Bears Smacked Down by FOMC Minutes
Market Recap:
SPX big winners were D.R. Horton Inc (DHI) 4.11%, Pulte Homes Inc (PHM) 3.84%, and Discover Financial Services (DFS) 3.82%. SPX big losers were Dell Inc (DELL) -5.67%, R.R. Donnelley & Sons Company (RRD) -5.54%, and Metropcs Communications Inc (PCS) -4.38%.
SPX five day big winners are Coventry Health Care Inc (CVH) 28.03%, Urban Outfitters Inc (URBN) 19.05%, and First Solar Inc (FSLR) 13.41%. SPX five day big losers are Sprint Nextel Corp (S) -9.46%, Best Buy Co Inc (BBY) -8.47%, and Perrigo Co (PRGO) -7.46%.
New Ten Day Highs: URBN, AKAM, ALL, AMGN, AIV, ADSK, AVB, BBBY, BRK.B, DVN, DFS, EBAY, ECL, FITB, FRX, DHI, IGT, KFT, NEM, JWN, PX, PFG, SNA, TJX, UNH, WLP, WY, AMZN, GOOG
New Ten Day Lows: ABT, AMD, ALTR, MO, AEE, AMT, ADI, T, BCR, BAX, BA, COG, CTL, XEL, CMS, KO, ED, SAI, DVA, DELL, XRAY, DO, RRD, DTE, DUK, EIX, ETR, EOG, EXC, EXPE, XOM, FLIR, GE, HCP, HCN, TEG, INTC, IBM, IRM, CLF, KR, LH, LLTC, MRO, MJN, MRK, MCHP, MU, MCO, MUR, NDAQ, GAS, NI, NBL, NU, OXY, POM, PFE, PCG, PNW, PXD, PPG, PSA, PWR, RSH, RSG, SCG, SEE, SRE, SHW, SIAL, SLM, SUN, SVU, TMO, TSS, VZ, WMT, WPI
Volume & Breadth Indicators
For the SPX Index there were 199 components advancing and 293 components declining. On the NYSE 3,126 issues were traded with 1,192 advancing issues and 1,825 retreating issues, a ratio of 1.53 to one declining. There were 63 new highs and 19 new lows. The five day moving average of New Highs is 145 while the five day moving average of New Lows is 12 and the ten day moving average of Net Advancing is 127.
Declining volume was higher at a ratio of 1.15 to one. The closing TRIN was 0.67 and the final tick was -9. The five day average of TRIN is .82 and the ten day average of TRIN is .87. The NYSE Composite Index lost -0.1% today while the SPX gained 0.02%.
For the NYSE, relative to the previous 30 session average, volume was -15.38% below the average. Of the last 15 sessions 1 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 14 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 76.2% of the average daily volume for the last year. Volume was 103.5% of the last 10 day average and 93.6% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was -9,000 and the average tick for the day was -6. There were 31 ticks greater than 600 and 27 ticks more extreme than -600. There were 4 ticks greater than 1000 and no ticks more extreme than -1000.
Moving Average and Support/Resistance Indicators:
40.4% of the SPX are above their five day moving average, 61.6% are above their 10 day average, 77.4% are above their 20 day moving average, 77.4% are above their 50 day moving average, and 64.2% are above their 200 day moving average.
There was one significant moving average crossover today as China had their 5 DMA cross below their 20 DMA. Our moving average Power Rating is 87 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Wednesday:
- Basic Materials -- Outperformed the SPX by +81%.
- Energy -- Outperformed the SPX by +35%.
- Technology -- Outperformed the SPX by +14%.
- Health Care -- Outperformed the SPX by +5%.
- Consumer Discretionary -- Outperformed the SPX by +31%.
Sectors weaker than the SPX for Wednesday:
- Financials -- Underperformed the SPX by -16%.
- Industrials -- Underperformed the SPX by -51%.
- Consumer Staples -- Underperformed the SPX by -33%.
- Utilities -- Underperformed the SPX by -8%.
Checking the sectors of the SPX tonight: (The sector Buy and Sell signals come from a mechanical trend trading system; there will be some whipsaw but the signal will never be on the wrong side for long.)
The Basic Materials sector advancing issues (25) totaled 699,882 shares traded (27,995 average per stock) and declining issues (5) totaled 179,018 shares traded (35,804 average per stock.) 28 components are on an uptrend (1 new uptrends today) and 2 components are on a downtrend (no new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.71% above the 20-Day average.
The Energy sector advancing issues (26) totaled 1,127,539 shares traded (43,367 average per stock) and declining issues (18) totaled 610,443 shares traded (33,914 average per stock.) 37 components are on an uptrend (4 new uptrends today) and 8 components are on a downtrend (2 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.75% above the 20-Day average.
The Financials sector advancing issues (29) totaled 2,505,444 shares traded (86,395 average per stock) and declining issues (50) totaled 2,096,088 shares traded (41,922 average per stock.) 68 components are on an uptrend (3 new uptrends today) and 13 components are on a downtrend (2 new downtrends today.) There were 4 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.74% above the 20-Day average.
The Industrials sector advancing issues (15) totaled 237,712 shares traded (15,847 average per stock) and declining issues (45) totaled 1,100,877 shares traded (24,464 average per stock.) 50 components are on an uptrend (1 new uptrends today) and 10 components are on a downtrend (4 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.84% above the 20-Day average.
The four 'risk sectors' totaled 95 advancing issues and 118 declining issues today with 9 new uptrends and 8 new downtrends. 84.7% of Risk Sector components are uptrending.
The Technology sector advancing issues (25) totaled 1,861,503 shares traded (74,460 average per stock) and declining issues (53) totaled 4,839,396 shares traded (91,309 average per stock.) 62 components are on an uptrend (2 new uptrends today) and 17 components are on a downtrend (4 new downtrends today.) There were 3 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 2.54% above the 20-Day average.
The Consumer Staples sector advancing issues (16) totaled 431,563 shares traded (26,973 average per stock) and declining issues (24) totaled 864,713 shares traded (36,030 average per stock.) 24 components are on an uptrend (1 new uptrends today) and 17 components are on a downtrend (1 new downtrends today.) There were 2 New Highs and no New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .43% above the 20-Day average.
The Utilities sector advancing issues (4) totaled 116,090 shares traded (29,023 average per stock) and declining issues (25) totaled 437,086 shares traded (17,483 average per stock.) 3 components are on an uptrend (2 new uptrends today) and 28 components are on a downtrend (no new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -1.06% below the 20-Day average.
The Health Care sector advancing issues (21) totaled 637,602 shares traded (30,362 average per stock) and declining issues (31) totaled 914,592 shares traded (29,503 average per stock.) 29 components are on an uptrend (1 new uptrends today) and 23 components are on a downtrend (4 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .15% above the 20-Day average.
The Consumer Discretionary sector advancing issues (38) totaled 1,626,492 shares traded (42,802 average per stock) and declining issues (42) totaled 1,435,325 shares traded (34,174 average per stock.) 62 components are on an uptrend (no new uptrends today) and 19 components are on a downtrend (4 new downtrends today.) There were 3 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.73% above the 20-Day average.
Based on the SPX sector data, we are on a Buy for the SPX and the Russell 2000.
What We Learned from Wednesday's Action:
Wednesday was session 2 to close below the 5 DMA, session 20 to close above the 10 DMA, session 20 to close above the 20 DMA, and session 29 to close above the 50 DMA. This was also session 18 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 3.42 points above the 10 DMA.
The SPX 5 DMA is 1415.69, 10 DMA is 1410.07, 20 DMA is 1397.02, 50 DMA is 1366.95, 100 DMA is 1359.91, and 200 DMA is 1332.55.
On Wednesday the SPX traded both below and above the opening range. 34.8% of the SPX closed up from the previous close; 50.4% closed higher than the open. During Wednesday's session the SPX gained .4 points from open to close. The SPX intraday trading range was 9.34 points. The 5-Day average intraday trading range is 9.63 points, the 10-Day average is 8.81 points, and the 20-Day average is 10.13 points. The trading range is expanding. The 5-Day SPX gain is 0.57%, the 10-Day gain is 0.80%, and the 15-Day gain is 2.78%.
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 -2. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be lower. Mel's 5-Day Oscillator is 62 and Mel's 10-Day Oscillator is 59 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bearish for Thursday's session.
Until the FOMC minutes were released mid afternoon, sellers were dominating today's action. But those minutes from the previous FOMC meeting obviously enthused traders with hopes of more QE.
Without Price movement, market technicals struggle to change as well. The last thirteen trading sessions have resulted the following gains and losses for the SPX: 3.24, 7.12, 0.87, 0.58, 3.07, (1.76), (0.18), 1.60, 9.98, 2.65, (0.03), (4.96), and 0.32 for an average change of 1.73 points per day. This kind of action makes it difficult to trade the indices and writing about it also becomes difficult.
The Market Internals data continues to persist bullish. The Lizard chart pattern discussed last night was confirmed by the Price action after today's opening hour. We like this Lizard pattern because of reliability but even an 80% success rate means 1-in-5 failures. But we, for now, will continue to bet on the short-side.
We think we may see a gap higher on Thursday, a fade-able gap that we would use to add to our short positions.
There were no changes to our holdings today as we missed our exit targets and did not make any changes.
Thursday, August 23
Economics
08:30 Initial Jobless Claims – consensus 364K, prior 361K
08:30 Continuing Claims – consensus 3300K, prior 3332K
08:58 Markit US Flash PMI – consensus 51.5
10:00 New Home Sales – consensus 365K, prior 350K
10:00 House Price Index – consensus 0.5%, prior 0.8%
11:00 Fed buying $1.5b-$2b Treasuries in 10 to 20-year range
1:00 Treasury selling $14b in 5-year TIPS
02:30 CNY HSBC Flash Manufacturing PMI
06:00 CHF Trade Balance
06:00 EUR German GDP
07:30 EUR German PMI
08:30 EUR PMI
14:00 EUR Eurozone Consumer Confidence
Earnings
Before:
No reports
After:
Aruba Networks (ARUN) EPS 17c
Salesforce.com (CRM) EPS 39c
Existing home sales were higher by 4.47 million, less than the expected 4.50 million. Oil inventories dropped 5.4 million barrels. Last week they declined by 3.7 million.
Personal Note: Long-time readers will recall the obsession with being present for our youngest daughter's graduation in June. Today was first day of college classes. New goal is the same as the old goal. This father will be present for the youngest daughter's graduation.
Thank you for reading. Think on it, trade on it, and be well.
-Mel