Another Disappointment for Bears
Market Recap:
With European markets lower and the crisis in Egypt ongoing, it appeared that buyers decided to be cautious. The government reported U.S. Nonfarm Productivity in the fourth quarter rose by +2.6%, which was above the consensus expectations for a reading of +2.1% and Q3’s revised level of +2.4%. On the inflation front, Unit Labor Costs were reported to have fallen -0.6% versus the expectations for +0.1%. Q3’s reading was unrevised at -0.1%. The Labor Department reported that initial claims for unemployment insurance for the week ending January 29 fell by 42K to 415K. The week’s total was below the consensus for a reading of 420K. Continuing Claims for unemployment for the week ending January 22 were in line with consensus at 3.928M vs. expectations for 3.828M.
The session began with a small gap lower and traded sideways for the first half hour before selling off eight points quickly just after 10 am. But the low of the day was on the chart at 10:15 as POMO began and dip buyers arrived and bought hard until lunch hour. The afternoon treated us to another lengthy stretch of ping-pong trading within a three point range until the final seventy minutes when it seemed like the NonFarm employment data was leaked and buyers arrived to pump the market into the close.
Today's market turn and rally right at 10:15 am sure had the look and feel of a POMO inspired rally. One minute the market was in danger of falling off a cliff, the next minute POMO began and the market made an about-face and rallied the rest of the session.
Checking our Market Leaders board this evening we see a mixed board with China, Germany, Emerging Markets and the chip makers (SOX) closing lower. The Dow and Russell Technology managed to close at 52 week closing highs while the SPX, NYSE Composite and SOX just missed.
Market Trend: Nine Sectors Report
Turning to our Nine Sectors Report tonight we have three positive changes as Consumer Staples, Health Care, and Consumer Discretionary all change from Sell to Neutral. This will result in the Nine Sectors signal moving to Neutral. But one thing to keep in mind is that the Consumer Staples and Discretionary sectors often move into Neutral leading into market downturns as these are often viewed as "defensive" sectors that are "safer" during a downturn.
Before Friday's open we get the big kahuna of economic data: The nonfarm payroll January jobs report. It is likely that the reaction to this data, followed by the reaction to the reaction, will drive much of Friday's trading. Expectations for this data are sky-high. It seems unlikely that the reality of the data could exceed the expectations.
Volume & Breadth Indicators
For the SPX Index there were 305 components advancing and 174 components declining. On the NYSE 3,137 issues were traded with 1,627 advancing issues and 1,391 retreating issues, a ratio of 1.17 to one advancing. There were 192 new highs and 7 new lows. The five day moving average of New Highs is 187 while the five day moving average of New Lows is 12 and the ten day moving average of Net Advancing is 431. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 1.54 to one. The closing TRIN was 0.76 and the final tick was 251. The five day average of TRIN is 1.08 and the ten day average of TRIN is 1.16. The NYSE Composite Index gained 0.2% today while the SPX gained 0.24%.
For the NYSE, relative to the previous 30 session average, volume was 4.14% above the average. Of the last 15 sessions 13 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 20 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 96.1% of the average daily volume for the last year. Volume was 92.6% of the last 10 day average and 104.6% of the previous day’s volume.
Breadth was fairly strong as the indices have fully recovered from last Friday’s sell-off. The only “weakness” is in the New Highs. For indices at 52 week highs, New Highs should be hovering near 400. But it is getting more difficult to believe that any significant downturn is coming.
Total tick for the day was 154,000 and the average tick for the day was 100. There were 71 ticks greater than 600 and 38 ticks more extreme than -600. There were 1 ticks greater than 1000 and 3 ticks more extreme than -1000. The tick action suggests institutional accumulation.
Intraday volume spiked during the downturn early today but also spiked on the up move later in the morning. Looking at the Nightly Breadth Indicators shows more bullish indicators than not. The only oddity among the indicators that stands out is the dropping percent of stocks above their 40 day moving average.
Moving Average and Support/Resistance Indicators:
76.2% of the SPX are above their five day moving average, 72% are above their 10 day average, 71.4% are above their 20 day moving average, 74.4% are above their 50 day moving average, and 88% are above their 200 day moving average.
There were no significant moving average crossovers today, and haven’t been any for a while, mostly because all the averages are already above the longer-term averages.
Sectors on the Move:
Sectors stronger than the SPX for Thursday:
- Basic Materials -- Outperformed the SPX by +13%.
- Consumer Staples -- Outperformed the SPX by +28%.
- Utilities -- Outperformed the SPX by +17%.
- Consumer Discretionary -- Outperformed the SPX by +93%.
Sectors weaker than the SPX for Thursday:
- Energy -- Underperformed the SPX by -20%.
- Financials -- Underperformed the SPX by -21%.
- Industrials -- Underperformed the SPX by -20%.
- Technology -- Underperformed the SPX by -8%.
- Health Care -- Underperformed the SPX by -10%.
In Late Trading:
173 SPX components moved upward and 171 components downward during the after hours with 116 million shares traded.
Friday, February 4
Economics
08:30 Nonfarm Payrolls
08:30 Nonfarm Payrolls Private
08:30 Unemployment Rate
08:30 Average Workweek
08:30 Hourly Earnings
Britain Housing Prices
Italian Consumer Prices Index
Canada Unemployment Rate
POMO Schedule
Treasury Coupon Purchase: 8/15/2013-1/31/2015: $6-8 bln
Earnings
Before: AET, AON, AVID, CLX, SUR, CEG, FO, UFS, MGI, BPOP, PPL, PHM, SXT, SEP, TSN, WY, YRCW
The government will release the highly-anticipated January jobs report before the opening bell.
Friday cometh! Enjoy it.
-Mel