August Lows Tested and Violated
Market Recap:
Greece admitted it won't meet its budget deficit targets for 2011 and possibly 2012. The austerity measures implemented have also reduced tax revenue as the country's GDP is expected to fall -5.5% this year. The Eurozone PMI stayed below 50. However, China reported that their composite PMI showed growth for the 31st straight month. All foreign markets were down hard as our open approached.
The week began with a small gap lower but traders seemed pleased with the ISM data at 10:00 am before quickly putting the high of the day on the chart and resuming downward pressure. Bounces were feeble as support failed to hold and the SPX closed at the lows of the day.
Looking at our Market Leaders board, our leaders were just plain thrashed today, with the Russell 2000 and the Financials bearing the brunt of the assault.
SPX big winners were Yahoo! Inc (YHOO) 2.63%, The Lorillard Group (LO) 2.03%, and Campbell Soup Co (CPB) .9%. SPX big losers were Micron Technology Inc (MU) -14.31%, Tenet Healthcare Corp (THC) -12.87%, and Ak Steel Holding Corp (AKS) -11.9%.
SPX five day big winners are Sears Holding Corp (SHLD) 6.08%, Aflac Inc (AFL) 3.04%, and The Lorillard Group (LO) 2.93%. SPX five day big losers are Micron Technology Inc (MU) -34.19%, Advanced Micro Devices (AMD) -29.22%, and Alpha Natural Resources (ANR) -25.15%.
New Ten Day Highs: BMY, CPB, LO, VXX, SH
New Ten Day Lows: MMM, ANF, ADBE, AMD, AES, AET, URBN, A, APD, ARG, AKS, AKAM, AA, ATI, ALTR, AEE, AXP, AIG, AMP, ABC, APH, APC, ADI, APA, AIV, APOL, AMAT, ADM, ADSK, ADP, AN, AVB, AVY, AVP, BHI, BLL, BAC, BCR, BDX, BBBY, BMS, BBY, BIIB, XL, BMC, BXP, BSX, BRCM, CA, COG, CAM, COF, CAH, CCL, CAT, CBS, CTL, CF, CHK, CME, XEL, CI, CINF, CTAS, CMS, KO, CCE, CMCSA, CPWR, COP, CNX, CEG, SAI, GLW, COST, CMI, CVS, DHR, DRI, DE, DNR, XRAY, DVN, DO, DFS, RRD, DOV, DOW, DNB, DD, ROST, ETFC, EBAY, ECL, ERTS, EMR, ESV, EOG, EQT, EQR, EL, EXC, EXPE, EXPD, ESRX, FAST, FIS, FHN, FSLR, FE, FLIR, FLS, FLR, FMC, FTI, FRX, FO, BEN, FCX, FTR, GE, GWW, HAL, HAR, HRS, HIG, HAS, HCP, HCN, HES, HD, DHI, HST, HCBK, HUM, ITW, TEG, INTC, IPG, IP, ISRG, IVZ, IRM, JEC, JNS, JDSU, JCI, JNPR, CLF, KIM, LH, LM, LEG, LEN, LUK, LXK, LTD, LNC, LLTC, L, LSI, MRO, MAR, MMC, MA, MAT, MJN, MHP, MCK, MWV, MHS, MDT, WFR, PCS, MCHP, MU, MSFT, MOLX, TAP, MON, MWW, MCO, MS, MUR, MYL, NBR, NDAQ, NTAP, NWL, NWSA, NBL, NU, NVLS, NVDA, NYX, ORLY, OXY, ODP, OI, PCAR, PLL, BTU, PBCT, PKI, PCG, PM, PNW, PXD, PCL, RL, PPL, PX, PCP, PFG, PLD, PEG, PSA, PHM, QLGC, QCOM, PWR, DGX, STR, RSH, RRC, RF, RDC, R, CRM, SNDK, SLE, CVG, SLB, SNI, SEE, SPG, SLM, SNA, LUV, SWN, S, STJ, SPLS, SBUX, HOT, STT, SYK, SUN, SVU, SYMC, TROW, TGT, TE, TLAB, THC, TER, TSO, BK, TIF, TIE, TJX, TSS, X, UNH, DRYS, QLD, JASO, AEM, DYN, KBH, MBI, UNM, VLO, VTR, VIA/B, VNO, VMC, DIS, WAT, WPI, WLP, WDC, WU, WY, AMZN, AAPL, C, GS, GOOG, ICE
Volume & Breadth Indicators
For the SPX Index there were 14 components advancing and 463 components declining. On the NYSE 3,129 issues were traded with 283 advancing issues and 2,811 retreating issues, a ratio of 9.93 to one declining. There were 15 new highs and 837 new lows. The five day moving average of New Highs is 17 while the five day moving average of New Lows is 277 and the ten day moving average of Net Advancing is -629. The Net Advancing data indicates a bearish trend.
Declining volume was higher at a ratio of 31.72 to one. The closing TRIN was 3.01 and the final tick was -303. The five day average of TRIN is 2.98 and the ten day average of TRIN is 2.34. The NYSE Composite Index lost -3.25% today while the SPX lost -2.93%.
For the NYSE, relative to the previous 30 session average, volume was 20.91% above the average. Of the last 15 sessions 7 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 19 sessions ended on a positive tick, 4 of last 10. For the SPX, the day's volume was 147.% of the average daily volume for the last year. Volume was 123.8% of the last 10 day average and 129.9% of the previous day’s volume.
Total tick for the day was -320,000 and the average tick for the day was -207. There were 95 ticks greater than 600 and 355 ticks more extreme than -600. There were 17 ticks greater than 1000 and 62 ticks more extreme than -1000. The tick action suggests institutional distribution.
Our tick chart for Monday shows just how ugly today’s session was. Seeing numbers in the teens is rare and can reflect panic selling suggesting a possible bottom.
Moving Average and Support/Resistance Indicators:
0.8% of the SPX are above their five day moving average, 1.6% are above their 10 day average, 2.4% are above their 20 day moving average, 5.2% are above their 50 day moving average, and 7.2% are above their 200 day moving average.
We had two significant moving average crossovers Monday as the Russell Technology Index 5 DMA crossed below the 20 DMA and the SOX 20 DMA crossed above the 50 DMA. Our moving average Power Rating is 6 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Monday:
- Basic Materials -- Outperformed the SPX by +29%.
- Technology -- Outperformed the SPX by +68%.
- Consumer Staples -- Outperformed the SPX by +161%.
- Utilities -- Outperformed the SPX by +63%.
- Consumer Discretionary -- Outperformed the SPX by +20%.
Sectors weaker than the SPX for Monday:
- Energy -- Underperformed the SPX by -49%.
- Financials -- Underperformed the SPX by -158%.
- Industrials -- Underperformed the SPX by -2%.
- Health Care -- Underperformed the SPX by -22%.
In Late Trading:
61 SPX components moved upward and 364 components downward during the after hours with 188 million shares traded.
What We Learned from Monday's Action:
Monday was session 2 to close below the 5 DMA, session 9 to close below the 10 DMA, session 9 to close below the 20 DMA, and session 48 to close below the 50 DMA. This was also session 8 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 52.35 points below the 10 DMA.
The SPX 5 DMA is 1143.49, 10 DMA is 1151.54, 20 DMA is 1168.62, 50 DMA is 1191.6, 100 DMA is 1251.55, and 200 DMA is 1279.4.
Looking Ahead:
This is a rather difficult point to make a call for the market direction. The August lows are being tested, with some major indices having violated those lows.
But we're going to say that the data suggests an interim bottom forming. The last time we had this many ticks more negative than -1000 was August 5th. This suggests that capitulation is in progress.
Today marks only the fourth time the SPX has lost 2% on the final day of a month only to also lose 2% on the first of the new month. The other three occasions each gained more than 10% during the following month.
Tuesday, October 4
Economics
10:00 Factory Orders – consensus 0.1%
10:00 Fed Chairman Bernanke to Testify Before JEC
03:30 AUD Reserve Bank of Australia Rate Decision
08:30 GBP PMI – Construction
09:00 EUR Eurozone PPI
Earnings
Before:
After: GPN, LNDC, RECN, LEDS, YUM
One important event is Federal Reserve Chairman Ben Bernanke's testimony to the U.S. Congress Joint Economic Committee.
Thank you for reading. Think on it, trade on it, and be well.
-Mel