Bulls Appear Tired; Bears Are Exhausted
by Jerome "Mel" Hickerson, MarketsPath.com
Overnight Fitch came out with comments suggesting that the UK still has some work to do on their fiscal situation. They also questioned the veracity of the global economic rebound. The NFIB Small Business Optimism index for February was reported at 88.0, which was below the consensus reading of 90.0 and January's reading of 89.3.
This resulted in some pressure on the futures and the regular session opened with selling pressure from the futures. The SPX gapped down a few points and promptly painted the low of the day just two minutes after the open as the “buy the dip” buyers were out in force. Technology stocks were rocking early in the day because of news of a new high speed router from Cisco Systems and this helped a number of high tech and telecom companies such as Apple and AT&T.
After putting the low on the chart, the next four hours were a slow torturous ascent followed by an hour of choppy trade near the high of the session, with the high coming at 1:34. The index painted an intraday double-top at 2:30 which was then rejected and followed by a sharp decline. The decline bounced at 3:25 but selling hit again at 3:43 and the index traded sideways choppily into the close.
Today we began to see volatility returning. That suggests that the topping process may be coming to at least a short-term turning point. While the daily range remains tight, the movement within the range was much more interesting today.
The indices are extremely overbought at this point. The market continues to creep higher in the face of few economic and earnings reports. Issues with sovereign debt remain outstanding and appear to have little real hope of easy resolution. The week before the quarter's triple-witching expiration tends to be negative.
In the last year the S&P is up 69%, the Dow is up about 62%, and the Nasdaq is up 84%. Mutual funds have only a 3.5% cash position. They are already “all in.” Retail investors have largely avoided this rally; where will the fuel come from to drive this market to make a significant move above the highs of January? The pattern of low volume, low volatility seems likely to result in a significant pullback sooner rather than later. This does not seem like the place that attracts new money into the market when all the money on the sidelines is already in.
For Wednesday, I look for a first hour high of the day to be met by sellers. The opening hour may follow a gap upward; although my thought is that we gap down and continue down for a trend day.
SPX Summary for Tuesday, March 09, 2010
246 Advancers/241 Decliners
Today's SPX component winners and losers:
• Largest one day loser is IVZ with -5.22%
• Largest three day loser is CF with -6.93%
• Largest five day loser is CF with -5.42%
• Largest ten day loser is HRB with -15.47%
• Largest one day winner is AIG with 12.10%
• Largest three day winner is AIG with 22.33%
• Largest five day winner is AIG with 30.19%
• Largest ten day winner is CCE with 35.30%
*** SPX Technical Summary ***
The average 14 day RSI of all 500 components is 65.
The greatest positive five day momentum component is AIG; the greatest negative five day momentum component is CF. The average five day momentum of all 500 components is 2.3.
82.40% of the SPX components are giving a crossover Buy signal; 3.40% of the SPX components are giving a Sell signal. This is a 24.2 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: 12 components.
• From Neutral to Sell: 3 components.
• From Neutral to Buy: 14 components.
Wednesday, March 10
Economics
10:00 Wholesale Inventories 0.2% cons.
10:30 Crude Inventories
02:00 Treasury Budget -$202.0b
Earnings
Before: CAS, AEO, BONT, BF.B, CRZO, PLCE, CWEI, HRBN, HWK, QLTI, SOL, MTN
After: AACC, BLDP, CLNE, FCEL, GYMB, HOTT, IDSY, JAS, MW, SQNM, WES
Auction
01:00 10-Yr Note Auction
Events
RGS, JACK, PETM, AZO at Bank of America Merrill Lynch Consumer Conference
LNC, COF, ZION, BK at Citi Financial Services Conference
MASI, MAPP, DYAX, SLXP at Cowen and Company Healthcare Conference
ENTR, MLNX, PCLM, SHOR at Credit Suisse Communication Equipment & Networking Conference
LINTA, TWC, S, T at Credit Suisse Group Global Media and Communications Conference
AAV, ERF, CMZ at FirstEnergy and Societe Generale Canadian Energy Conference
CA, DIOD, AVGO, CHKP at Jefferies & Co Global Technology Conference
CSX, NSC, UNP, KSU at JPMorgan Aviation, Transportation & Defense Conference
SYNT at Oppenheimer & Co. Internet Services 1-on-1 Conference
TSYS, TLAB, PSYS, JBL at Raymond James Institutional Investors Conference
EPCT at The Center for Business Intelligence West Coast Forum on Early Access Programs
CSCO, NETL, RVBD, NVDA at Wedbush Morgan Securities New York MAC: Management Access Conference
PL Annual Investor Conference
JAH Analyst and Investor Meeting
January unemployment rates on a state-by-state basis will be released in the morning. Wholesale inventories are expected to have risen 0.2% in January after falling 0.8% in December; this report is due shortly after the start of trading. The weekly crude oil inventories report is also due in the morning, while the February Treasury budget is due out in the afternoon, but neither is usually a market mover.
Mel’s Random Hits:
• Total tick for the day was +200,000. Breadth was negative briefly at the open and remained strongly positive until the final hour.
• The day's range was 10.47 points.
• The day's volume was 98.5% of the average daily volume for the last year. Volume was 136.1% of the last 10 day average and 145.2% of Monday’s volume.
• 27% of the SPX stocks closed with two day RSI above 90. 38% closed with RSI above 80. 8% closed with RSI below 20 and 2% closed with RSI below 10.
• 73.8% of the SPX are above their five day moving average, 85.8% are above their 10 day average, and 91.2% are above their 20 day moving average.
• 21% of the SPX stocks closed below their most recent previous lows.
• 24% of the SPX closed above their most recent previous high.
• 55.4% of stocks closed in the top half of the day's range. (44.6% closed in bottom half.)
• 6.6% of stocks closed in the bottom 20% of the day's range.
• 4.8% of stocks closed in the top 10% of the day's range.
• 28.4% of stocks closed within 2% of their 52 week high. 49.6% of stocks closed within 5% of their 52 week high.
• 26.4% of stocks closed within 50% of their 52 week low. 8.0% of stocks closed within 25% of their 52 week low.
• 9.4% of stocks closed within ¼% of their high for the day.
• 7.2% of stocks closed within ¼% of their low for the day.
• 49.6% of the SPX closed up from the previous close; 65.2% closed higher than the open.
• Sectors weaker than the SPX for the day: Technology, Financials, and Industrials.
• Sectors stronger than the SPX for the day: Consumer Staples, Energy, Utilities, Basic Materials, Health Care, and Consumer Discretionary.
• The $SOX index strength was again weaker again than the SPX today, ten of the last thirteen sessions. This weakness almost always leads to a pullback.
• The 2 Day RSI of the SPX is 99. The Dow RSI is 93, NASDAQ is 99 and Russell 99.
• Over the last four sessions, the average session closed 69.5% of the range above the low.
• Upside momentum continued to moderate from Monday’s 2.57 to today’s 2.3. The ratio of SPX components giving a crossover buy signal compared to sell signals has jumped to 24 to 1.
• 237 SPX components moved upward and 136 components downward during the after hours with 186 million shares traded. Volume was heavy.
• Our trade signal remains Sell.
Have a great Wednesday everyone!
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"Mel"
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