Bears Remain Frustrated
by Jerome "Mel" Hickerson, MarketsPath.com
Overnight futures were about as flat as a pancake; the pre-market this morning traded in one of the tightest ranges I have ever seen. So the regular session opened flat but proceeded to stair-step higher for 90 minutes painting the high at 11:06. The indices then found resistance and leveled off before giving back all the gains and setting the low of the day at 12:31. But the indices are anything if not resilient and quickly the SPX bounced back to near the high of the day. The closing hour was choppy trade giving back some of the earlier gains but still a strong close.
Much of today’s action was driven by Citigroup. Citi’s volume was 437% of normal today blowing the SPX volume out of proportion. So when you see the SPX volume numbers tonight, keep in mind that Citi was more than a quarter of the volume. The other 499 components had very ordinary volume. But more important than the volume is what Citi did to the XLF. The 3.66% up move in Citi today contributed to lifting the financials and driving the sector up 1.11%. This in turn dragged the SPX upward and helped keep the market afloat.
The XLF has been a major force since the February 5th reversal. The XLF bottomed at 13.51 and reached a high of 15.56 today; that’s a whopping 15.2% in just a little more than a month. The XLF seems destined to break above the October highs; long-time readers know that this is my signal for removing my call that the SPX would top at 1150 (made in early November.) I did not think the XLF would rebound this hard but I did leave the option open as a possibility and it now seems all but certain. If the XLF begins setting new 52 week highs, the SPX will be right along with it.
But at this point, I see a topping process. See the attached chart. The small trading range, low volume, low volatility is all symptomatic of topping processes; volatility does not come at the top.
For Thursday, the model continues to call for a breather and pullback; logic tells us we need a catalyst to start any downside momentum. I can’t begin to guess what it might be and we may continue to hover around the 1150 area until something arises as a catalyst.
SPX Summary for Wednesday, March 10, 2010
344 Advancers/143 Decliners
Today's SPX component winners and losers:
• Largest one day loser is EQT with -5.58%
• Largest three day loser is IVZ with -6.46%
• Largest five day loser is IGT with -5.12%
• Largest ten day loser is SPLS with -10.63%
• Largest one day winner is AIG with 10.92%
• Largest three day winner is AIG with 28.55%
• Largest five day winner is AIG with 45.69%
• Largest ten day winner is CCE with 35.87%
*** SPX Technical Summary ***
The average 14 day RSI of all 500 components is 66.
The greatest positive five day momentum component is AIG; the greatest negative five day momentum component is IGT. The average five day momentum of all 500 components is 2.76.
84.40% of the SPX components are giving a crossover Buy signal; 3.40% of the SPX components are giving a Sell signal. This is a 24.8 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 3 components.
• From Buy to Neutral: 8 components.
• From Neutral to Sell: 3 components.
• From Neutral to Buy: 18 components.
Thursday, March 11
Economics
08:30 Initial Claims
08:30 Continuing Claims
08:30 Trade Balance $-40.6b
Earnings
Before: CSUN, DK, IMAX, JTK, LDK, OSTK, SFD, BKE
After: ARO, AIRM, CCO, GG, KOG, NSM, PSUN, PLL, POWR, ZQK, SEAC, SHFL, SWHC, ZUMZ
Auction
01:00 30-Yr Auction
Events
STEC, SHOR, KOPN, SY at Wedbush Morgan Securities New York MAC: Management Access Conference
ACM, CBI, URS, MDR at UBS Engineering & Construction One-on-One Conference
CPN, EXC, WR at Morgan Stanley Utilities Conference
RGC, CNK, CKEC, IMAX at Gabelli & Company, Inc. Digital Cinema & Movie Conference
SONS, ATHR, CRNT at Credit Suisse Communication Equipment & Networking Conference
CBRX, GILD, TSON, LGND at Cowen and Company Healthcare Conference
NYB, HBAN, PNC, SNV at Citi Financial Services Conference
ENOC at CERAWeek 2010
HELE, BONT, NILE, PNRA at Bank of America Merrill Lynch Consumer Conference
BMTI Analyst and Investor Meeting
CERN Investor Community Meeting
V Investor Day
XOM Analyst Meeting
IT Investor Day
The weekly jobless claims report from the Department of Labor is due out in the morning. The number of Americans filing new claims for unemployment is expected to have fallen to a 460,000 unit annual rate from 469,000 the previous week. Continuing claims are expected to have fallen to 4.495 million from 4.5 million in the previous week. The Census Bureau is expected to report that the January trade gap widened to $41 billion from $40.2 billion in December.
Mel’s Random Hits:
• Total tick for the day was +238,000. The last negative day was more than a month ago, February 5th. This is the longest positive daily stretch within my database. The only negative stretch today was between 12:00 and 12:45. Breadth continues to lead the way upward.
• The day's range was 8.17 points.
• The day's volume was 104.1% of the average daily volume for the last year. Volume was 139.8% of the last 10 day average and 105.6% of Tuesday’s volume. Citi volume was 926,027,602 beyond the average; if you adjust today’s volume to discount that difference then today would have been only 86.5% of the yearly average. Volume was actually quite light today other than Citi.
• 33% of the SPX stocks closed with two day RSI above 90. 48% closed with RSI above 80. 10% closed with RSI below 20 and 4% closed with RSI below 10.
• 72.0% of the SPX are above their five day moving average, 85.8% are above their 10 day average, and 91.4% are above their 20 day moving average.
• 10% of the SPX stocks closed below their most recent previous lows.
• 34% of the SPX closed above their most recent previous high.
• 66.6% of stocks closed in the top half of the day's range. (33.4% closed in bottom half.)
• 5.0% of stocks closed in the bottom 20% of the day's range.
• 9.8% of stocks closed in the top 10% of the day's range.
• 30.4% of stocks closed within 2% of their 52 week high. 50.4% of stocks closed within 5% of their 52 week high.
• 27.0% of stocks closed within 50% of their 52 week low. 8.6% of stocks closed within 25% of their 52 week low.
• 18.0% of stocks closed within ¼% of their high for the day.
• 3.4% of stocks closed within ¼% of their low for the day.
• 69.4% of the SPX closed up from the previous close; 66.0% closed higher than the open.
• Sectors weaker than the SPX for the day: Consumer Staples, Basic Materials, Health Care, Consumer Discretionary, Utilities, and Industrials.
• Sectors stronger than the SPX for the day: Technology, Financials, and Energy.
• The $SOX index strength was stronger than the SPX today.
• The 2 Day RSI of the SPX is 99. The Dow RSI is 94, NASDAQ is 99 and Russell 99.
• Over the last four sessions, the average session closed 64.1% of the range above the low.
• Upside momentum moved upward a bit from Tuesday’s 2.3 to today’s 2.76. The ratio of SPX components giving a crossover buy signal compared to sell signals has edged upward a fraction to 24.8 to 1.
• Bears are rightly frustrated here. The last session down more than 2.3 points was 12 sessions ago; only one session down more than three points in more than a month. On average, during this year long rally, the market has seen one -25 point day per month; we are well overdue. If a breakdown should occur, a Thursday seems the likely day of the week: Since November 12th, we have had 16 Thursday sessions and those 16 sessions have netted a -49 points. This highest Thursday of the 16 was +10 and the worst was -34.
• 219 SPX components moved upward and 118 components downward during the after hours with 72 million shares traded. Volume was very light.
• Our trade signal remains Sell.
Have a great Thursday everyone!
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"Mel"
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