Bears Come Roaring Back
by Jerome "Mel" Hickerson
Before Friday’s open, attention shifted back to Europeas Hungarywas talking about it becoming the next Greeceand France's Prime Minister said that another 20% decline in the Euro against the greenback would be a good thing. It was a huge disappointment when the Labor Department reported that Nonfarm Payrolls grew in the month of May by 431,000. This total was well below the consensus estimates of 536,000 jobs. Census hiring was responsible for 411K new jobs during the month. The private sector showed gains of just 41,000 jobs, which was well below the estimates for 180,000. Given all the hype for a big positive surprise, this was a very disappointing report and futures sold off hard on the news.
At the open, the sell-off continued. The SPX gapped down more than 15 points, weakly mounted a few point bounce, and then continued downward with few and weak bounce attempts the rest of the session. Technical damage to the indices was heavy.
The pirates have once again escaped from the brig and while the Union Jack still flies, we are near to bringing back the Jolly Roger.
We dropped from the 1103 line in the sand to below the 1070 demarcation in one session. The next level that has my focus is 1055. Aclose below that level would almost certainly force a bearish viewpoint going forward.
Monday will be a crucial day for the indices. Nonfarm payroll data induced gaps are among the most reliable gaps to fade; they rarely fail to fill quickly. But Friday’s NFP gap down was the largest gap in my database going back to 1950. The uniqueness of the size of the gap as well as the daylong follow-through downward suggests to me that this market wants to sell.
One thing I have observed over the years: When a market wants to sell, the news is used as an excuse. If the market doesn’t want to sell, the news is shrugged off and ignored. Many indicators suggest an early week bounce; instinct and experience tell me that this bounce is an opportunity to sell rather than a buying opportunity.
Reviewing the holiday-shortened week brings a few highlights:
- The high of the week was a few points higher than the previous week and the low of the week was 20 points higher.
- The total tick for the week was positive (barely.)
- The net SPX loss for the week was more than 24 points.
- Average daily volume for the week was the lowest in eight weeks.
Day Trade Systems Update: (Signals today)
* GDX at: 10:17
* SSO at: 11:34
* GDX at: 11:49
* SSO at: 12:12
* GDX Short at: 12:40
* GDX at: 1:29
Friday was another good day for our trade systems. We once again focused on Market Vectors Gold Miner (GDX) and Proshares Trust Ultra S&P (SSO). We were long more often than short but we were successful because we took small gains and jumped aside before getting steamrolled.
SPX Summary for Friday, June 04, 2010
4 Advancers/490 Decliners
65 Advancers/429 Decliners for the week
Today's SPX component winners and losers:
- Largest one day loser is TLAB with -11.20%
- Largest three day loser is TLAB with -15.19%
- Largest five day loser is TLAB with -23.21%
- Largest ten day loser is TLAB with -16.28%
- Largest one day winner is ESV with 0.92%
- Largest three day winner is SWN with 13.30%
- Largest five day winner is SWN with 11.24%
- Largest ten day winner is NTAP with 16.25%
*** SPX Technical Summary ***
The lowest 14 day RSI component is LEN; the highest 14 day RSI component is BDK. The average 14 day RSI of all 500 components is 39.
The greatest positive five day momentum component is SWN; the greatest negative five day momentum component is TLAB. The average five day momentum of all 500 components is -4.27.
8.60% of the SPX components are giving a crossover Buy signal; 39.40% of the SPX components are giving a Sell signal. This is a 4.6 to 1 ratio of Sell signals over Buy signals.
SPX component signal changes today (evidence of trend):
- From Sell to Neutral: 2 components.
- From Buy to Neutral: 0 components.
- From Neutral to Sell: 118 components.
- From Neutral to Buy: 12 components.
Once again, we are seeing movement to the Sell side.
The moving averages:
Close 1064.88
9 EMA 1094.97 Falling
5 DMA 1085.24 Falling
10 DMA 1083.26 Falling
20 DMA 1108.40 Falling
50 DMA 1156.59 Falling
100 DMA 1136.80 Falling
200 DMA 1106.61 Rising
10 Wk MA 1145.97 Falling
NYSE Summary
On the NYSE 3214 issues were traded with 315 advancing issues and 2839 retreating issues, a ratio of 9.01 to 1 declining. There were 17 new highs and 40 new lows.
Declining volume was higher at a ratio of 119.16 to 1. The closing TRIN was 13.22 and the final tick was -679.
It is rare to see such negative volume and such a large closing TRIN.
Evidence of trend:
Relative to the previous 30 session average, volume was 2.68% above the average. Of the last 15 sessions 9 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 12 sessions ended on a positive tick, 3 of last 10.
The 5 day moving average of New Highs is 25 while the 5 day moving average of new lows is 23 and the 10 day moving average of Net Advancing is 112.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line decreased from 202756 to 200232. This -1.26% decrease came while the SPX was losing -3.56%. The 10 day moving ratio of positive volume is 1.08 and the 10 day moving Advance/Decline ratio is 1.07. The 10 day moving ratio of positive volume has trended 0.16 over the last three days and the 10 day moving Advance/Decline ratio has trended 0.18 over the last three days.
The NYSE Composite Index lost -3.79% today.
NYSE Statistics:
Absolute Breadth Index: 43.32 down from previous day of 46.49
Cumulative Volume Index: 40,622.38 down from previous day of 41,463.39
High Low Logic Index: 0.42 down from previous day of 0.47
McClellan Oscillator: (110.59) down from previous day of 6.10
McClellan 10 DMA: (172.75) up from previous day of (208.44)
McClellan Summation Index: (1,815.77) down from previous day of (1,705.28)
% Stocks Above 200 DMA: 51.79 down from previous day of 57.68
% Stocks Above 40 DMA: 18.50 down from previous day of 22.73
New High / New Low Ratio: 28.00 down from previous day of 82.14
26wk New High/Low Ratio: 25.76 down from previous day of 66.30
13wk New High/Low Ratio: 22.90 down from previous day of 63.55
4wk New High/Low Ratio: 37.05 down from previous day of 77.48
Cumulative 4-Week New Hi-Low: 436,847 down from previous day of 436,881
Nasdaq Adv/Decline: 1,424 down from previous day of 1,486
Russell 1000 Advance/ Decline Line: 2,280 down from previous day of 2,369
Russell 2000 Advance/ Decline Line: (1,944) down from previous day of (1,858)
Notes:
Absolute Breadth Index: Low numbers suggest a topping process and high numbers suggest a bottoming process.
Cumulative Volume Index: If this begins to trend down while the averages are trending up, it is a bearish sign. If this begins to trend up while the averages are trending down, it is a bullish sign.
High Low Logic Index: High readings are bearish; low readings are bullish.
McClellan Oscillator: -100 is oversold and +100 is overbought. Also watch for crosses above and below zero.
McClellan Summation Index: Interpreted as bullish or bearish when it crosses over the zero line.
Cumulative 4-Week New Hi-Low: The difference between the number of issues reaching new highs (during a 4-week period) and the number of issues reaching new lows (during the same 4-week period).
Mel’s Missives from the Matrix:
- Total tick for the day was -278,000 and the average tick for the day was -223. There were 13 ticks greater than 600 and 254 ticks more extreme than -600. There were no ticks greater than 1000 and 30 ticks more extreme than -1000. The tick action suggests institutional distribution.
- The day's range was 37.93 points. The intraday trading range - 9:35to the close - was 28.08. The 5 DMA of daily range is 25.8.
- Evidence of the intraday trend: At 10amvolume was 88.33% of the 10 day average. By noonthe volume was 90.56% of the 10 day average, and by 2pmvolume was 93.68% of the 10 day average.
- The day's volume was 123.8% of the average daily volume for the last year. Volume was 101.7% of the last 10 day average and 124.9% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 2:45and 3:00when relative volume increased 65.5% while the SPX was dropping -0.37%. The largest drop in relative volume came between 12:15and 12:30when relative volume dropped -58.3% while the SPX was dropping -0.03%.
- 0% of the SPX stocks closed with two day RSI above 90. 0% closed with RSI above 80. 47% closed with RSI below 20 and 9% closed with RSI below 10.
- 8% of the SPX are above their five day moving average, 15.6% are above their 10 day average, 11.6% are above their 20 day moving average, 8% are above their 50 day moving average, and 21.6% are above their 100 day moving average.
- 0% of the SPX closed above their most recent previous high.
- 88% of the SPX stocks closed below their most recent previous lows.
- 4 SPX issues advanced and 490 issues declined, a net SPX advance/decline of -486.
- Evidence of the intraday trend: At 10am, 66.4% of the SPX components were in the top half of the range. By noon, 20.8% were in the top half of the range, and by 2pm, 8.2% were in the top half of the range.
- 1.4% of stocks closed in the top half of the day's range. (98.4% closed in bottom half.)
- 0.2% of stocks closed in the top 10% of the day's range. 0.2% of stocks closed in the top 20% of the day's range.
- 32% of stocks closed in the bottom 10% of the day's range. 83.2% of stocks closed in the bottom 20% of the day's range.
- 1% of stocks closed within 2% of their 52 week high. 4.2% of stocks closed within 5% of their 52 week high.
- 67.4% of stocks closed within 50% of their 52 week low. 35.4% of stocks closed within 25% of their 52 week low.
- 0.6% of stocks closed within ¼% of their high for the day.
- 15.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 5.4% of the SPX components were up since the open. By noon, 6% were up since the open, and by 2pm, 3.2% were up since the open.
- 1.2% of the SPX closed up from the previous close; 7.6% closed higher than the open.
- Sectors stronger than the SPX for Friday:
- Technology -- Outperformed the SPX by +3%.
- Consumer Staples -- Outperformed the SPX by +73%.
- Utilities -- Outperformed the SPX by +39%.
- Health Care -- Outperformed the SPX by +49%.
- Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -60%.
- Energy -- Underperformed the SPX by -16%.
- Financials -- Underperformed the SPX by -43%.
- Industrials -- Underperformed the SPX by -145%.
- Consumer Discretionary -- Underperformed the SPX by -80%.
- The $SOX index strength was weaker relative to the SPX Friday by -1.03%.
- The XLF underperformed the SPX by -0.43% Friday.
- The 2 Day RSI of the SPX is 18. The Dow RSI is 15, the NASDAQ is 23 and the Russell is 19.
- Over the last four sessions, the average session closed 48.42% of the range above the low. Friday closed at 16.3% of the daily range.
- Upside momentum moved downward Friday, from Thursday’s 3.19 to today’s -4.27. The ratio of SPX components giving a crossover sell signal compared to buy signals moved negatively to S 4.58 to 1.
- The ISEE Equity 10 day moving average Friday was 152.4. The lowest 10 day average in the last 52 weeks was 141.5 on 06/29/09and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 305 SPX components moved upward and 150 components downward during the after hours with 231 million shares traded.
Have a great weekend everyone!
-Mel
