Another Consolidation Day
by Jerome "Mel" Hickerson
Market Recap:
Although the Manufacturing PMI's in China and the Eurozone were weak and clearly signal that a contraction is occurring, ECB President Mario Draghi's speech seemed to give traders reason to continue to be hopeful. Initial Claims for Unemployment Insurance for the week ending 11/26 rose by 6,000 to 402K. This was above the consensus estimate for 392K and above last week's revised total of 396k (from 393K). Continuing Claims for the week ending 11/19 came in at 3.740M vs. consensus of 3.650M and last week's 3.705M.
The session began without a significant gap and traded lower briefly before whipsawing higher to put the high of the day on the chart at 10:04 am. But soon after 10:00 am the SPX began to drift lower before settling into drifting back and forth within a five point range for hours with a slight positive bias. Absolutely dull. And bullish after yesterday's huge gain as few traders were selling. The final hour traders showed some reluctance to hold overnight ahead of the jobs report as there was some mild selling into the finish to bring the index to close in the lower half of the intraday range.
Checking our Market Leaders Board we find a very mixed close as most of our leaders hovered around breakeven. The Russell 2000 small caps lost almost 1% while Technology led the gainers with a half percent.
SPX big winners were CF Industries Holdings Inc (CF) 5.12%, Netflix Inc (NFLX) 4.1%, and Nordstrom Inc (JWN) 3.99%. SPX big losers were Kohl's Corp (KSS) -6.78%, Sears Holding Corp (SHLD) -4.8%, and Viacom Inc Class B (VIAB) -3.64%.
SPX five day big winners are Alpha Natural Resources (ANR) 24.49%, Genworth Financial (GNW) 22.24%, and US Steel Corp (X) 21.6%. SPX five day big losers are Hospira Inc (HSP) -6.26%, Corning Inc (GLW) -4.13%, and Tiffany & Co (TIF) -4.01%.
New Ten Day Highs: ABT, AES, AET, URBN, ATI, AGN, MO, AEE, AEP, AMGN, APOL, ADM, AN, AVY, BLL, BCR, BMS, BIIB, XL, HRB, BA, BSX, BMY, BF/B, COG, CAM, COF, CFN, CCL, CBG, CBS, CNP, XEL, CI, CTAS, CLX, CMS, CL, CAG, COP, ED, CEG, COST, CVH, DVA, DF, DE, DELL, XRAY, DTV, DOW, DPS, DTE, DNB, ROST, EMR, ESV, ETR, EOG, EQT, EFX, EL, EXC, ESRX, FDO, FAST, FSLR, FLIR, FLS, FMC, FTI, FRX, FCX, FTR, GME, GD, GIS, GPC, GT, GWW, HAR, HSY, HON, HRL, DHI, HUM, IPG, IBM, IFF, IVZ, KMB, KFT, KR, LH, LEG, LLY, LMT, LO, M, MA, MJN, MCD, MCK, MWV, MHS, MDT, MRK, MDP, TAP, MON, MCO, MYL, NYT, NEM, NWSA, GAS, NI, NBL, NU, NUE, NVDA, NYX, ORLY, OMC, PCAR, PLL, PDCO, JCP, POM, PFE, PM, PNW, PPL, PX, PFG, PG, PHM, PWR, DGX, RTN, RAI, SWY, SLE, SCG, CVG, SRE, SIAL, SJM, SO, LUV, SRCL, SYY, TE, TJX, TMK, TSN, UNH, JASO, DYN, MBI, VAR, VRSN, VZ, VFC, VMC, WMT, WAG, DIS, WPO, WAT, WLP, WDC, WU
New Ten Day Lows: EK, KSS, VXX, WPI
Volume & Breadth Indicators
For the SPX Index there were 176 components advancing and 292 components declining. On the NYSE 3,141 issues were traded with 1,202 advancing issues and 1,845 retreating issues, a ratio of 1.53 to one declining. There were 105 new highs and 18 new lows. The five day moving average of New Highs is 76 while the five day moving average of New Lows is 57 and the ten day moving average of Net Advancing is -328. The Net Advancing data indicates a bearish trend.
Declining volume was higher at a ratio of 1.41 to one. The closing TRIN was 0.78 and the final tick was -99. The five day average of TRIN is .63 and the ten day average of TRIN is 1.57. The NYSE Composite Index lost -0.45% today while the SPX lost -0.19%.
For the NYSE, relative to the previous 30 session average, volume was -12.22% below the average. Of the last 15 sessions 3 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 109.4% of the average daily volume for the last year. Volume was 118.7% of the last 10 day average and 81.1% of the previous day’s volume.
Market breadth today was weaker than the small decline justified and the broad NYSE Composite Index losing significantly more than the SPX confirms that. Whether this is just a one day aberration we can’t know yet but it bears keeping a close eye on.
Total tick for the day was 73,000 and the average tick for the day was 47. There were 55 ticks greater than 600 and 44 ticks more extreme than -600. There were 2 ticks greater than 1000 and 5 ticks more extreme than -1000. The tick action suggests institutional accumulation.
The tick data today shows a typical consolidation day pattern as we see the larger ticks were mostly bearish while the smaller ticks were mostly bullish.
The intraday volume pattern shows heaviest relative volume was during the end of the first hour while the market was selling fairly hard then volume drifted lower the rest of the session.,
Moving Average and Support/Resistance Indicators:
97% of the SPX are above their five day moving average, 94% are above their 10 day average, 64.2% are above their 20 day moving average, 71.8% are above their 50 day moving average, and 34% are above their 200 day moving average.
There were no significant moving average crossovers today. Our moving average Power Rating is 37 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Thursday:
- Technology -- Outperformed the SPX by +70%.
- Consumer Staples -- Outperformed the SPX by +0%.
- Health Care -- Outperformed the SPX by +34%.
- Consumer Discretionary -- Outperformed the SPX by +27%.
Sectors weaker than the SPX for Thursday:
- Basic Materials -- Underperformed the SPX by -45%.
- Energy -- Underperformed the SPX by -38%.
- Financials -- Underperformed the SPX by -44%.
- Industrials -- Underperformed the SPX by -17%.
- Utilities -- Underperformed the SPX by -10%.
In Late Trading:
182 SPX components moved upward and 128 components downward during the after hours with 81.9 million shares traded.
What We Learned from Thursday's Action:
Thursday was session 4 to close above the 5 DMA, session 2 to close above the 10 DMA, session 2 to close above the 20 DMA, and session 2 to close above the 50 DMA. This was also session 10 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 43.32 points above the 10 DMA.
The SPX 5 DMA is 1207.59, 10 DMA is 1201.27, 20 DMA is 1227.17, 50 DMA is 1207.97, 100 DMA is 1214.22, and 200 DMA is 1265.43.
On Thursday the SPX traded below the opening range but did not trade above the opening range. 35.6% of the SPX closed up from the previous close; 48.4% closed higher than the open. During Thursday's session the SPX lost -2.32 points from open to close. The session was an NR7 day (Narrowest Range last 7 days).
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 Friday is +5. Greater than three is bullish and less than negative three is bearish. Based solely on the technicals, we are bullish for Friday's session.
The trading range made this a difficult session to day trade. We had a quick fifty cent gain on TZA early in the day, then reentered and watched the market stall and simply waffle back and forth for hours, finally exiting at the close for a small gain.
The jobs data Friday morning will likely determine the fate of this December rally and should determine the action on Friday morning at least. The December jobs report does have a positive bias as sixteen of the last twenty-one December reports have beaten expectations.
We mentioned last night that we expected today’s session to end near breakeven, and that was pretty close. But we did expect a lower low today than we saw today. Still, today’s narrow range consolidation was not surprising. A guess for tomorrow is that we see a morning gap, most likely higher. A gap lower may provide an opportunity to buy the dip.
Friday, December 2
Economics
08:30 Change in Nonfarm Payrolls – consensus 112k
08:30 Change in Private Payrolls – consensus 135k
08:30 Change in Manufacturing Payrolls – consensus 6k
08:30 Unemployment Rate – consensus 9%
08:30 Underemployment Rate
08:30 Average Weekly Hours – consensus 34.3
08:15 CHF Retail Sales
10:00 EUR Euro-Zone PPI
12:00 CAD Unemployment Rate
Earnings
Before: BIG, BNS
Jobless claims came in at 402,000, more than the expected 391,000. Construction spending rose 0.8%, more than the anticipated rise of 0.3%. The ISM manufacturing survey was 52.7, better than the consensus 51.5. On Friday we get the big kahuna of economic data, the non farm payrolls.
Trade well!
Thank you for reading. Think on it, trade on it, and be well.
-Mel
