A Tight Range Day
by Jerome "Mel" Hickerson
Overnight futures peaked a little after 6am, fell several points, but rebounded to near breakeven, suggesting a flat open. Lackluster earnings were the topic of the morning.
The Tuesday session opened with a quick three point move downward and continued working down another five points to put the low of the day on the chart at 10:15am. A small rally followed, gaining about eight points and put the trading high on the chart at 11:42am. The rest of the session was sluggish with a downward bias as the SPX closed in the bottom 40% of the intraday range.
Stepping back and looking at the day, it fits the pattern of simple consolidation following Monday’s surge higher. It’s easy to be thinking that the bulls had a good showing today on the heels of their big day Monday.
But we’re not convinced. First, our Nine Sectors Report had three negative moves today, almost offsetting Monday’s five positive moves. Three negative moves coming so quickly is a bit unsettling to the bullish case. Second, the weakness we’re seeing is in the sectors most likely to lead the SPX; the only Buy signal is in the Health Sector. And third, the weakness in Technology, Sox, and Small Caps seems like a clue that shouldn’t be disregarded.
One other clue given to us today may have been the eight point range. The last time we saw a range less than ten points was June 18th, which was followed by a 90 point drop. Before that, we previously saw a below ten point range on April 26th preceding a large drop.
On another note, it’s been more than two weeks (July 16th) since we’ve seen a session with a negative total tick. While we sometimes go longer than two weeks, I’ve found that usually this is about the timeframe where some serious selling gets triggered by some news event or earnings/economic release. It may not happen in the next couple of days, but I suspect we’ll see something soon.
Wednesday may bring anything to this wacky market, but we’ll hold the Sell signal for yet another day.
An eight point range is never easy to trade. We had a decent day, but it’s never fun to spend a day recovering the prior day’s losses; we don’t often do this. But today we stayed focused on the SPX because that’s our bread and butter.
I had a question from a subscriber because late morning we stepped out of SDS for just a couple minutes and lost a cent or two plus commissions on the exchange. I was asked to explain my reasoning on the move. At that point the SPX was at a cusp; deciding whether to break into positive territory and go higher or whether to fade back. Watching the queues, I saw buyers lined up and didn’t want to be exposed by being short until I knew whether there were sellers to meet the demand. So I stepped aside and watched for a couple minutes, then decided to reenter SDS.
When you are trading, you simply can’t allow concerns about commissions to drive your trades; a $16 round trip commission pales compared to losses on a trade. And if you are paying more than $8 for a commission, call your broker and ask for cheaper. You may be surprised at how easy it is.
Wednesday, August 4
Economics
08:15 ADP Employment Report 30k cons.
10:00 ISM Services 53.2 cons.
10:30 Crude Inventories
05:00 EMU Retail Sales
Earnings
Before: ADMD, AGU, AYE, AFAM, ANR, AOL, CAM, LSE, XEC, CGX, DWSN, DVN, DGIT, EP, FTR, FCN, GRMN, HI, ICE, LOJN, LL, NEWS, OC, RL, PHM, SIRI, SPQ, TRW,
After: ADCT, ALL, ANDE, ATO, ATW, CAR, CELL, CATM, CBOU, CBEH, EGLE, EXM, FRT, ROCK, GIVN, GMXR, HIG, HSN, IO, JACK, MDAS, MUR, PACR, PAA, PPO, PRU, SMSI, RIG, TTEC, WES, AUY
Before the market opens, payroll processing firm ADP is expected to report that private sector employers added 30,000 jobs in July. The Institute for Supply Management's index of activity in the service sector for July is expected to show little change when it is released after the opening bell. The government's weekly oil inventory report is also due Wednesday.
Mel’s Missives from the Matrix:
- Total tick for the day was 135,000 and the average tick for the day was 87. There were 142 ticks greater than 600 and 43 ticks more extreme than -600. There were 10 ticks greater than 1000 and 2 ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 8.68 points. The intraday trading range - 9:35 to the close - was 8.37. The 5 DMA of daily range is 17.49.
- Evidence of the intraday trend: At 10am volume was 93.99% of the 10 day average. By noon the volume was 88.97% of the 10 day average, and by 2pm volume was 90.04% of the 10 day average.
- The day's volume was 82.3% of the average daily volume for the last year. Volume was 86.1% of the last 10 day average and 96.9% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 12:00 and 12:15 when relative volume increased 30.1% while the SPX was dropping -0.11%. The largest drop in relative volume came between 1:15 and 1:30 when relative volume dropped -28.9% while the SPX was rising 0.05%.
- 13% of the SPX stocks closed with two day RSI above 90. 22% closed with RSI above 80. 9% closed with RSI below 20 and 3% closed with RSI below 10.
- 66.2% of the SPX are above their five day moving average, 68.4% are above their 10 day average, 73.8% are above their 20 day moving average, 68.8% are above their 50 day moving average, 48.4% are above their 100 day moving average, and 52.2% are above their 150 day moving average.
- 14% of the SPX closed above their most recent previous high.
- 31% of the SPX stocks closed below their most recent previous lows.
- 116 SPX issues advanced and 374 issues declined, a net SPX advance/decline of -258.
- Evidence of the intraday trend: At 10am, 33.4% of the SPX components were in the top half of the range. By noon, 65.4% were in the top half of the range, and by 2pm, 45.8% were in the top half of the range.
- 35.6% of stocks closed in the top half of the day's range. (64.2% closed in bottom half.)
- 2.6% of stocks closed in the top 10% of the day's range. 7.8% of stocks closed in the top 20% of the day's range.
- 12.4% of stocks closed in the bottom 10% of the day's range. 28.8% of stocks closed in the bottom 20% of the day's range.
- 9.2% of stocks closed within 2% of their 52 week high. 20.8% of stocks closed within 5% of their 52 week high.
- 79.4% of stocks closed within 50% of their 52 week low. 48% of stocks closed within 25% of their 52 week low.
- 4% of stocks closed within ¼% of their high for the day.
- 16.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 19.8% of the SPX components were up since the open. By noon, 34% were up since the open, and by 2pm, 27.8% were up since the open.
- 22.2% of the SPX closed up from the previous close; 34.6% closed higher than the open.
- Sectors stronger than the SPX for Tuesday:
- Energy -- Outperformed the SPX by +66%.
- Utilities -- Outperformed the SPX by +1%.
- Health Care -- Outperformed the SPX by +132%.
- Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -101%.
- Financials -- Underperformed the SPX by -50%.
- Industrials -- Underperformed the SPX by -2%.
- Technology -- Underperformed the SPX by -4%.
- Consumer Staples -- Underperformed the SPX by -39%.
- Consumer Discretionary -- Underperformed the SPX by -103%.
- The $SOX index strength was weaker relative to the SPX Tuesday by -0.55%.
- The XLF underperformed the SPX by -0.5% Tuesday.
- The 2 Day RSI of the SPX is 65. The Dow RSI is 70, the NASDAQ is 58 and the Russell is 46.
- Over the last four sessions, the average session closed 61.7% of the range above the low. Tuesday closed at 38.8% of the daily range.
- Upside momentum decreased Tuesday, from Monday’s 0.28 to today’s -0.02. The ratio of SPX components giving a crossover sell signal compared to buy signals decreased slightly to B 4.11 to 1.
- The ISEE Equity 10 day moving average Tuesday was 168.3. 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.
- 245 SPX components moved upward and 113 components downward during the after hours with 116 million shares traded.
Trade 'em well on Wednesday everyone!
-Mel
