Another Reversal Day?
by Jerome "Mel" Hickerson
Worldwide euphoria hit the markets overnight as the futures were flying by early this morning. So the regular session opened with a hard gap upward, quickly gave back almost half, then inched upward setting the high of the day at 2pm. At that point the index ran into resistance and reversed downward giving back most of the day’s gains.
Bears were excited by today’s reversal; I saw the selling at the close as relieving pressure from a coiled spring and everything in my model suggests that bears would have actually been better served by a stronger close. (But more on what the model says below.)
Regardless, it is what it was; and there’s no way around what the charts are saying here. Today’s daily candle was a small range reversal bar similar to the dragonfly dojis we have seen recently except today’s was the opposite, a bearish candle. A large range reversal would have been more convincing but today is still a bearish candle.
This doesn’t mean we won’t see some more – brief – upside before a likely pullback. But this daily candle along with other technical indicators certainly suggests that we are likely to see a multi-day pullback beginning soon. See attached charts for a few examples of today’s hammer pattern and notice that the suggested pullback doesn’t always begin immediately.
Inside the model, signals are clearer than they’ve been recently. This market is overextended and internals say that now is the time for a moderate breather, on the order of 5%, not a full-blown correction. But look for multi-day softness in the market unless some unforeseen event fuels us higher.
Breadth remains strong suggesting that any pullback here might be brief and not deep, and continues to suggest that more strength lies ahead.
SPX Summary for Tuesday, March 02, 2010
313 Advancers/174 Decliners
Today's SPX component winners and losers:
• Largest one day loser is SPLS with -10.09%
• Largest three day loser is SPLS with -10.13%
• Largest five day loser is HRB with -14.45%
• Largest ten day loser is HRB with -19.17%
• Largest one day winner is QCOM with 6.93%
• Largest three day winner is IPG with 21.57%
• Largest five day winner is CCE with 35.98%
• Largest ten day winner is MIL with 50.21%
*** SPX Technical Summary ***
The lowest 14 day RSI component is HRB; the highest 14 day RSI component is MIL. The average 14 day RSI of all 500 components is 67.
The greatest positive five day momentum component is CCE; the greatest negative five day momentum component is HRB. The average five day momentum of all 500 components is 2.97.
60.00% of the SPX components are giving a crossover Buy signal; 10.00% of the SPX components are giving a Sell signal. This is a 6.0 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 5 components.
• From Buy to Neutral: 10 components.
• From Neutral to Sell: 5 components.
• From Neutral to Buy: 47 components.
Wednesday, March 3
Economics
07:30 Challenger Job Cuts YoY
08:15 ADP Employment Change -10k cons.
10:00 ISM Services 51.0 cons.
10:30 Crude Inventories
02:00 Fed’s Beige Book
Earnings
Before: BIG, BJ, BWS, CSIQ, CMED, COST, DIN, JOYG, LINC, LOJN, NZ, POZN, RIMG
After: AIMC, ARII, CWTR, CMTL, DIVX, DAVE, FL, FTEK, PETM, SINA, TTWO, SINA, AUY
Events
09:00 Richard Fisher Speaks
01:00 Dennis Lockhart Speaks
The ISM services sector index for February is expected to have risen to 51 from 50.5 in January, a signal of further expansion in the sector. The weekly oil inventories report is due in the morning and the Federal Reserve's "beige book" reading on the economy is due in the afternoon.
Mel’s Random Hits:
• Total tick for the day was +300,000. Breadth continues to lead the market and breadth continues to suggest upward. Today, breadth was negative briefly around 3:30. The rest of the session was positive.
• The day's range was 6.95 points.
• The day's volume was 77.55% of the average daily volume for the last year. Volume was 99.6% of the last 10 day average and 109% of Monday’s volume.
• 37% of the SPX stocks closed with two day RSI above 90. 53% closed with RSI above 80. 4% closed with RSI below 20 and 2% closed with RSI below 10. These numbers are approaching overbought.
• 83.4% of the SPX are above their five day moving average, 81.0% are above their 10 day average, and 87.4% are above their 20 day moving average. These numbers are overbought.
• 7% of the SPX stocks closed below their most recent previous lows.
• 45% of the SPX closed above their most recent previous high.
• 42.0% of stocks closed in the top half of the day's range. (58.0% closed in bottom half.)
• 20.6% of stocks closed in the bottom 20% of the day's range.
• 5.8% of stocks closed in the top 10% of the day's range.
• 20.2% of stocks closed within 2% of their 52 week high. 40.2% of stocks closed within 5% of their 52 week high.
• 26.2% of stocks closed within 50% of their 52 week low. 8.4% of stocks closed within 25% of their 52 week low.
• 9.6% of stocks closed within ¼% of their high for the day.
• 14.2% of stocks closed within ¼% of their low for the day.
• 61.4% of the SPX closed up from the previous close; 48.4% closed higher than the open.
• Sectors weaker than the SPX for the day: Industrials, Technology, and Consumer Discretionary.
• Sectors stronger than the SPX for the day: Energy, Financials, Consumer Staples, Basic Materials, Utilities, and Health Care.
• The $SOX index strength was weaker than the SPX today.
• The 2 Day RSI of the SPX is 91. The Dow RSI is 79, NASDAQ is 95 and Russell 97. The NASDAQ and Russell continue to be the strongest; today the Dow was the weakest.
• Over the last four sessions, the average session closed 72.7% of the range above the low.
• Upside momentum increased upward from Monday’s 1.18 to today’s 2.97. The ratio of SPX components giving a crossover buy signal compared to sell signals has increased to 6 to 1.
• 221 SPX components moved upward and 159 components downward during the after hours with 126 million shares traded. Volume was heavy.
• Swing Trade: Short at the open Wednesday. Hold until further notice.
Have a great Wednesday everyone!
----------
"Mel"
ETF’s we trade:
Ultra S&P500 ProShares (NYSE: SSO)
Ultra Dow30 ProShares (NYSE: DDM)
Ultra QQQ ProShares (NYSE: QLD)
PS UTLRSHRT QQQ (NYSE: QID)
UltraShort S&P500 ProShares (NYSE: SDS)
UltraShort Dow30 ProShares (NYSE: DXD)
PowerShares QQQ Trust (NASDAQ: QQQQ)
Direxion Daily Small Cp Bear 3X (NYSE:TZA)
Direxion Daily Small Cp Bull 3X (NYSE:TNA)
