM, VSEA
Auction
01:00 7-Yr Note Auction
Mel’s Missives from the Matrix:
- Total tick for the day was 25,000 and the average tick for the day was 16. There were 93 ticks greater than 600 and 88 ticks more extreme than -600. There were 5 ticks greater than 1000 and 6 ticks more extreme than -1000.
- The day's range was 11.55 points. The intraday trading range - 9:35 to the close - was 11.3. The 5 DMA of daily range is 13.07.
- Evidence of the intraday trend: At 10am volume was 83.12% of the 10 day average. By noon the volume was 84.19% of the 10 day average, and by 2pm volume was 82.19% of the 10 day average.
- The day's volume was 80.6% of the average daily volume for the last year. Volume was 84.8% of the last 10 day average and 82.9% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 12:15 and 12:30 when relative volume increased 50.0% while the SPX was rising 0.05%. The largest drop in relative volume came between 12:00 and 12:15 when relative volume dropped -37.8% while the SPX was rising 0.02%.
- 5% of the SPX stocks closed with two day RSI above 90. 9% closed with RSI above 80. 18% closed with RSI below 20 and 4% closed with RSI below 10.
- 40.4% of the SPX are above their five day moving average, 74.8% are above their 10 day average, 80.6% are above their 20 day moving average, 66% are above their 50 day moving average, 40.6% are above their 100 day moving average, and 47.8% are above their 150 day moving average.
- 3% of the SPX closed above their most recent previous high.
- 55% of the SPX stocks closed below their most recent previous lows.
- 97 SPX issues advanced and 390 issues declined, a net SPX advance/decline of -293.
- Evidence of the intraday trend: At 10am, 51.2% of the SPX components were in the top half of the range. By noon, 32% were in the top half of the range, and by 2pm, 43.6% were in the top half of the range.
- 22.4% of stocks closed in the top half of the day's range. (77.4% closed in bottom half.)
- 2% of stocks closed in the top 10% of the day's range. 5% of stocks closed in the top 20% of the day's range.
- 13.8% of stocks closed in the bottom 10% of the day's range. 34.6% of stocks closed in the bottom 20% of the day's range.
- 7.2% of stocks closed within 2% of their 52 week high. 20.2% of stocks closed within 5% of their 52 week high.
- 80.2% of stocks closed within 50% of their 52 week low. 47.8% of stocks closed within 25% of their 52 week low.
- 4.2% of stocks closed within ¼% of their high for the day.
- 15.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 39% of the SPX components were up since the open. By noon, 26% were up since the open, and by 2pm, 32.2% were up since the open.
- 19.4% of the SPX closed up from the previous close; 26.8% closed higher than the open.
- Sectors stronger than the SPX for Wednesday:
- Basic Materials -- Outperformed the SPX by +16%.
- Energy -- Outperformed the SPX by +48%.
- Industrials -- Outperformed the SPX by +40%.
- Consumer Staples -- Outperformed the SPX by +15%.
- Utilities -- Outperformed the SPX by +41%.
- Consumer Discretionary -- Outperformed the SPX by +0%.
- Sectors weaker than the SPX for Wednesday:
- Financials -- Underperformed the SPX by -18%.
- Technology -- Underperformed the SPX by -20%.
- Health Care -- Underperformed the SPX by -58%.
- The $SOX index strength was weaker relative to the SPX Wednesday by -1.13%.
- The XLF underperformed the SPX by -0.18% Wednesday.
- The 2 Day RSI of the SPX is 40. The Dow RSI is 56, the NASDAQ is 32 and the Russell is 34.
- Over the last four sessions, the average session closed 63.94% of the range above the low. Wednesday closed at 24% of the daily range.
- Upside momentum increased slightly Wednesday, from Tuesday’s 3.02 to today’s 3.52. The ratio of SPX components giving a crossover sell signal compared to buy signals also increased slightly to B 9.14 to 1.
- The ISEE Equity 10 day moving average Wednesday was 171.1. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 192 SPX components moved upward and 160 components downward during the after hours with 131 million shares traded.
Trade 'em well on Thursday everyone!
-Mel
