August Begins with Sharp Move Higher
by Jerome "Mel" Hickerson
Overnight news out of China that PMI was below expectations was viewed as evidence of a slowing economy likely to mean the Chinese will soon ease up on their tightening policies and spend some money to get the economy growing more robustly. The major European PMI's were above expectations, which, given the worries over these economies, was good news. As a result, the futures in the U.S. were up in the pre-market.
The first session of the month began with an explosive gap higher of about 12 points. The first 30 minutes were mostly sideways but economic data released at 10am tacked on almost six more points and the rout was on. The rest of the session drifted steadily higher, adding another six points before the close.
If you were short over the weekend, the day began painfully and there was never a place to escape. Resistance in the 1121 area was violated and the SPX spent time consolidating without pulling back before heading higher into the close.
Market breadth is clearly telling us to expect higher to come. Our Nine Sectors Report is suggesting to expect higher prices to come. Our Matrix says that historically these internal market conditions result in a pullback of some sort. As a result, we will keep our Sell indicator for another day, but be forewarned: A down day tomorrow is anything but certain. We could well breach 1131 before any significant pullback arrives.
Our trading systems took it on the chin today as we had the worst day in months. We made a decision early today that the SPX might be difficult to trade so we turned to GDX, which has often been good to us in the past. While indeed the SPX would have been difficult today, GDX gave us a couple of false entry signals and it turns out the SPX would have produced smaller losses.
Tuesday, August 3
Economics
08:30 Personal Income 0.2% cons.
08:30 Personal Spending 0.1% cons.
08:30 PCE Prices-Core 0.1% cons.
10:00 Factory Orders 0.8% cons.
12:30 Australian Bank Announcement
05:00 EMU: PPI
09:30 Australian Merchandise Trade
Earnings
Before: AGAM, AHCI, AMT, ADM, AAWW, BHI, BYD, FUN, BOH, DF, DISCA, DTG, DUK, DHI, DOW, EXPD, FDP, IPXL, LEA, MRO, MMC, MRO, MA, TAP, NICE, OMX, PTRY, PH, HK, PFE, PG, RDC, SMG, SIRO, SII, SOLF, YRCW
After: ACAS, ARP, APC, ARNA, AVB, BBOX, SAM, BTUI, CHK, DXCM, DGI, DSCM, ERTS, GLUU, HRS, HTZ, JAH, LEAP, MASI, PZZA, PEET, PEGA, PCLN, RUBO, SONS, SSNC, TRLG, UTI, WTS, WWWW, WBMD, INT, ZGEN
The government is due to report on June personal income and spending. Economists believe incomes rose 0.2% in the month, while spending is forecast to be up 0.1%. A report on June factory orders comes out after the opening bell. In addition, top auto makers will report July car and truck sales throughout the day.
Mel’s Missives from the Matrix:
- Total tick for the day was 362,000 and the average tick for the day was 235. There were 231 ticks greater than 600 and 9 ticks more extreme than -600. There were 16 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 19.77 points. The intraday trading range - 9:35 to the close - was 13.6. The 5 DMA of daily range is 18.21.
- Evidence of the intraday trend: At 10amvolume was 85.34% of the 10 day average. By noonthe volume was 90.47% of the 10 day average, and by 2pmvolume was 88.23% of the 10 day average.
- The day's volume was 83.7% of the average daily volume for the last year. Volume was 88.4% of the last 10 day average and 96.9% 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 39.1% while the SPX was rising 0.49%. The largest drop in relative volume came between 9:45 and 10:00 when relative volume dropped -24.6% while the SPX was rising 0.10%.
- 29% of the SPX stocks closed with two day RSI above 90. 57% closed with RSI above 80. 4% closed with RSI below 20 and 2% closed with RSI below 10.
- 81.2% of the SPX are above their five day moving average, 80% are above their 10 day average, 82.4% are above their 20 day moving average, 72.8% are above their 50 day moving average, 51.8% are above their 100 day moving average, and 56.2% are above their 150 day moving average.
- 79% of the SPX closed above their most recent previous high.
- 1% of the SPX stocks closed below their most recent previous lows.
- 462 SPX issues advanced and 29 issues declined, a net SPX advance/decline of 433.
- Evidence of the intraday trend: At 10am, 37.4% of the SPX components were in the top half of the range. By noon, 78.4% were in the top half of the range, and by 2pm, 68.8% were in the top half of the range.
- 79.2% of stocks closed in the top half of the day's range. (20.6% closed in bottom half.)
- 19.2% of stocks closed in the top 10% of the day's range. 40.4% of stocks closed in the top 20% of the day's range.
- 3.4% of stocks closed in the bottom 10% of the day's range. 6.6% of stocks closed in the bottom 20% of the day's range.
- 11.2% of stocks closed within 2% of their 52 week high. 22.8% of stocks closed within 5% of their 52 week high.
- 77.8% of stocks closed within 50% of their 52 week low. 44.2% of stocks closed within 25% of their 52 week low.
- 23.2% of stocks closed within ¼% of their high for the day.
- 5% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 90.8% of the SPX components were up since the open. By noon, 94% were up since the open, and by 2pm, 91.8% were up since the open.
- 93.4% of the SPX closed up from the previous close; 73.2% closed higher than the open.
- Sectors stronger than the SPX for Monday:
- Basic Materials -- Outperformed the SPX by +46%.
- Energy -- Outperformed the SPX by +121%.
- Financials -- Outperformed the SPX by +22%.
- Sectors weaker than the SPX for Monday:
- Industrials -- Underperformed the SPX by -23%.
- Technology -- Underperformed the SPX by -11%.
- Consumer Staples -- Underperformed the SPX by -105%.
- Utilities -- Underperformed the SPX by -13%.
- Health Care -- Underperformed the SPX by -32%.
- Consumer Discretionary -- Underperformed the SPX by -9%.
- The $SOX index strength was weaker relative to the SPX Monday by -0.45%.
- The XLF outperformed the SPX by 0.22% Monday.
- The 2 Day RSI of the SPX is 91. The Dow RSI is 93, the NASDAQ is 86 and the Russell is 87.
- Over the last four sessions, the average session closed 57.59% of the range above the low. Monday closed at 89% of the daily range.
- Upside momentum increased Monday, from Friday’s -0.33 to today’s 0.28. The ratio of SPX components giving a crossover sell signal compared to buy signals decreased slightly to B 5.34 to 1.
- The ISEE Equity 10 day moving average Monday was 171.6. 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.
- 208 SPX components moved upward and 121 components downward during the after hours with 154 million shares traded.
Trade 'em well on Tuesday everyone!
-Mel
