Bears Continue to Suffer
by Jerome "Mel" Hickerson
Friday began with more rumors flying about a Greece bailout. During the session the market was rocked by further rumors and Fitch downgrading Greece's credit rating. The indices moved abruptly on the downgrade but recovered quickly.
The session opened with a gap upward of about 2.5 points, worked upward a bit further, then retraced the entire gap setting the low of the day at 9:49. The index then surged upward five points by 10am. At 10:27 the Fitch downgrade hit the tape and the index gave up four points in two minutes. But then began a two wave ascent to a midday high just before noon.
The first two hours of the afternoon had a somewhat bearish look as the SPX traded mildly downward in a two wave descent that returned the index to the level of the opening gap at 2pm. But bulls took control of the weekly close and pushed the tape upward, especially in the closing 40 minutes. The closing 40 minutes struck me as possibly having the appearance of bears covering short positions, possibly margin calls.
We are certainly enmeshed in a historic run here; all news is perceived as good news for the markets. I have written repeatedly of all the reasons I see for a pullback; all of those reasons remain and I continue to believe we see a move back of at least several percent. But today's report will try to examine the other side of the picture; let's set bias aside and examine reasons this rally should continue.
Note: I am finding this more difficult than I had imagined when I began. But every trader should exercise their ability to set aside bias and look both ways.
We will begin by reviewing the charts. First, a high level look at the daily chart for the last year. It is obvious that the SPX is firmly entrenched in a long-term up-trending channel. I won't bother to include a weekly chart; the trend is just as obvious on both time frames.
The monthly chart shows the familiar stair-stepping pattern. I am including it displayed along with the 10 month moving average. I'll remind readers of the significance of this chart by suggesting a review of the February 20th report (http://www.advicetrade.com/nightlyreport/2/2010/20/).
But now lets step back and look at 40 years of SPX action. This very high-level view shows a quarterly look at the index along with the 500 day moving average. Notice that all of the rally during 2009 fell below this moving average but that as 2010 began, the index has moved above the average. Now look back over the last 40 years and observe what the index has done in the past as it moved above this average. Ask yourself, over the next few years does it not seem likely that the index could challenge the all time highs once again?
This rally may well take the summer off. But don't fool yourself over the long-term. Cycles such as this usually run a few years.
A popular theme in the chat room is discussion about our economic problems. It is true that these issues often cause momentary blips in the market such as Friday's two minute plunge on the Fitch downgrade of Greece (which took 17 minutes for the index to recover.)
My point is this: As a trader, never confuse the economy with the market -- you'll drive yourself nuts. Some of the market's largest up moves have come during recessions, 2009 is simply one example of many. The market is moved by many forces; the economic impact is one of hundreds of forces that relate to the market. I'll leave you with one example that few consider. Think of the 1950's and 60's when the economy was undergoing 20 years of growth while the equities were relatively flat. If economic woes supposedly cause market plunges, why wouldn't the inverse also be true?
If you spend too much effort focusing on the economic issues you will hurt yourself as a trader; it's better and more profitable to study the market than the economy.
Day Trade Systems Update: (Signals Friday)
* Scalp GDX Short at: 11:09
* SPX Short at: 11:50
* UYM Long at: 1:36
SPX Summary for Friday, April 09, 2010
121 Advancers/366 Decliners
355 Advancers/139 Decliners for the week.
Today's SPX component winners and losers:
• Largest one day loser is EK with -3.52%
• Largest three day loser is AKS with -7.97%
• Largest five day loser is MEE with -11.91%
• Largest ten day loser is FRX with -9.57%
• Largest one day winner is JEC with 8.47%
• Largest three day winner is EK with 10.30%
• Largest five day winner is EK with 23.58%
• Largest ten day winner is EK with 25.25%
*** SPX Technical Summary ***
The lowest 14 day RSI component is BIIB; the highest 14 day RSI component is BDK. The average 14 day RSI of all 500 components is 62.
The greatest positive five day momentum component is EK; the greatest negative five day momentum component is MEE. The average five day momentum of all 500 components is 1.74.
62.60% of the SPX components are giving a crossover Buy signal; 10.80% of the SPX components are giving a Sell signal. This is a 5.8 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 6 components.
• From Buy to Neutral: 18 components.
• From Neutral to Sell: 11 components.
• From Neutral to Buy: 25 components.
The moving averages:
Close 1194.37
9 EMA 1182.03 Rising
10 DMA 1179.66 Rising
20 DMA 1171.08 Rising
50 DMA 1129.26 Rising
100 DMA 1121.97 Rising
200 DMA 1068.11 Rising
10 Wk MA 1134.13 Rising
NYSE Summary
On the NYSE 3185 issues were traded with 2090 advancing issues and 991 retreating issues, a ratio of 2.11 to 1 advancing. There were 369 new highs and 5 new lows.
Advancing volume was higher at a ratio of 2.51 to 1. The closing TRIN was 0.84 and the final tick was 803.
Evidence of trend:
Relative to the previous 30 session average, volume was -7.30% below 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, 25 sessions ended on a positive tick, 9 of last 10.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line increased from 206639 to 207738. This 0.53% increase came while the SPX was gaining 0.66%. The 10 day moving ratio of positive volume is 1.47 and the 10 day moving Advance/Decline ratio is 1.35. The 10 day moving ratio of positive volume has trended 0.28 over the last three days and the 10 day moving Advance/Decline ratio has trended 0.22 over the last three days.
The NYSE Composite Index gained 0.84% today.
Mel’s Missives from the Matrix:
• Total tick for the day was 223,000. There were 73 ticks greater than 600 and 19 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000.
• The day's range was 7.51 points. The 5 DMA of daily range is 10.58.
• Evidence of the intraday trend: At 10am volume was 131.71% of the 10 day average. By noon the volume was 108.21% of the 10 day average, and by 2pm volume was 99.76% of the 10 day average.
• The day's volume was 89.2% of the average daily volume for the last year. Volume was 93.9% of the last 10 day average and 90.3% of the previous day’s volume.
• Evidence of the intraday trend: The largest increase in relative volume came between 11:30 and 11:45 when relative volume increased 26.0% while the SPX was rising 0.05%. The largest drop in relative volume came between 9:45 and 10:00 when relative volume dropped -45.3% while the SPX was rising 0.15%.
• 21% of the SPX stocks closed with two day RSI above 90. 38% closed with RSI above 80. 9% closed with RSI below 20 and 3% closed with RSI below 10.
• 66.2% of the SPX are above their five day moving average, 77% are above their 10 day average, and 79.8% are above their 20 day moving average.
• 55% of the SPX closed above their most recent previous high.
• 5% of the SPX stocks closed below their most recent previous lows.
• 391 SPX issues advanced and 101 issues declined, a net SPX advance/decline of 290.
• Evidence of the intraday trend: At 10am, 60% of the SPX components were in the top half of the range. By noon, 69% were in the top half of the range, and by 2pm, 56.2% were in the top half of the range.
• 79.2% of stocks closed in the top half of the day's range. (20.6% closed in bottom half.)
• 38.2% of stocks closed in the top 10% of the day's range. 52.8% of stocks closed in the top 20% of the day's range.
• 1.4% of stocks closed in the bottom 10% of the day's range. 3% of stocks closed in the bottom 20% of the day's range.
• 39% of stocks closed within 2% of their 52 week high. 63.2% of stocks closed within 5% of their 52 week high.
• 39% of stocks closed within 50% of their 52 week low. 10.6% of stocks closed within 25% of their 52 week low.
• 50% of stocks closed within ¼% of their high for the day.
• 1.8% of stocks closed within ¼% of their low for the day.
• Evidence of the intraday trend: At 10am, 62.8% of the SPX components were up since the open. By noon, 71.8% were up since the open, and by 2pm, 62% were up since the open.
• 78.4% of the SPX closed up from the previous close; 72.2% closed higher than the open.
• Sectors stronger than the SPX for Friday:
- Energy -- Outperformed the SPX by +44%.
- Technology -- Outperformed the SPX by +10%.
- Utilities -- Outperformed the SPX by +20%.
- Consumer Discretionary -- Outperformed the SPX by +10%.
• Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -49%.
- Financials -- Underperformed the SPX by -30%.
- Industrials -- Underperformed the SPX by -11%.
- Consumer Staples -- Underperformed the SPX by -13%.
- Health Care -- Underperformed the SPX by -23%.
• The $SOX index strength was stronger relative to the SPX Friday by 0.49%.
• The XLF underperformed the SPX by -0.3% Friday.
• The 2 Day RSI of the SPX is 85. The Dow RSI is 80, the NASDAQ is 91 and the Russell is 87.
• Over the last four sessions, the average session closed 74.1% of the range above the low. Friday closed at 95.9% of the daily range.
• Upside momentum increased Friday, from Thursday’s 1.35 to today’s 1.74. The ratio of SPX components giving a crossover buy signal compared to sell signals oddly decreased to B 5.8 to 1.
• The ISEE Equity 10 day moving average Friday was 230.2. The lowest 10 day average in the last 52 weeks was 141.5 on 06/29/09 and the highest 10 day average in the last 52 weeks was 230.2 on 04/09/10.
• 170 SPX components moved upward and 168 components downward during the after hours with 107 million shares traded.
Have a great weekend everyone!
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"Mel"
