Bad Jobs Report Shakes Trader Confidence
Market Recap:
Obviously, Friday morning’s open was dominated by the dismal jobs report. Traders were optimistic after Thursday’s economic data pointed to higher non-farm payroll numbers. But the real issue with Friday’s data is that it fell into the middle of “not bad enough for QE” and “too poor for economic recovery.” So traders were predictably unhappy and the market quickly showed that unhappiness.
Friday’s session began with a large gap lower and the SPX continued to work lower throughout the session until mid afternoon. The low of the day was at 2:21 pm before the SPX bounced a bit less than seven points over the last ninety minutes of the trading session.
Our Market Leaders Board shows that the Sox and Technology got the worst of Friday’s drubbing while the Financials got off the easiest.
SPX big winners were Alexander & Baldwin Inc (ALEX) 8.47%, R.R. Donnelley & Sons Company (RRD) 5.9%, and WPX Energy Inc (WPX) 2.37%. SPX big losers were Teradata Corporation (TDC) -11.37%, Citrix Systems Inc (CTXS) -7.81%, and F5 Networks Inc (FFIV) -7.15%.
SPX five day big winners are Constellation Brands Inc (STZ) 30.79%, Alexander & Baldwin Inc (ALEX) 29.28%, and Netflix Inc (NFLX) 21.57%. SPX five day big losers are Wellpoint Inc (WLP) -9.09%, Mead Johnson Nutrition Company (MJN) -6.57%, and UnitedHealth Group Inc. (UNH) -6.34%.
New Ten Day Highs: AVB, RRD, FTR, GR, DHI, KMB, KIM, KSS, LEN, LO, MA, NSM, NSC, PBCT, PM, SHLD, SLM, SRCL, TLAB, KBH, WMT
New Ten Day Lows: AET, ADM, ADSK, BMS, BMC, CTXS, CVH, EBAY, HUM, JPM, KLAC, LIFE, NTAP, TDC, TSN, WLP
Market Recap – Weekly Review:
The SPX lost -7.49 points during the week (-.55%). The range for the week was 26.78, 1.97%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 63. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was 478,000. On the NYSE, the advance/decline line increased during the week by 3,891 and the 10 day average of Net Advancing increased by 202. There were 1244 New Highs and 35 New Lows. The week closed at 24.79% of the weekly range.
For the week, Russell 2000 advancing issues (1,227) totaled 20,882,523 shares traded (17,019 average per stock) and declining issues (718) totaled 9,356,922 shares traded (13,032 average per stock.) 1,200 components are on a weekly uptrend (127 new uptrends this week) and 751 components are on a weekly downtrend (62 new downtrends this week.) There were 277 New Highs and 6 New Lows.
For the week, SPX advancing issues (191) totaled 27,279,405 shares traded (142,824 average per stock) and declining issues (304) totaled 51,603,288 shares traded (169,748 average per stock.) 245 components are on a weekly uptrend (19 new uptrends this week) and 252 components are on a weekly downtrend (23 new downtrends this week.) There were 74 New Highs and New Lows.
For the week, NASDAQ Composite Index advancing issues (710) totaled 29,525,220 shares traded (41,585 average per stock) and declining issues (1,766) totaled 26,425,284 shares traded (14,963 average per stock.) There were 56 New Highs and 29 New Lows.
Checking the sectors of the SPX for the week:
The Basic Materials sector advancing issues (11) totaled 1,850,654 shares traded (168,241 average per stock) and declining issues (19) totaled 1,877,935 shares traded (98,839 average per stock.) 12 components are on a weekly uptrend (no new uptrends this week) and 18 components are on a weekly downtrend (3 new downtrends this week.) There were 2 New Highs and no New Lows.
The Energy sector advancing issues (22) totaled 3,726,764 shares traded (169,398 average per stock) and declining issues (22) totaled 3,970,871 shares traded (180,494 average per stock.) 14 components are on a weekly uptrend (5 new uptrends this week) and 29 components are on a weekly downtrend (1 new downtrends this week.) There were 1 New Highs and no New Lows.
The Financials sector advancing issues (31) totaled 2,048,409 shares traded (66,078 average per stock) and declining issues (50) totaled 13,992,067 shares traded (279,841 average per stock.) 41 components are on a weekly uptrend (2 new uptrends this week) and 40 components are on a weekly downtrend (4 new downtrends this week.) There were 11 New Highs and no New Lows.
The Industrials sector advancing issues (17) totaled 1,377,257 shares traded (81,015 average per stock) and declining issues (44) totaled 4,603,666 shares traded (104,629 average per stock.) 26 components are on a weekly uptrend (no new uptrends this week) and 35 components are on a weekly downtrend (no new downtrends this week.) There were 4 New Highs and no New Lows.
The four 'risk sectors' totaled 81 advancing issues and 135 declining issues this week with 7 new uptrends and 8 new downtrends.
The Technology sector advancing issues (19) totaled 6,581,586 shares traded (346,399 average per stock) and declining issues (59) totaled 13,044,217 shares traded (221,088 average per stock.) 23 components are on a weekly uptrend (3 new uptrends this week) and 55 components are on a weekly downtrend (8 new downtrends this week.) There were 8 New Highs and no New Lows.
The Consumer Staples sector advancing issues (19) totaled 3,318,426 shares traded (174,654 average per stock) and declining issues (21) totaled 2,016,573 shares traded (96,027 average per stock.) 28 components are on a weekly uptrend (1 new uptrends this week) and 12 components are on a weekly downtrend (2 new downtrends this week.) There were 16 New Highs and no New Lows.
The Utilities sector advancing issues (13) totaled 883,865 shares traded (67,990 average per stock) and declining issues (17) totaled 1,057,391 shares traded (62,199 average per stock.) 30 components are on a weekly uptrend (no new uptrends this week) and 1 components are on a weekly downtrend (no new downtrends this week.) There were 11 New Highs and no New Lows.
The Health Care sector advancing issues (13) totaled 1,668,357 shares traded (128,335 average per stock) and declining issues (39) totaled 4,606,663 shares traded (118,120 average per stock.) 31 components are on a weekly uptrend (no new uptrends this week) and 21 components are on a weekly downtrend (4 new downtrends this week.) There were 13 New Highs and no New Lows.
The Consumer Discretionary sector advancing issues (46) totaled 5,824,087 shares traded (126,611 average per stock) and declining issues (33) totaled 6,433,905 shares traded (194,967 average per stock.) 40 components are on a weekly uptrend (8 new uptrends this week) and 41 components are on a weekly downtrend (1 new downtrends this week.) There were 8 New Highs and no New Lows.
Volume & Breadth Indicators
For the SPX Index there were 81 components advancing and 409 components declining. On the NYSE 3,144 issues were traded with 987 advancing issues and 2,033 retreating issues, a ratio of 2.06 to one declining. There were 167 new highs and 7 new lows. The five day moving average of New Highs is 249 while the five day moving average of New Lows is 7 and the ten day moving average of Net Advancing is 636. The Net Advancing data indicates a bullish trend.
Declining volume was higher at a ratio of 4.3 to one. The closing TRIN was 2.24 and the final tick was -400. The five day average of TRIN is 1.52 and the ten day average of TRIN is 1.4. The NYSE Composite Index lost -1.04% today while the SPX lost -0.95%.
For the NYSE, relative to the previous 30 session average, volume was -29.09% below the average. Of the last 15 sessions 5 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 18 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 76.% of the average daily volume for the last year. Volume was 86.9% of the last 10 day average and 97% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 42,000 and the average tick for the day was 27. There were 22 ticks greater than 600 and 14 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Moving Average and Support/Resistance Indicators:
33.6% of the SPX are above their five day moving average, 76.4% are above their 10 day average, 74.8% are above their 20 day moving average, 57% are above their 50 day moving average, and 55.6% are above their 200 day moving average.
There were no significant moving average crossovers Friday. Our moving average Power Rating is 45 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Financials -- Outperformed the SPX by +21%.
- Consumer Staples -- Outperformed the SPX by +79%.
- Utilities -- Outperformed the SPX by +71%.
- Health Care -- Outperformed the SPX by +28%.
- Consumer Discretionary -- Outperformed the SPX by +49%.
Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -24%.
- Energy -- Underperformed the SPX by -22%.
- Industrials -- Underperformed the SPX by -40%.
- Technology -- Underperformed the SPX by -65%.
Checking the sectors of the SPX after Friday: (The sector Buy and Sell signals come from a mechanical trend trading system; there will be some whipsaw but the signal will never be on the wrong side for long.)
The Basic Materials sector advancing issues (1) totaled 8,867 shares traded (8,867 average per stock) and declining issues (29) totaled 996,032 shares traded (34,346 average per stock.) 21 components are on an uptrend (no new uptrends Friday) and 9 components are on a downtrend (4 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 2.06% above the 20-Day average.
The Energy sector advancing issues (5) totaled 363,165 shares traded (72,633 average per stock) and declining issues (38) totaled 1,567,105 shares traded (41,240 average per stock.) 37 components are on an uptrend (no new uptrends Friday) and 7 components are on a downtrend (7 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 3.03% above the 20-Day average.
The Financials sector advancing issues (17) totaled 346,669 shares traded (20,392 average per stock) and declining issues (63) totaled 3,688,798 shares traded (58,552 average per stock.) 67 components are on an uptrend (no new uptrends Friday) and 14 components are on a downtrend (9 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 2.44% above the 20-Day average.
The Industrials sector advancing issues (5) totaled 163,512 shares traded (32,702 average per stock) and declining issues (56) totaled 1,446,366 shares traded (25,828 average per stock.) 39 components are on an uptrend (no new uptrends Friday) and 22 components are on a downtrend (18 new downtrends Friday.) There were 1 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.59% above the 20-Day average.
The four 'risk sectors' totaled 28 advancing issues and 186 declining issues Friday with 0 new uptrends and 38 new downtrends. 75.9% of Risk Sector components are uptrending.
The Technology sector advancing issues (1) totaled 37,325 shares traded (37,325 average per stock) and declining issues (76) totaled 5,583,386 shares traded (73,466 average per stock.) 35 components are on an uptrend (no new uptrends Friday) and 43 components are on a downtrend (39 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.59% above the 20-Day average.
The Consumer Staples sector advancing issues (11) totaled 405,770 shares traded (36,888 average per stock) and declining issues (29) totaled 992,663 shares traded (34,230 average per stock.) 29 components are on an uptrend (no new uptrends Friday) and 11 components are on a downtrend (5 new downtrends Friday.) There were 2 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.73% above the 20-Day average.
The Utilities sector advancing issues (16) totaled 263,056 shares traded (16,441 average per stock) and declining issues (15) totaled 217,405 shares traded (14,494 average per stock.) 21 components are on an uptrend (1 new uptrends Friday) and 10 components are on a downtrend (4 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .7% above the 20-Day average.
The Health Care sector advancing issues (4) totaled 69,555 shares traded (17,389 average per stock) and declining issues (47) totaled 1,191,011 shares traded (25,341 average per stock.) 31 components are on an uptrend (no new uptrends Friday) and 20 components are on a downtrend (13 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.86% above the 20-Day average.
The Consumer Discretionary sector advancing issues (21) totaled 896,201 shares traded (42,676 average per stock) and declining issues (56) totaled 1,827,178 shares traded (32,628 average per stock.) 60 components are on an uptrend (2 new uptrends Friday) and 21 components are on a downtrend (7 new downtrends Friday.) There were 2 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.04% above the 20-Day average.
Based on the SPX sector data, we are on a Buy for the SPX and the Russell 2000.
What We Learned from Friday's Action:
Friday was session 1 to close below the 5 DMA, session 5 to close above the 10 DMA, session 8 to close above the 20 DMA, and session 5 to close above the 50 DMA. This was also session 18 for the 5 DMA to close above 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 9.32 points above the 10 DMA.
The SPX 5 DMA is 1364.79, 10 DMA is 1345.36, 20 DMA is 1339.16, 50 DMA is 1339.52, 100 DMA is 1360.34, and 200 DMA is 1302.79.
On Friday the SPX traded below the opening range but did not trade above the opening range. 19.8% of the SPX closed up from the previous close; 52.2% closed higher than the open. During Friday's session the SPX lost -12.41 points from open to close. The SPX intraday trading range was 8.63 points. The 5-Day average intraday trading range is 10.65 points, the 10-Day average is 11.49 points, and the 20-Day average is 14.78 points. The trading range is contracting. The 5-Day SPX gain is 1.93%, the 10-Day gain is 2.20%, and the 15-Day gain is 1.92%.
Note: The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be in charge for the day. If we break out of that trading range, it's telling us that new buying or selling is impacting traders' assessments of value. Looking back at today’s breakouts also helps us grasp sentiment going forward because when a clear trend is established it often carries through for several sessions.
Looking Ahead:
The Market Environment for Monday is zero. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be lower. Mel's 5-Day Oscillator is 60 and Mel's 10-Day Oscillator is 49 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are neutral on Monday's bias.
There were low expectations for Friday’s non-farm payroll number and the data failed to meet even those low expectations. We hear chatter that the low expectations coming into this earnings season may allow for surprises to the upside. Maybe. But often low expectations aren’t low enough. The summer earnings season often results in a market decline.
There is much here to support either the bullish or bearish case. On balance, it might seem that the bulls have a slight advantage. New Highs on the NYSE are surging and this is often a confirmation that higher highs are soon to be seen.
One thing we track is the Russell 2000 5-day average versus a Pivot. When the Russell moves above the Pivot area it is most often bullish and currently the Russell is moving above the Pivot.
But the bears also have some technicals going their way. The advancing volume ratio is slipping. This suggests that traders are becoming reluctant to chase the rising issues higher and are beginning to focus on buying the declining stocks. When this happens, rallies tend to lose momentum, form a rounded top, and often eventually decline.
After Friday’s action, most of our SPX sectors are showing short-term bearish candle chart patterns. Whether this continues early in the week is always problematical but the chart patterns are suggesting that it very well could continue.
Looking at the overall technical backdrop, we find that moving averages are converging into a narrow zone. Convergences often happen at market turning points and often lead to range bound trading. A confluence of support can be found around 1335-1340 but a sustained break down through 1335 would likely spell further trouble for the SPX.
For the upcoming week, earnings season kicks off with Alcoa on Monday. The rest of the week includes JPMorgan, Wells Fargo, and Google.
SPX levels to watch include 1348; a close above is bullish and a close below is bearish. For the Russell 2000, keep an eye on the 789 level.
Week of July 09 - July 13 Overview
Date/Time Release/Consensus
07/09/12 15:00 Consumer Credit/$9.5B
07/11/12 7:00 MBA Mortgage Index/NA
07/11/12 8:30 Trade Balance/-$48.9B
07/11/12 10:00 Wholesale Inventories/0.003
07/11/12 10:30 Crude Inventories/NA
07/11/12 14:00 FOMC Minutes/
07/12/12 8:30 Initial Claims/375K
07/12/12 8:30 Continuing Claims/3300K
07/12/12 8:30 Export Prices ex-ag./NA
07/12/12 8:30 Import Prices ex-oil/NA
07/12/12 14:00 Treasury Budget/NA
07/13/12 8:30 PPI/-0.006
07/13/12 8:30 Core PPI/0.002
07/13/12 9:55 Mich Sentiment/73.5
Monday, July 9
Economics
3:00 Consumer Credit, est. $8.00B, prior $6.52B
1:30 CNY Consumer Price Index, est. 2.3%, prior 3.0%
5:45 CHF Unemployment Rate, est. 2.9%, prior 3.0%
6:00 EUR German Trade Balance (euros), est. 14.0 B, prior 14.4 B
Earnings
Before:
No major earnings reported.
After:
Alcoa (AA) EPS 6c, revs $5.84 B
The non farm payrolls rose 80,000, well below the consensus of 90,000. The unemployment rate stayed at 8.2% which was expected. On Monday there are no significant releases.
Thank you for reading. Think on it, trade on it, and be well.
-Mel