Back and Forth between 1131 and 1150
by Jerome "Mel" Hickerson
Market Recap:
Futures in the U.S. were modestly higher despite a rather sour day in Asia and ongoing worries in Europe regarding the cost of bailing out Anglo Irish Bank as well as expectations for an imminent downgrade of Spain. On the economic front, we got the Case-Shiller Home Price Index at 9:00 am eastern and then the Richmond Fed and Consumer Confidence numbers at 10:00 am.
Once again, today's session opened without a significant gap. But bears had their mojo face on early and took the SPX down hard putting the low of the day on the chart at 10:02 am. But then the Fed POMO wiped that mojo right off the bears faces as the money started flowing right into the equities and the bears lost their mojo quickly as the bulls ramped things sharply higher for most of the rest of the day, closing just off the highs as the index once again reached 1150 and backed off.
One thing is clear about this market: The Fed POMO money flows straight into it and manipulates the market almost instantly higher. It is useless and senseless to complain about the manipulation but it can be profitable to recognize it for what it is and try to play along with it.
I frequently hear from traders that the momentum is upward. Maybe so, maybe not. Seven sessions ago we closed just under 1143. Today's close was less than five points above that. That strikes us as waning momentum. The repeated knocks on the ceiling at 1150 is equaled only by the repeated trips down to the 1131 area; one or the other will give, and probably quite soon.
Looking at the Market Leaders board, we find almost everything higher today, as we'd expect. Only China is down as a result of following the Street's down performance from yesterday. Emerging Markets once again reached a new 52 week high but the XLF continues to struggle as it remains in "Correction" territory.
Market Trend: Nine Sectors Report
Turning to the Nine Sectors Report, we find a couple of changes tonight, one positive and one negative for a net wash. Therefore we're keeping the Sell signal yet again.
This is a real struggle here and reminiscent of last March when the indices just kept creeping higher at quarter end leading up into earnings season. But there are real differences internally between now and the end of March, primarily within the action of the financials. The month of March through mid-April the XLF was steadily climbing higher; that is not true during this rally. The other thing that catches our eye is the ten day average of Net Advancing on the NYSE. Market breadth is waning here and that is often a warning signal that traders are getting wary of being caught long.
Volume & Breadth Indicators
For the SPX Index there were 390 Advancers/96 Decliners. On the NYSE 3,138 issues were traded with 2,140 advancing issues and 901 retreating issues, a ratio of 2.38 to one advancing. There were 171 new highs and 14 new lows. The five day moving average of New Highs is 188 while the five day moving average of New Lows is 12 and the ten day moving average of Net Advancing is 212. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 3.38 to one. The closing TRIN was 0.7 and the final tick was 576. The NYSE Composite Index gained 0.65% today.
For the NYSE, relative to the previous 30 session average, volume was 1.29% above the average. Of the last 15 sessions 4 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, 5 of last 10. For the SPX, the day's volume was 85.8% of the average daily volume for the last year. Volume was 102.4% of the last 10 day average and 117.8% of the previous day’s volume.
Breadth turned higher with today’s rally and the broad NYSE Composite Index outperformed the SPX. But New Highs were the lowest in three days while New Lows were also highest in three days. The final tick was strong, so on balance, these stats lean to the bullish side.
Further, total tick for the day was 235,000 and the average tick for the day was 152. There were 209 ticks greater than 600 and 59 ticks more extreme than -600. There were 15 ticks greater than 1000 and 4 ticks more extreme than -1000. The tick action suggests institutional accumulation.
The tick data looks lopsided but consider that just about half of the negative 600 ticks came before 10:00 am and the rest of the session was even more lopsided than it appears; from 10:00 until 2:20, this day was ruled by bulls. The bears had a brief 40 minutes before 3:00 but then the bulls regained control. Looking at the nightly indicators, these things are mostly bouncing back and forth nightly as we trade within the 1131 to 1150 range. But as long as the McClellan Summation Index keeps climbing, the bulls appear to control the tape.
Moving Average Indicators:
63.40% of the SPX components are giving a crossover Buy signal; 6.60% of the SPX components are giving a Sell signal. This is a 9.6 to 1 ratio of Buy signals over Sell signals.
85% of the SPX are above their five day moving average, 79.2% are above their 10 day average, 85.8% are above their 20 day moving average, 83.2% are above their 50 day moving average, 73.6% are above their 100 day moving average, and 64.2% are above their 150 day moving average.
This may prove meaningless if it reverses quickly but notice tonight that we have a splash of red appearing on the left side of the chart; one of the short-term averages has crossed below. We see that the XLF 5 DMA has moved below the 20 DMA; this is how a pullback will begin. Not always with the XLF, of course, but with one of the averages crossing below and then others follow. We may see this 5 DMA quickly move back over the 20 DMA within the next day or two but it warrants keeping a close eye on it.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Energy -- Outperformed the SPX by +16%.
- Industrials -- Outperformed the SPX by +7%.
- Consumer Staples -- Outperformed the SPX by +17%.
- Health Care -- Outperformed the SPX by +35%.
- Consumer Discretionary -- Outperformed the SPX by +30%.
Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -47%.
- Financials -- Underperformed the SPX by -37%.
- Technology -- Underperformed the SPX by -34%.
- Utilities -- Underperformed the SPX by -25%.
Stocks on the Move:
Today's SPX component winners and losers:
- Largest one day loser is MON with -8.30%
- Largest three day loser is MON with -9.36%
- Largest five day loser is ADBE with -20.41%
- Largest ten day loser is ADBE with -19.06%
- Largest one day winner is WAG with 11.40%
- Largest three day winner is WAG with 14.57%
- Largest five day winner is WAG with 13.80%
- Largest ten day winner is KLAC with 17.18%
In Late Trading:
182 SPX components moved upward and 114 components downward during the after hours with 81 million shares traded.
Wednesday, September 29
Economics
10:30 Crude Inventories
Australian Conference Board Leading Index 0.1% cons.
UK Mortgage Approvals 48.7k cons.
UK Net Lending 0.1b cons.
Euro-Zone Consumer Confidence 0.61 cons.
Swiss Leading Indicator 2.18 cons.
Japan Industrial Production
Japan Retail Trade 3.9%cons.
Earnings
Before: ATU, AM, FDO
After: OMN, SNX, XRTX
Auction
01:007yr Note Auction
Speeches
12:30Charles Plosser
The government's weekly oil inventory report is due after the start of trading.
Have a great Wednesday!
-Mel
