Bears Exist?
by Jerome "Mel" Hickerson
There was no economic data released before the open Friday. But it was a quadruple witch session and the fact that the latest a health care plan may pass over the weekend hung over the day.
The session opened with a quick pop upward putting the high of the day on the chart just two minutes after the open. This was sustained for only a couple of minutes before the SPX began an almost two hour steady but controlled descent. Four hours were then spent trading within a very tight range laterally. Thirty minutes before the close the index made a quick three and a half point down move then quickly recovered before moving sideways again into the close.
Friday’s action differed greatly from action over the last several weeks; not only was it the first session to lose more than two points in almost four weeks, but the internals were much weaker than we’ve seen over the last month. Breadth was much worse than the six point decline would suggest. Almost every sector was worse than the SPX (all except Health Care.) No matter whether you are a candle chart reader or a bar chart reader, the two day chart pattern says sell. For a candle chart reader, it’s a doji followed by a bearish engulfing candle; if you are a bar chart reader, it’s a large range outside day (LROD) with a close near the bottom of the range. Both are sell signals.
So, if the long-awaited pullback has finally arrived, what should we expect here? I believe that the 50 and 20 day moving averages will provide support that the index will not fall through. The 20 DMA is sitting around 1132 and the 50 DMA around 1115.
The February correction violated each of these averages as did the late October correction. Why do I believe that this pullback (assuming it comes here) might be different? As you know, one element I pay a great deal of attention to is the market breadth. If you examine the attached charts, you can see the arrows showing the breadth in mid October and January before the pullbacks. At both times the breadth was lagging behind the SPX. Of the five pullbacks that have occurred in the last eight months, two entered the pullback with lagging breadth and both broke down through the 50 DMA while the others did not. Since our current breadth is leading above the SPX, this seems to suggest that any pullback here would not be deep enough to break the 50 DMA. It would seem more likely that any pullback would find support around the 20 DMA.
SPX Summary for Friday, March 19, 2010
126 Advancers/368 Decliners
324 Advancers/168 Decliners for the week
Today's SPX component winners and losers:
• Largest one day loser is SLM with -5.54%
• Largest three day loser is NBR with -9.80%
• Largest five day loser is CNX with -16.03%
• Largest ten day loser is CNX with -17.13%
• Largest one day winner is TIE with 3.66%
• Largest three day winner is LSI with 10.23%
• Largest five day winner is LSI with 14.18%
• Largest ten day winner is AIG with 22.61%
*** SPX Technical Summary ***
The lowest 14 day RSI component is CF; the highest 14 day RSI component is RX. The average 14 day RSI of all 500 components is 66.
The greatest positive five day momentum component is LSI; the greatest negative five day momentum component is CNX. The average five day momentum of all 500 components is 0.68.
74.80% of the SPX components are giving a crossover Buy signal; 4.60% of the SPX components are giving a Sell signal. This is a 16.3 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 8 components.
• From Buy to Neutral: 20 components.
• From Neutral to Sell: 8 components.
• From Neutral to Buy: 14 components.
NYSE Summary
On the NYSE 3184 issues were traded with 909 advancing issues and 2182 retreating issues, a ratio of 2.40 to 1 declining. There were 259 new highs and 9 new lows.
Declining volume was higher at a ratio of 3.07 to 1. The closing TRIN was 1.28 and the final tick was 396.
Evidence of trend:
Relative to the previous 30 session average, volume was 80.25% above the average. Of the last 15 sessions 2 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 28 sessions ended on a positive tick, 10 of last 10.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line decreased from 203546 to 202273. This -0.63% decrease came while the SPX was losing -0.51%.
Monday, March 22
Economic
No significant economic events scheduled.
Earnings
Before: CTFO, TIF, WAG, WSM
After: PVH, RUBO
Auction
11:30 3-Month Auction
11:30 6-Month Auction
Speeches
03:45 Dennis Lockhart
Events
KMB Investor Day
NZ Analyst Meeting
CHK, CXO, HERO, BBG at Howard Weil Energy Conference
MNDO at United Business Media VoiceCon Orlando Conference
Mel’s Random Hits:
• Total tick for the day was -174,000. There were 9 ticks greater than 600 and 96 ticks more extreme than -600. There were 0 ticks greater than 1000 and 7 ticks more extreme than -1000. The tick action suggests institutional distribution.
• Total tick for the week was 358,000, the lowest weekly total since the first week of February.
• The day's range was 13.87 points. The 5 DMA of daily range is 10.08.
• The week’s range was 28 points, 2.47%. Combined with the small range of last week, the two week range is the smallest two week range since mid January. Excluding holiday weeks, these two weeks stand out as the smallest week ranges since October of 2007.
• The day's volume was 100.8% of the average daily volume for the last year. Volume was 110.2% of the last 10 day average and 121.5% of the previous day’s volume.
• 7% of the SPX stocks closed with two day RSI above 90. 12% closed with RSI above 80. 37% closed with RSI below 20 and 16% closed with RSI below 10.
• 44.4% of the SPX are above their five day moving average, 63.6% are above their 10 day average, and 83.8% are above their 20 day moving average.
• 9% of the SPX closed above their most recent previous high.
• 54% of the SPX stocks closed below their most recent previous lows.
• 122 SPX issues advanced and 369 issues declined, a net SPX advance/decline of -247.
• 26% of stocks closed in the top half of the day's range. (74% closed in bottom half.)
• 3% of stocks closed in the top 10% of the day's range. 5.2% of stocks closed in the top 20% of the day's range.
• 12.8% of stocks closed in the bottom 10% of the day's range. 27.6% of stocks closed in the bottom 20% of the day's range.
• 26.2% of stocks closed within 2% of their 52 week high. 53.4% of stocks closed within 5% of their 52 week high.
• 37.6% of stocks closed within 50% of their 52 week low. 9.8% of stocks closed within 25% of their 52 week low.
• 4.4% of stocks closed within ¼% of their high for the day.
• 13.4% of stocks closed within ¼% of their low for the day.
• 23.8% of the SPX closed up from the previous close; 16.4% closed higher than the open.
• Sectors stronger than the SPX for Friday:
- Health Care (some irony here?)
• Sectors weaker than the SPX for Friday:
- Basic Materials
- Energy
- Financials
- Industrials
- Technology
- Consumer Staples
- Utilities
- Consumer Discretionary
• The $SOX index strength was weaker than the SPX Friday.
• The XLF underperformed the SPX by -0.31% Friday.
• The 2 Day RSI of the SPX is 30. The Dow RSI is 48, NASDAQ is 23 and Russell 17.
• Over the last four sessions, the average session closed 64.7% of the range above the low. Friday closed at 32.8% of the daily range.
• Upside momentum decreased Friday, from Thursday’s 1.42 to today’s 0.68. The ratio of SPX components giving a crossover buy signal compared to sell signals increased marginally to 16.3 to 1.
• 243 SPX components moved upward and 184 components downward during the after hours with 247 million shares traded.
Have a great weekend everyone!
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"Mel"
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