An Up Week but Ends on a Low Note
Market Recap:
Friday's session began with a large gap lower and spent most of the morning trying to build a bottom. But the SPX surrendered an additional six points or so during the noon hour before trading choppily sideways the rest of the low volume Friday afternoon session as traders seemed to be content to just wait to see what the weekend would bring. The SPX closed very near to the lows of the day.
Our Market Leaders Board is consistent with all of our leaders closing lower, led lower by Technology and the Sox, with the Financials and the Russell 2000 small caps right there along with them. The strongest indices were the Dow and the SPX, each losing about 1% on the day.
SPX big winners were Sandisk Corp (SNDK) 9.22%, Baker Hughes Inc (BHI) 8.28%, and Noble Corp (NE) 3.9%. SPX big losers were Chipotle Mexican Grill (CMG) -26.45%, Advanced Micro Devices (AMD) -13.85%, and Intuitive Surgical Inc (ISRG) -8.82%.
SPX five day big winners are Baker Hughes Inc (BHI) 16.01%, Sandisk Corp (SNDK) 15.8%, and Textron Inc (TXT) 13.65%. SPX five day big losers are Chipotle Mexican Grill (CMG) -19.21%, Dean Foods Company (DF) -16.46%, and Advanced Micro Devices (AMD) -13.88%.
New Ten Day Highs: MO, AEE, AEP, BHI, CELG, CNP, CVX, XEL, CMS, ED, DTE, DNB, EBAY, ESV, ETR, EOG, EQT, EXC, FE, HAL, HES, TEG, ITT, LEG, M, MAS, MSFT, MON, NTAP, GAS, NI, NBL, POM, PFE, PNW, PPG, PPL, PEG, SNDK, SCG, SLB, SRE, SNA, SE, SWK, SRCL, TXT, VFC, VMC, GOOG
New Ten Day Lows: AMD, AGN, APOL, AIZ, BAC, BCR, BBY, BSX, CFN, CHK, CME, CB, CI, CINF, CAG, SAI, CVS, DF, DELL, DV, ETFC, ECL, FII, FIS, FHN, FTR, GME, GNW, GT, HSY, HRL, HST, HCBK, ISRG, IVZ, JCI, K, KR, LH, LM, LXK, LNC, WFR, MET, MWW, MS, NYT, NTRS, PBCT, PBI, PNC, PLD, PRU, PWR, DGX, RSH, CVG, SNI, SHLD, SLM, LUV, STT, STI, TLAB, THC, BK, TSN, X, VAR, VZ, ICE
Market Recap – Weekly Review:
The SPX gained 6.06 points during the week (.45%). The range for the week was 35.32, 2.6%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 58. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was 249,000. On the NYSE, the advance/decline line increased during the week by 650 and the 10 day average of Net Advancing decreased by -324. There were 1032 New Highs and 159 New Lows.
For the week, Russell 2000 advancing issues (554) totaled 15,317,722 shares traded (27,649 average per stock) and declining issues (1,391) totaled 25,193,780 shares traded (18,112 average per stock.) 1,020 components are on a weekly uptrend (58 new uptrends this week) and 930 components are on a weekly downtrend (237 new downtrends this week.) There were 206 New Highs and 57 New Lows.
Notice that the Russell still has more components uptrending than downtrending on a weekly basis. But this last week went far to neutralizing that advantage.
For the week, SPX advancing issues (277) totaled 70,228,232 shares traded (253,532 average per stock) and declining issues (218) totaled 64,196,199 shares traded (294,478 average per stock.) 236 components are on a weekly uptrend (33 new uptrends this week) and 262 components are on a weekly downtrend (33 new downtrends this week.) There were 77 New Highs and 19 New Lows.
For the week, NASDAQ Composite Index advancing issues (646) totaled 42,533,160 shares traded (65,841 average per stock) and declining issues (1,818) totaled 41,439,616 shares traded (22,794 average per stock.) There were 45 New Highs and 53 New Lows.
Checking the sectors of the SPX for the week:
The Basic Materials sector advancing issues (21) totaled 3,222,040 shares traded (153,430 average per stock) and declining issues (8) totaled 2,006,597 shares traded (250,825 average per stock.) 10 components are on a weekly uptrend (1 new uptrends this week) and 20 components are on a weekly downtrend (1 new downtrends this week.) There were 3 New Highs and no New Lows.
The Energy sector advancing issues (40) totaled 10,007,009 shares traded (250,175 average per stock) and declining issues (4) totaled 2,239,579 shares traded (559,895 average per stock.) 26 components are on a weekly uptrend (10 new uptrends this week) and 18 components are on a weekly downtrend (1 new downtrends this week.) There were 1 New Highs and 1 New Lows.
The Financials sector advancing issues (10) totaled 2,641,305 shares traded (264,131 average per stock) and declining issues (71) totaled 27,233,325 shares traded (383,568 average per stock.) 36 components are on a weekly uptrend (no new uptrends this week) and 45 components are on a weekly downtrend (11 new downtrends this week.) There were 15 New Highs and 2 New Lows.
The Industrials sector advancing issues (41) totaled 7,291,980 shares traded (177,853 average per stock) and declining issues (18) totaled 3,021,146 shares traded (167,841 average per stock.) 25 components are on a weekly uptrend (3 new uptrends this week) and 36 components are on a weekly downtrend (3 new downtrends this week.) There were 6 New Highs and no New Lows.
The four 'risk sectors' totaled 112 advancing issues and 101 declining issues this week with 4 new uptrends and 16 new downtrends.
The Technology sector advancing issues (59) totaled 24,585,374 shares traded (416,701 average per stock) and declining issues (19) totaled 10,332,639 shares traded (543,823 average per stock.) 21 components are on a weekly uptrend (5 new uptrends this week) and 57 components are on a weekly downtrend (3 new downtrends this week.) There were 7 New Highs and 9 New Lows.
The Consumer Staples sector advancing issues (8) totaled 2,552,081 shares traded (319,010 average per stock) and declining issues (32) totaled 7,051,403 shares traded (220,356 average per stock.) 23 components are on a weekly uptrend (2 new uptrends this week) and 17 components are on a weekly downtrend (4 new downtrends this week.) There were 9 New Highs and 3 New Lows.
The Utilities sector advancing issues (26) totaled 2,890,490 shares traded (111,173 average per stock) and declining issues (5) totaled 376,193 shares traded (75,239 average per stock.) 31 components are on a weekly uptrend (no new uptrends this week) and no components are on a weekly downtrend (no new downtrends this week.) There were 13 New Highs and no New Lows.
The Health Care sector advancing issues (23) totaled 7,445,838 shares traded (323,732 average per stock) and declining issues (29) totaled 4,085,687 shares traded (140,886 average per stock.) 27 components are on a weekly uptrend (4 new uptrends this week) and 25 components are on a weekly downtrend (6 new downtrends this week.) There were 12 New Highs and no New Lows.
The Consumer Discretionary sector advancing issues (49) totaled 9,592,115 shares traded (195,757 average per stock) and declining issues (32) totaled 7,849,630 shares traded (245,301 average per stock.) 37 components are on a weekly uptrend (8 new uptrends this week) and 44 components are on a weekly downtrend (4 new downtrends this week.) There were 11 New Highs and 4 New Lows.
Volume & Breadth Indicators
For the SPX Index there were 81 components advancing and 416 components declining. On the NYSE 3,146 issues were traded with 1,022 advancing issues and 2,012 retreating issues, a ratio of 1.97 to one declining. There were 135 new highs and 39 new lows. The five day moving average of New Highs is 206 while the five day moving average of New Lows is 32 and the ten day moving average of Net Advancing is 73.
Declining volume was higher at a ratio of 3.21 to one. The closing TRIN was 1.63 and the final tick was -352. The five day average of TRIN is 1.21 and the ten day average of TRIN is 1.34. The NYSE Composite Index lost -1.15% today while the SPX lost -1.02%.
For the NYSE, relative to the previous 30 session average, volume was 26.61% above the average. Of the last 15 sessions 2 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 15 sessions ended on a positive tick, 3 of last 10. For the SPX, the day's volume was 110.5% of the average daily volume for the last year. Volume was 118.8% of the last 10 day average and 94.8% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was -93,000 and the average tick for the day was -60. There were 6 ticks greater than 600 and 30 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional distribution.
Moving Average and Support/Resistance Indicators:
43.8% of the SPX are above their five day moving average, 54.6% are above their 10 day average, 55.8% are above their 20 day moving average, 59.4% are above their 50 day moving average, and 51.8% are above their 200 day moving average.
There was one significant moving average crossover Friday as Technology had their 5 DMA cross above the 20 DMA. A quick glance at our averages chart looks pretty bullish longer term despite other data suggesting an upcoming decline. A pullback then higher just might be coming. Our moving average Power Rating is 58 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +32%.
- Energy -- Outperformed the SPX by +133%.
- Consumer Staples -- Outperformed the SPX by +38%.
- Utilities -- Outperformed the SPX by +119%.
Sectors weaker than the SPX for Friday:
- Financials -- Underperformed the SPX by -35%.
- Industrials -- Underperformed the SPX by -23%.
- Technology -- Underperformed the SPX by -16%.
- Health Care -- Underperformed the SPX by -30%.
- Consumer Discretionary -- Underperformed the SPX by -23%.
Checking the sectors of the SPX after Friday: (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 77,157 shares traded (25,719 average per stock) and declining issues (26) totaled 949,001 shares traded (36,500 average per stock.) 23 components are on an uptrend (no new uptrends Friday) and 7 components are on a downtrend (4 new downtrends Friday.) There were 2 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed 1.1% above the 20-Day average.
The Energy sector advancing issues (24) totaled 1,434,914 shares traded (59,788 average per stock) and declining issues (20) totaled 1,625,375 shares traded (81,269 average per stock.) 40 components are on an uptrend (1 new uptrends Friday) and 4 components are on a downtrend (2 new downtrends Friday.) There were no 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 2.93% above the 20-Day average.
The Financials sector advancing issues (2) totaled 157,530 shares traded (78,765 average per stock) and declining issues (79) totaled 6,230,143 shares traded (78,863 average per stock.) 25 components are on an uptrend (no new uptrends Friday) and 56 components are on a downtrend (37 new downtrends Friday.) 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 1.19% above the 20-Day average.
The Industrials sector advancing issues (7) totaled 1,295,970 shares traded (185,139 average per stock) and declining issues (54) totaled 1,544,494 shares traded (28,602 average per stock.) 41 components are on an uptrend (no new uptrends Friday) and 20 components are on a downtrend (13 new downtrends Friday.) There were 2 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .48% above the 20-Day average.
The four 'risk sectors' totaled 36 advancing issues and 179 declining issues Friday with 1 new uptrends and 56 new downtrends. 59.7% of Risk Sector components are uptrending.
The Technology sector advancing issues (8) totaled 1,340,390 shares traded (167,549 average per stock) and declining issues (70) totaled 6,057,224 shares traded (86,532 average per stock.) 43 components are on an uptrend (no new uptrends Friday) and 35 components are on a downtrend (18 new downtrends Friday.) There were 1 New Highs and 2 New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .62% above the 20-Day average.
The Consumer Staples sector advancing issues (1) totaled 110,537 shares traded (110,537 average per stock) and declining issues (39) totaled 2,238,769 shares traded (57,404 average per stock.) 19 components are on an uptrend (no new uptrends Friday) and 21 components are on a downtrend (8 new downtrends Friday.) There were 1 New Highs and 2 New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed 1.4% above the 20-Day average.
The Utilities sector advancing issues (22) totaled 658,706 shares traded (29,941 average per stock) and declining issues (9) totaled 170,991 shares traded (18,999 average per stock.) 28 components are on an uptrend (no new uptrends Friday) and 3 components are on a downtrend (1 new downtrends Friday.) There were 12 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 1.33% above the 20-Day average.
The Health Care sector advancing issues (2) totaled 96,770 shares traded (48,385 average per stock) and declining issues (50) totaled 2,725,973 shares traded (54,519 average per stock.) 21 components are on an uptrend (no new uptrends Friday) and 30 components are on a downtrend (17 new downtrends Friday.) 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 1.64% above the 20-Day average.
The Consumer Discretionary sector advancing issues (12) totaled 699,513 shares traded (58,293 average per stock) and declining issues (69) totaled 2,950,445 shares traded (42,760 average per stock.) 48 components are on an uptrend (1 new uptrends Friday) and 33 components are on a downtrend (16 new downtrends Friday.) There were no New Highs and 2 New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .81% above the 20-Day average.
Based on the SPX sector data, we are on a Buy for the SPX and the Russell 2000.
What We Learned from Friday's Action:
Friday was session 1 to close below the 5 DMA, session 4 to close above the 10 DMA, session 6 to close above the 20 DMA, and session 6 to close above the 50 DMA. This was also session 4 for the 5 DMA to close above 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 7.04 points above the 10 DMA.
The SPX 5 DMA is 1365.85, 10 DMA is 1355.62, 20 DMA is 1350.49, 50 DMA is 1333.65, 100 DMA is 1359.96, and 200 DMA is 1313.43. Notice the convergence of the averages. This is a sign of choppy sideways trade that will eventually lead to a break out, one way or the other.
On Friday the SPX traded below the opening range but did not trade above the opening range. 17.6% of the SPX closed up from the previous close; 29.4% closed higher than the open. During Friday's session the SPX lost -13.85 points from open to close. The SPX intraday trading range was 8.02 points. The 5-Day average intraday trading range is 12.15 points, the 10-Day average is 13.1 points, and the 20-Day average is 12.29 points. The trading range is contracting. The 5-Day SPX gain is 0.43%, the 10-Day gain is 0.59%, and the 15-Day gain is 2.53%. Still uptrending.
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 Monday is +3. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be lower. Mel's 5-Day Oscillator is 46 and Mel's 10-Day Oscillator is 34 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bullish for Monday's session.
US stocks were mostly up week-over-week with the Dow +0.35% and the SPX +0.4%. But the Russell 2000 was -1.1%, show a large small cap divergence between the other indices. This is often a forerunner of a decline as it suggests traders are reluctant to take on risk.
Looking ahead to next week, we have a lot of major earnings to be reported, including AAPL, AMZN, and NFLX. Because expectations are quite low for these reports, surprises to the upside can not be ruled out. When expectations are so low, it is much easier to surprise upward.
Chances for something of a market bounce may also be enhanced by a quiet week expected from Europe as nothing major seems likely this week from the eurozone.
Of course, as always, and hint of further monetary easing is certain to bring out buyers.
A couple of data points worth mentioning. While Thursday touched intraday on new rally highs, market breadth, as measured by the Advance/Decline line failed to confirm. It was close, after Friday's action it makes sense to keep an eye on this diversion which often suggests lower prices ahead.
Another negative divergence that bears watching, similar to the divergence of the small caps mentioned above, is that traders appear reluctant and unwilling to chase the rising stocks; volume has curled over and traders are placing their volume on the downward moving stocks. While this is simply a warning flag at this point, this is often a clue that a rally has exhausted itself for now.
While our Market Internals data has downshifted into Neutral and we expect to see further downside before higher prices, we are going to be cautious early this week and see what comes; choppiness is likely with a small bounce early in the week making some sense. We are mist likely to find any upcoming bounce as a decent opportunity to reload on the shorts-side; for now, we are in a "seel-the-bounce-mode."
SPX levels to watch include 1356; a close above is bullish and a close below is bearish. For the Russell 2000, keep an eye on the 795 level.
Monday, July 23
Week of July 23 - July 27 Overview
Date/Time Release/Consensus
07/24/12 10:00 FHFA Housing Price Index/NA
07/25/12 7:00 MBA Mortgage Index/NA
07/25/12 10:00 New Home Sales/374K
07/25/12 10:30 Crude Inventories/NA
07/26/12 8:30 Initial Claims/375K
07/26/12 8:30 Continuing Claims/3300K
07/26/12 8:30 Durable Orders/0.01
07/26/12 8:30 Durable Orders - ex Transportation/0
07/26/12 10:00 Pending Home Sales/0.007
07/27/12 8:30 GDP-Adv./0.012
07/27/12 8:30 Chain Deflator-Adv./0.015
07/27/12 9:55 Michigan Sentiment - Final/72
Economics
08:30 Chicago Fed National Activity –prior -0.45
11:00 Fed to purchase $4.25b-$5b notes in 8 to 10-year range
11:30 Treasury selling $30b 3-month bills, $27b 6-month bills
01:30 AUD Producer Price Index
14:00 EUR Eurozone Consumer Confidence
12:30 Germany to sell EU3b in 12-mo bills
14:00 France to sell bills
Earnings
Before:
Haliburton (HAL) EPS 75c
Coca-Cola (KO) EPS $1.09
Hasbro (HAS) EPS 24c
McDonalds (MCD) EPS $1.38
After:
Texas Instruments (TXN) EPS 34c
VMWare (VMW) EPS 66c
There were no significant economic releases on Friday and there will be none on Monday.
Be sure to enjoy the rest of your weekend!
Thank you for reading. Think on it, trade on it, and be well.
-Mel