An Oversold Market Continues to Sell
Market Recap:
US stock index futures erased their gains to turn negative Tuesday morning after Greek party leaders failed to agree on a coalition government, trumping earlier euphoria over a batch of better-than-expected economic news. Futures had been higher following news that German GDP grew 0.5 percent in the first quarter in seasonally adjusted terms — five times as fast as expected — as exports helped the economy bounce back from a contraction of 0.2 percent in the fourth quarter. Consumer prices were flat in April, according to the Labor Department, in line with economists' expectations. The index rose 0.3 percent in March. Empire State manufacturing index jumped to 17.09 in May after a dismal 6.56 reading in April.
Tuesday's session began without a significant gap and immediately began to work higher. But at the end of the opening hour the SPX quickly began to surrender the entire day's gains. Then, as we have seen often recently, when European markets closed, the SPX quickly rallied. But the intraday pattern continued with an afternoon sell off as the SPX closed near the session lows.
Our Market Leaders Board has all of our leaders again closing in negative territory with the Sox leading the way lower and the Russell 2000 small caps getting off with the least damage.
SPX big winners were Tjx Companies Inc (TJX) 6.9%, Agilent Technologies Inc (A) 3.94%, and Lennar Corp Cl A (LEN) 2.78%. SPX big losers were Avon Products Inc (AVP) -12.43%, Alpha Natural Resources (ANR) -9.44%, and Fossil Inc (FOSL) -6.95%.
SPX five day big winners are Dean Foods Company (DF) 16.75%, Bmc Software Inc (BMC) 11.67%, and Netflix Inc (NFLX) 6.44%. SPX five day big losers are Windstream Corp (WIN) -16.8%, Pitney Bowes Inc (PBI) -16.04%, and Chesapeake Energy Corp (CHK) -13.47%.
New Ten Day Highs: BMC, CL, DRI, DF, D, GIS, HNZ, MKC, NSM, PEP, VXX, SH
New Ten Day Lows: ANF, URBN, APD, AA, ATI, MO, AEP, AXP, AIG, AMP, APA, AMAT, AZO, AVB, AVY, AVP, BAC, BBT, BXP, BSX, BRK.B, CAM, COF, CFN, CAT, CBG, CBS, CF, CHK, CVX, CI, CTAS, COH, KO, CCE, CMCSA, CMA, CSC, CNX, ED, STZ, SAI, GLW, CMI, DHR, DE, DNR, DVN, DV, DO, RRD, DOV, DOW, DD, ETFC, EMN, EP, EMR, ESV, ETR, EOG, EQT, EL, EXPD, XOM, FII, FITB, FHN, FSLR, FLR, FMC, FTI, F, FRX, FCX, GD, GE, GPC, GNW, GWW, HAL, HOG, HAR, HRS, HIG, HES, HPQ, HD, HON, HSP, HST, HCBK, HUM, ITW, IFF, IGT, IP, ISRG, IRM, ITT, JEC, JNJ, CLF, KEY, KIM, KSS, KFT, KR, LLL, LM, LEG, LUK, LXK, LLY, LNC, LLTC, L, LO, LOW, LSI, MTB, M, MRO, MMC, MAS, MA, MHP, MRK, MET, MCHP, MU, MOLX, MS, MUR, NBR, NOV, NTAP, NWL, NEM, GAS, NBL, JWN, NTRS, NUE, ORLY, OXY, OI, BTU, PBCT, POM, PKI, PCG, PM, PXD, PBI, PCL, PNC, RL, PPG, PPL, PX, PFG, PLD, PRU, PSA, RTN, RF, RDC, R, SLE, SLB, SCHW, SEE, SHLD, SHW, SPG, SE, SWK, SPLS, HOT, STT, SRCL, SYK, SUN, SVU, TE, TDC, TXT, BK, TMO, TIF, TWX, TIE, TMK, X, UTX, DRYS, QLD, AEM, UNM, VLO, VRSN, VMC, WAG, WPI, WLP, WFC, WY, AAPL, C, ICE
Volume & Breadth Indicators
For the SPX Index there were 117 components advancing and 347 components declining. On the NYSE 3,141 issues were traded with 1,073 advancing issues and 1,977 retreating issues, a ratio of 1.84 to one declining. There were 40 new highs and 126 new lows. The five day moving average of New Highs is 53 while the five day moving average of New Lows is 74 and the ten day moving average of Net Advancing is -746. The Net Advancing data indicates a bearish trend.
Declining volume was higher at a ratio of 3.73 to one. The closing TRIN was 2.19 and the final tick was 56. The five day average of TRIN is 1.4 and the ten day average of TRIN is 1.55. The NYSE Composite Index lost -0.91% today while the SPX lost -0.58%.
For the NYSE, relative to the previous 30 session average, volume was 7.83% above the average. Of the last 15 sessions 8 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 18 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 98.5% of the average daily volume for the last year. Volume was 104.8% of the last 10 day average and 110.8% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 5,000 and the average tick for the day was 3. There were 38 ticks greater than 600 and 49 ticks more extreme than -600. There were 3 ticks greater than 1000 and 2 ticks more extreme than -1000. The tick action suggests institutional distribution.
Moving Average and Support/Resistance Indicators:
16.2% of the SPX are above their five day moving average, 12.4% are above their 10 day average, 17.6% are above their 20 day moving average, 23.8% are above their 50 day moving average, and 56.4% are above their 200 day moving average.
There were two significant moving average crossovers today as both the Russell 2000 and Germany saw their 20 DMA cross below the 100 DMA. Our moving average Power Rating is 28 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Financials -- Outperformed the SPX by +6%.
- Industrials -- Outperformed the SPX by +11%.
- Technology -- Outperformed the SPX by +44%.
- Consumer Staples -- Outperformed the SPX by +58%.
- Health Care -- Outperformed the SPX by +15%.
- Consumer Discretionary -- Outperformed the SPX by +36%.
Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -92%.
- Energy -- Underperformed the SPX by -109%.
- Utilities -- Underperformed the SPX by -9%.
Checking the sectors of the SPX tonight: (The sector Buy and Sell signals come from a mechanical trend trading system; there will be some whipsaw but the signal will never be on the wrong side for long.)
The Basic Materials sector advancing issues (3) totaled 127,286 shares traded (42,429 average per stock) and declining issues (26) totaled 1,179,681 shares traded (45,372 average per stock.) 1 components are on an uptrend (no new uptrends today) and 29 components are on a downtrend (no new downtrends today.) There were no New Highs and 1 New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed -3.33% below the 20-Day average.
The Energy sector advancing issues (1) totaled 63,542 shares traded (63,542 average per stock) and declining issues (43) totaled 3,134,448 shares traded (72,894 average per stock.) 3 components are on an uptrend (no new uptrends today) and 41 components are on a downtrend (3 new downtrends today.) There were no New Highs and 5 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -3.06% below the 20-Day average.
The Financials sector advancing issues (12) totaled 1,267,054 shares traded (105,588 average per stock) and declining issues (69) totaled 6,014,456 shares traded (87,166 average per stock.) 9 components are on an uptrend (no new uptrends today) and 72 components are on a downtrend (7 new downtrends today.) There were no New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.83% below the 20-Day average.
The Industrials sector advancing issues (10) totaled 184,021 shares traded (18,402 average per stock) and declining issues (51) totaled 1,748,924 shares traded (34,293 average per stock.) 5 components are on an uptrend (1 new uptrends today) and 56 components are on a downtrend (1 new downtrends today.) There were no New Highs and 3 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.52% below the 20-Day average.
The four 'risk sectors' totaled 26 advancing issues and 189 declining issues today with 1 new uptrends and 11 new downtrends. 8.3% of Risk Sector components are uptrending.
The Technology sector advancing issues (29) totaled 1,508,042 shares traded (52,001 average per stock) and declining issues (50) totaled 5,595,312 shares traded (111,906 average per stock.) 10 components are on an uptrend (1 new uptrends today) and 69 components are on a downtrend (1 new downtrends today.) There were no New Highs and 3 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.35% below the 20-Day average.
The Consumer Staples sector advancing issues (17) totaled 927,189 shares traded (54,541 average per stock) and declining issues (24) totaled 1,141,114 shares traded (47,546 average per stock.) 22 components are on an uptrend (4 new uptrends today) and 19 components are on a downtrend (1 new downtrends today.) There were 4 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.29% below the 20-Day average.
The Utilities sector advancing issues (1) totaled 19,140 shares traded (19,140 average per stock) and declining issues (31) totaled 858,072 shares traded (27,680 average per stock.) 14 components are on an uptrend (no new uptrends today) and 18 components are on a downtrend (10 new downtrends today.) There were 2 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed .94% above the 20-Day average.
The Health Care sector advancing issues (15) totaled 425,414 shares traded (28,361 average per stock) and declining issues (36) totaled 1,427,387 shares traded (39,650 average per stock.) 13 components are on an uptrend (2 new uptrends today) and 38 components are on a downtrend (6 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.76% below the 20-Day average.
The Consumer Discretionary sector advancing issues (34) totaled 1,426,626 shares traded (41,960 average per stock) and declining issues (45) totaled 2,655,779 shares traded (59,017 average per stock.) 20 components are on an uptrend (6 new uptrends today) and 61 components are on a downtrend (4 new downtrends today.) There were no New Highs and 2 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -1.67% below the 20-Day average.
Based on the SPX sector data, we are on a Sell for the SPX and the Russell 2000.
What We Learned from Tuesday's Action:
Tuesday was session 9 to close below the 5 DMA, session 8 to close below the 10 DMA, session 8 to close below the 20 DMA, and session 8 to close below the 50 DMA. This was also session 6 for the 5 DMA to close below the 20 DMA. One early sign of a sustainable rally or pullback is often a close above or below the 10 DMA. The SPX closed 32.47 points below the 10 DMA.
The SPX 5 DMA is 1347, 10 DMA is 1363.13, 20 DMA is 1375.43, 50 DMA is 1384.41, 100 DMA is 1351.89, and 200 DMA is 1277.6.
On Tuesday the SPX traded both below and above the opening range. 25.4% of the SPX closed up from the previous close; 27.6% closed higher than the open. During Tuesday's session the SPX lost -7.7 points from open to close. The SPX intraday trading range was 16.53 points. The 5-Day average intraday trading range is 14.83 points, the 10-Day average is 14.22 points, and the 20-Day average is 12.56 points. The trading range is expanding. The 5-Day SPX gain is -2.42%, the 10-Day gain is -5.35%, and the 15-Day gain is -3.01%.
Note: The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be in charge for the day. If we break out of that trading range, it's telling us that new buying or selling is impacting traders' assessments of value. Looking back at today’s breakouts also helps us grasp sentiment going forward because when a clear trend is established it often carries through for several sessions.
Looking Ahead:
The Market Environment for Wednesday is +6. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be sideways. Mel's 10 Day Oscillator is -7 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are bullish for Wednesday's session.
This was certainly an ugly session. The equities simply can not hold intraday gains into the close. The tick was suggesting institutional selling into strength the entire day and late in the session it became obvious that sellers were ruling the tape. It is never a good sign when an oversold market rallies and then sells off to close in the red.
The powder is on the floor. Any kind of a spark could flash an explosive rally. But for now, sellers own the market. The Market Internals remain very bearish.
SPX levels to watch include 1364; a close above is bullish and a close below is bearish. For the Russell 2000, keep an eye on the 795 level.
Wednesday, May 16
Economics
07:00 MBA Mortgage Purchase Index
08:30 Housing Starts – consensus 684K
08:30 Building Permits – consensus 730K
09:15 Industrial Production – consensus 0.5%
09:15 Capacity Utilization – consensus 79.0%
10:00 Mortgage Delinquencies
10:00 MBA Mortgage Foreclosures
2:00 FOMC Minutes
08:30 GBP Jobless Claims Change
09:00 EUR Eurozone CPI
09:00 CHF ZEW Survey
09:30 GBP BoE Inflation Report
23:50 JPY GDP
10:00 France to sell 2, 3, 4, 5, 10, 11, and 15-year bonds
10:30 Germany to sell EU5b in 10-yr notes
Earnings
Before:
Abercrombie & Fitch (ANF) EPS 2c, revs $951.57M
Deere (DE) EPS $2.54, revs $9.65B
Staples (SPLS) EPS 30c, revs $6.19B
Target (TGT) EPS $1.01, revs $16.77B
After:
Limited (LTD) EPS 41c, revs $2.32B
The CPI came in at 0 which was in line with expectations. The CPI was flat. Retail sales rose 0.1%, in line with expectations. The Empire State manufacturing index was 17.09, better than the consensus 10.0 and the home price index was 29, better than the expected 26. On Wednesday we will get oil inventories, housing starts, industrial production, oil inventories and the FOMC minutes from the last meeting.
Thank you for reading. Think on it, trade on it, and be well.
-Mel