Another One for the Bulls
by Jerome "Mel" Hickerson
Early morning futures were pointing to modest weakness at the open as the enthusiasm from the European bank stress tests appeared to be waning just before the open. The Chicago Fed reported that their National Activity Index came in at -0.62 in June, which was below the revised May reading of +0.31 (April’s reading was +0.25).
The week began without a gap as the SPX opened flat and traded mostly sideways for the opening half hour but did manage to put the low of the day on the chart just 12 minutes into the session. The index moved sharply higher at 10am when the new homes sales were above consensus. Then the index moved mostly sideways until about 2:20pm when a brief pullback brought the index down about four points – which seemed large on a sluggish day such as today. But the closing hour brought the SPX back to close at the highs. It was yet another victory today for the bulls.
A few words about trading philosophy and discipline. The world is full of people who are certain when wrong while people who are correct are often full of doubts. A trader is better served by having doubts than by being certain. You must use discipline to be successful; manage risks by using position size management and stops, while only entering positions that meet rules based criteria. Entering a position because the “economy is terrible” may work for investors (although it could be argued either way) but as a trader you aren’t likely to be in your position long enough for it to matter either way.
A trader shouldn’t care about the big picture or “road map.” It may be fun to debate whether we see SPX 800 before 1300, but if you are day trading, it’s much more important to decide whether the SPX sees 1120 before 1100. Enjoy the debating but never allow your day trading to be influenced by such information because the only thing that matters to a day trader is which way are we going now.
Regarding direction, my swing signals are still pointing long but I am moving the pointer to cash. I am doing this not because the internals are weakening here but because I believe a pullback is imminent. The Dow has jumped triple-digits three successive days; this is pretty rare. The last occurrence was the end of 2008 and beginning of 2009. What happened after that was ugly but things are different now and I don’t expect a huge sell-off. Still, I do expect something, so I believe cash is better than long here.
We quickly made a decision this morning that we had to go into dime mode; there are days that reaching for more just isn’t going to work well enough to make it worth the risk. The last trade of the day would have worked for more but the first three trades weren’t going to work if looking for more than dime. So we were simply taking what the market was willing to surrender. On the ES futures side, Gary’s traders have two open short positions waiting to cover in the next couple of days.
Tuesday, July 27
Economics
09:00 Case-Shiller 20 City Index
10:00 Consumer Confidence 51.5 cons.
04:00 EMU M3 Money Supply
09:30 Australian CPI
Earnings
Before: AMG, AKS, ECOL, ABC, BEAV, BP, CPLA, CRDN, CIT, CPO, CMI, DPZ, DD. ELNK, ENR, ICON, LLL, FSTR, LVLT, LMT, NDAQ, OXY, OXPS, RF, SVU, TASR, TLAB, TIN, TMO, X, UA, VLO, WU, WRLD
After: ACE, AET, AFL, ATAC, ACAS, BGS, BXP, BRCM, BWLD, CHRW, CBG, CEPH, ETM, FISV, HA, ILMN, IGT, JLL, KONA, MEE, MTH, NBR, NSC, PNRA, RSYS, RFMD, SIMG, SUPX, TRMB, ULTI, USNA
Auction
01:00 2-Yr Note Auction
The Case-Shiller 20-city home price index is expected to have risen 4% in June versus a year ago after rising 3.8% in May. After the start of trading, the Conference Board releases the Consumer Confidence index for July. The index is expected to have fallen to 51 from 52.9 in June.
Mel’s Missives from the Matrix:
- Total tick for the day was 310,000 and the average tick for the day was 202. There were 229 ticks greater than 600 and 15 ticks more extreme than -600. There were 20 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 13.59 points. The intraday trading range - 9:35 to the close - was 13.51. The 5 DMA of daily range is 19.66.
- Evidence of the intraday trend: At 10am volume was 68.78% of the 10 day average. By noon the volume was 86.27% of the 10 day average, and by 2pm volume was 85.72% of the 10 day average.
- The day's volume was 80.7% of the average daily volume for the last year. Volume was 84.5% of the last 10 day average and 82.1% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 10:00 and 10:15 when relative volume increased 28.2% while the SPX was rising 0.55%. The largest drop in relative volume came between 10:15and 10:30 when relative volume dropped -34.6% while the SPX was dropping -0.15%.
- 58% of the SPX stocks closed with two day RSI above 90. 78% closed with RSI above 80. 1% closed with RSI below 20 and 0% closed with RSI below 10.
- 91.6% of the SPX are above their five day moving average, 86.8% are above their 10 day average, 88.6% are above their 20 day moving average, 73% are above their 50 day moving average, 46.4% are above their 100 day moving average, and 53.4% are above their 150 day moving average.
- 77% of the SPX closed above their most recent previous high.
- 2% of the SPX stocks closed below their most recent previous lows.
- 437 SPX issues advanced and 52 issues declined, a net SPX advance/decline of 385.
- Evidence of the intraday trend: At 10am, 59.6% of the SPX components were in the top half of the range. By noon, 84.8% were in the top half of the range, and by 2pm, 80.6% were in the top half of the range.
- 87.4% of stocks closed in the top half of the day's range. (12.4% closed in bottom half.)
- 43% of stocks closed in the top 10% of the day's range. 61% of stocks closed in the top 20% of the day's range.
- 0.6% of stocks closed in the bottom 10% of the day's range. 1.4% of stocks closed in the bottom 20% of the day's range.
- 12.2% of stocks closed within 2% of their 52 week high. 23% of stocks closed within 5% of their 52 week high.
- 76.4% of stocks closed within 50% of their 52 week low. 42.2% of stocks closed within 25% of their 52 week low.
- 45.2% of stocks closed within ¼% of their high for the day.
- 0.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 56% of the SPX components were up since the open. By noon, 85.2% were up since the open, and by 2pm, 81.6% were up since the open.
- 87.2% of the SPX closed up from the previous close; 86.8% closed higher than the open.
- Sectors stronger than the SPX for Monday:
- Financials -- Outperformed the SPX by +27%.
- Industrials -- Outperformed the SPX by +52%.
- Health Care -- Outperformed the SPX by +58%.
- Consumer Discretionary -- Outperformed the SPX by +38%.
- Sectors weaker than the SPX for Monday:
- Basic Materials -- Underperformed the SPX by -51%.
- Energy -- Underperformed the SPX by -23%.
- Technology -- Underperformed the SPX by -43%.
- Consumer Staples -- Underperformed the SPX by -59%.
- Utilities -- Underperformed the SPX by -38%.
- The $SOX index strength was stronger relative to the SPX Monday by 0.26%.
- The XLF outperformed the SPX by 0.27% Monday.
- The 2 Day RSI of the SPX is 91. The Dow RSI is 92, the NASDAQ is 91 and the Russell is 101.
- Over the last four sessions, the average session closed 74.08% of the range above the low. Monday closed at 99.9% of the daily range.
- Upside momentum increased Monday, from Friday’s 4.42 to today’s 5.05. The ratio of SPX components giving a crossover sell signal compared to buy signals increased to B 8.22 to 1.
- The ISEE Equity 10 day moving average Monday was 164. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10 and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 223 SPX components moved upward and 140 components downward during the after hours with 157 million shares traded.
Trade 'em well on Tuesday everyone!
-Mel
