Bear Disappointment as Bulls Continue to Rampage
by Jerome "Mel" Hickerson
Market Recap:
The bears were disappointed yet again this morning as better than expected PMI reports in China and Europe lifted stock futures in the U.S. ADP reported that private sector jobs rose by 170K jobs in January, which was below the consensus expectations for a gain of about 197K and below December's revised (lower) 292K.
Bear disappointment continued as the mid-week session opened with a gap higher. After a very brief pullback, ISM data seemed to fuel a further surge higher as the bulls took command. The high of the day was at 13:38 pm and the rest of the session was a gentle decline for the SPX while other indices continued to rise.
On our Market Leaders Board all of our leaders were strong today with the Russell 2000 small caps leading the charge and the Dow relatively weak.
SPX big winners were Whirlpool Corp (WHR) 12.38%, Marathon Petroleum Corp (MPC) 8.78%, and Broadcom Corp Cl A (BRCM) 7.83%. SPX big losers were Amazon.Com Inc (AMZN) -8.62%, C.H. Robinson Worldwide (CHRW) -7.48%, and Southwestern Energy Co (SWN) -2.32%.
SPX five day big winners are Netflix Inc (NFLX) 29.39%, J.C. Penney Company Inc (JCP) 20.54%, and Whirlpool Corp (WHR) 12.3%. SPX five day big losers are Sandisk Corp (SNDK) -11.2%, Frontier Communications Corp (FTR) -10.55%, and Chesapeake Energy Corp (CHK) -10.31%.
New Ten Day Highs: AET, AIG, AMT, AMGN, APC, AMAT, AIZ, AZO, AVB, BLL, BCR, BBT, BIIB, XL, HRB, BMC, BXP, BRCM, CA, CBS, CF, CME, CINF, COH, CTSH, CMCSA, CSC, STZ, COST, CVH, DHR, DVA, DELL, DNR, DTV, DOV, DOW, DNB, DD, EMN, EBAY, EMC, EQR, EXPE, FDO, FAST, FIS, FISV, FLS, FMC, BEN, GILD, GR, HRS, HAS, HCP, HCN, HPQ, HON, ITW, IBM, INTU, JNS, JNJ, LLL, LH, LUK, LTD, LMT, MMC, MA, MAT, MHS, PCS, MSFT, MON, MS, MYL, NTAP, NI, NU, NUE, PDCO, PKI, RL, PPG, PFG, PGR, PRU, PSA, QCOM, PWR, RSG, R, CRM, SCG, SEE, SPG, SLM, SNA, SO, LUV, STJ, HOT, SRCL, SYMC, TGT, TDC, TXT, TMO, TIF, TWC, TJX, TMK, UNP, UPS, X, UTX, QLD, MBI, VRSN, VMC, WMT, WM, WAT, WDC, WHR, AAPL, C, GS
New Ten Day Lows: COG, CHRW, XOM, HSY, KSS, NOV, NYX, PBCT, PFE, PCL, SNI, TROW, TLAB, VXX, DYN, AMZN
Volume & Breadth Indicators
For the SPX Index there were 389 components advancing and 77 components declining. On the NYSE 3,134 issues were traded with 2,524 advancing issues and 536 retreating issues, a ratio of 4.71 to one advancing. There were 302 new highs and 10 new lows. The five day moving average of New Highs is 214 while the five day moving average of New Lows is 9 and the ten day moving average of Net Advancing is 630. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 5.43 to one. The closing TRIN was 0.87 and the final tick was 412. The five day average of TRIN is 1.45 and the ten day average of TRIN is 1.2. The NYSE Composite Index gained 1.18% today while the SPX gained 0.88%.
For the NYSE, relative to the previous 30 session average, volume was 16.19% 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, 22 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 112.5% of the average daily volume for the last year. Volume was 116.9% of the last 10 day average and 112.8% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 223,000 and the average tick for the day was 144. There were 63 ticks greater than 600 and 1 ticks more extreme than -600. There were 8 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Looking at the one-minute tick data, there were 118 ticks greater than 500 and 20 ticks more extreme than -500. 70.6% one-minute ticks were positive. There were no ticks greater than 900 and no ticks more extreme than -900. The tick action suggests institutional accumulation.
The tick data today shows bears were simply destroyed as the bulls were in total command. These are unusual numbers.
The intraday volume pattern shows a volume spike in the early morning followed by decreasing volume. The Nightly Breadth Indicators have moved back to very overbought again.
Moving Average and Support/Resistance Indicators:
76.4% of the SPX are above their five day moving average, 73.2% are above their 10 day average, 79% are above their 20 day moving average, 86.8% are above their 50 day moving average, and 67.4% are above their 200 day moving average.
There were no significant moving average crossovers today. Our moving average Power Rating is 88 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Wednesday:
- Basic Materials -- Outperformed the SPX by +10%.
- Financials -- Outperformed the SPX by +70%.
- Industrials -- Outperformed the SPX by +29%.
- Technology -- Outperformed the SPX by +43%.
- Health Care -- Outperformed the SPX by +9%.
Sectors weaker than the SPX for Wednesday:
- Energy -- Underperformed the SPX by -31%.
- Consumer Staples -- Underperformed the SPX by -8%.
- Utilities -- Underperformed the SPX by -54%.
- Consumer Discretionary -- Underperformed the SPX by -55%.
In Late Trading:
219 SPX components moved upward and 133 components downward during the after hours with 120.9 million shares traded.
What We Learned from Wednesday's Action:
Wednesday was session 1 to close above the 5 DMA, session 1 to close above the 10 DMA, session 29 to close above the 20 DMA, and session 29 to close above the 50 DMA. This was also session 27 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 7.0 points above the 10 DMA.
The SPX 5 DMA is 1316.86, 10 DMA is 1317.09, 20 DMA is 1302.93, 50 DMA is 1259.95, 100 DMA is 1232.75, and 200 DMA is 1257.21.
On Wednesday the SPX traded above the opening range but did not trade below the opening range. 80.2% of the SPX closed up from the previous close; 60.4% closed higher than the open. During Wednesday's session the SPX gained 11.63 points from open to close. The SPX intraday trading range was 9.58 points. The 5-Day average intraday trading range is 13.2 points, the 10-Day average is 12.11 points, and the 20-Day average is 11.6 points. The trading range is expanding.
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 Thursday is -3. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be higher. Mel's 10 Day Oscillator is 63 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bearish for Thursday's session.
Today's ramp higher wasn't totally unexpected (see last night's report.) But the strength of today's rally was somewhat surprising. We confess to being a bit confused and discouraged by the never-ending ramp of the market. Like a marathon runner or mountain climber, the market needs to breathe. This market is not breathing; it is simply inhaling. But often momentum on the way up meets its evil twin on the way down.
As we have mentioned many times, a topping process is a process, not a point in time, unlike a bottom which is often characterized by an intraday reversal. Until the "all-news-is-good-news" cycle changes, this market sees no reason to pullback. This is certain to eventually occur.
Thursday, February 2
Economics
07:30 Challenger Job Cuts
08:00 RBC Consumer Outlook Index
08:30 Nonfarm Productivity – consensus 0.8%
08:30 Unit Labor Costs – 1.0%
08:30 Initial Jobless Claims – consensus 370K
08:30 Continuing Claims – consensus 3535K
3:00 Fed Chairman Bernanke testifies before House Budget Committee
07:00 CHF Trade Balance
10:00 EUR Euro-Zone PPI
5:00 France to sell 4.25% 2018 bonds
Earnings
Before: ACM, AGN, ADS, ATK, AZN, BZH, BHE, BX, BSX, BCO, CAM, CSL, CI, CME, CUB, CMI, DB, DO, DHX, DOW, EXP, RDEN, EVR, GR, IP, IVC, K, KELYA, KEM, KNSY, LSTR, LEA, LII, MHO, MA, MMS, MDC, MD, MRK, MTOR, MSCI, MWIV, NOV, NCI, NYT, NUS, ODFL, ONNN, PTEN, PENN, PHM, ROLL, RSTI, ROP, RCL, RGLD, R, SBH, SLE, SNA, SNE, HOT, SPH, SX,C, TE TEN, TDW, TRCR, USG, VIAB, WBC, WEC, XEL
After: APKT, AATI, ALKS, NLY, BEBE, BKXH, WIFI, BRS, CLMS, CPT, CATM, CFN, CAVM, CBG, CHEF, COGO, COLM, CNW, CTCT, CYMI, DRIV, EW, EXAM, EXTR, FISV, GCAP, GNW, GILD, HAYN, INFN, IN, IRF, XXIA, KEX, MXL, MCHP, MAA, MTX, MTSC, MFLX, NFG, N, NSR, EGOV, NOA, NVLS, OPLK, PACB, PCCC, PKI, POWI, PWER, PFG, RDK, SIGI, SIMG, SIMO, SSD, SMT, SRCL, SUN, TTWO, TSYS, THQI, TRMB, UTI, VRTX, ZOLT
The ADP employment index showed a gain of 170,000 jobs, a bit less than the expected 172,000. The ISM manufacturing survey came in at 54.1, less than the consensus 54.6. On Thursday we will get chain store sales and jobless claims.
Personal Note: We were more than frustrated today, and not simply with the market. As you may have read, cancer drugs are in short supply nationwide and we had a life-extending drug treatment cancelled for tomorrow due to a drug being unavailable. So to say that we are a bit distraught tonight would not do justice to how we feel.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel
