.... And Back Down Again
by Jerome "Mel" Hickerson, MarketsPath.com
Today’s session opened under selling pressure from the futures, gapped down quickly, tried to stabilize, but bears regained control around 10:00 and pushed the ball downfield hard until setting the low of the day at 11:10. From there, the bulls mounted a weak comeback but the lows of the day were retested about 1:20 at which point the bulls mounted a stronger snapback rally erasing eight points of the earlier loss moving upward into the close. Welcome to renewed volatility.
Now, down to the more important business of looking at where we might go from here. I know that many in the chat room see more work on the downside; so do I. I just differ on timing; I see a bounce coming from here before eventually testing the 50 day moving average of the SPX. I think it is possible we even move briefly above 1150 once again, although I do not think this is highly likely.
Why do I see a bounce? First, let’s examine the SPX daily chart. This is now the 11th time since late November that that we have seen a similar pattern on the daily bar; the first ten times all bounced. Ten for ten…. This may be the one failure – all patterns fail eventually. But until they do, you have to respect them. (See the chart.)
Market internals are mixed but on balance are suggesting at least a brief bounce. We’ve got the signal that says “Friday’s close should be higher than Thursday’s open.” This signal has a 79% success rate over the last 30 months; of course that’s a 21% failure rate. You make the call.
Money flow today was into the long side ETFs and out of the inverse ETFs. This is almost always a clue that the movers and shakers intend to try to ratchet things upward tomorrow. Follow the money. (See chart.)
One more reason: The Dollar has been rallying strongly; a pullback on the Dollar would likely fuel a rally in the equities. The 2 Day RSI of the Dollar is 96, suggesting at least a brief pullback of the Dollar.
So there are my four main reasons for expecting a bounce from here. But here’s one last one: We still have a 2.5 to 1 ratio of SPX components giving a Buy signal as opposed to a Sell signal. As long as this ratio remains above two, it’s hard for me to get too bearish.
Thursday, January 21
Economics
08:30 Initial Claims
08:30 Continuing Claims
10:00 Leading Indicators
10:00 Philadelphia Fed
Earnings
Before: APH, AUO, SCHW, CMA, CAL, FCS, FITB, GS, ESI, KEY, NITE, LM, NDP, PNC, PCP, LUV, UNP, UNH, XRX
After: AMD, AXP, BNI, COF, CBST, DGII, ELX, EZPW, GOOG, IBKR, IFT, ISRG, JJSF, PBCT, WDC
Events
SGMS Analyst Day
WPI Analyst Day
WGL Analyst Meeting
SPX Summary for Wednesday, January 20, 2010
70 Advancers/425 Decliners
Today's SPX component winners and losers:
• Largest one day loser is CSX with -6.24%
• Largest three day loser is THC with -10.30%
• Largest five day loser is FSLR with -10.35%
• Largest ten day loser is PCS with -21.90%
• Largest one day winner is STT with 7.22%
• Largest three day winner is SVU with 8.48%
• Largest five day winner is SVU with 14.04%
• Largest ten day winner is ZION with 29.71%
*** SPX Technical Summary ***
The lowest 14 day RSI component is EXPE; the highest 14 day RSI component is ZION. The average 14 day RSI of all 500 components is 52.
Yesterday's lowest RSI EXPE earned -2.11% today.
Yesterday's highest RSI SYK earned -1.77% today.
The greatest positive five day momentum component is SVU; the greatest negative five day momentum component is FSLR. The average five day momentum of all 500 components is 0.33.
42.40% of the SPX components are giving a crossover Buy signal; 16.80% of the SPX components are giving a Sell signal. This is a 2.5 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 13 components.
• From Buy to Neutral: 27 components.
• From Neutral to Sell: 10 components.
• From Neutral to Buy: 25 components.
*** SPX Component Swing Trade Ideas ***
New Crossover Buy Signals:
AMT FIS APC HRS APA HPQ CFN ITT CNP LEG CTXS MAT COP NTRS
CVH POM DV RRC D SWY EIX SO EP VIA/B AAPL
New Crossover Sell Signals:
BMC COG DTV ERTS IVZ LIFE LLTC OI CRM VMC
High Positive Momentum:
SVU WYN TWC MI ZION HUM EK MRK NTRS MTB KEY STZ
High Negative Momentum:
MMM FSLR PWR S COH AKS LTD GT TIF KLAC LIFE
Mel’s Random Hits:
• Total tick for the day was -57,000. Breadth was negative from the open, briefly positive just before noon, negative again for about and hour, then positive from a little after 2:00 into the close.
• The day's range was 18.7 points.
• The day's volume was 87.15% of the average daily volume for the last year. Volume was 103.9% of the last 10 day average.
• 5% of the SPX stocks closed with two day RSI above 90. 10% closed with RSI above 80. 24% closed with RSI below 20 and 13% closed with RSI below 10.
• 30% of the SPX are above their five day moving average, 39% are above their 10 day average, and 51% are above their 20 day moving average.
• 31% of the SPX stocks closed below their most recent previous lows.
• 11% of the SPX closed above their most recent previous high.
• 57.4% of stocks closed in the top half of the day's range. (42.6% closed in bottom half.)
• 8.0 of stocks closed in the bottom 20% of the day's range.
• 10.0% of stocks closed in the top 10% of the day's range.
• 13.2% of stocks closed within 2% of their 52 week high.
• 23.2% of stocks closed within 50% of their 52 week low.
• 14.8% of stocks closed within ¼% of their high for the day.
• 3.0% of stocks closed within ¼% of their low for the day.
• 13.6% of the SPX closed up from the previous close; 31.2% closed higher than the open.
• Sectors weaker than the SPX for the day: Basic Materials, Energy, Industrials, Technology, and Consumer Discretionary.
• Sectors stronger than the SPX for the day: Financials, Consumer Staples, Utilities, and Health Care.
• The $SOX index strength was stronger than the SPX again today.
• The 2 Day RSI of the SPX is 25. The Dow RSI is 30, NASDAQ is 33 and Russell 36.
• SPX components moved upward during the after hours with 96 million shares traded.
• Posted today: “11:17:10 I think it is likely we just saw the low of the day.” The low of the day was seven minutes before that posting. Needless to say, we made good money on the long side after being short overnight.
Have a great Thursday!
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"Mel"
