Bulls Carry on Their Work
Market Recap:
There were two ways to look at the weakness in Friday morning's markets. Traders were either having a tantrum over the fact that they didn't get what they wanted from central bankers during the week. Or traders were merely taking money off the table in front of what is sure to be a weekend full of headlines from both Europe and China. In any event, stocks were down in Europe and Asia, and the U.S. was following along.
Friday's session began with a sharp gap lower but the low of the day was on the chart during the opening minutes. The rest of the session was a march higher with a few lulls along the way but no significant pullbacks.
Our Market Leaders Board shows all of our leaders having strong sessions with the SOX, Financials, Russell 2000 small caps, and Technology quite strong while the NYSE Composite Index lagged. When the broadest index lags, it can frequently be a warning sign of some upcoming weakness.
SPX big winners were Sprint Nextel Corp (S) 8.79%, Masco Corp (MAS) 3.94%, and Expedia Inc (EXPE) 3.93%. SPX big losers were Exelon Corporation (EXC) -3.95%, US Steel Corp (X) -3.89%, and Yum! Brands Inc (YUM) -3.36%.
SPX five day big winners are Iron Mountain Inc (IRM) 18.85%, Sprint Nextel Corp (S) 18.73%, and Chesapeake Energy Corp (CHK) 17.84%. SPX five day big losers are Alpha Natural Resources (ANR) -10.64%, Fastenal Company (FAST) -6.74%, and Halliburton Co (HAL) -6.71%.
New Ten Day Highs: AET, MO, AEE, AEP, ADP, AN, BLL, BMS, BBY, BIG, BMY, BRK.B, COF, CAH, CCL, CNP, CI, CLX, CMS, CL, CMCSA, ED, COST, CVH, D, DPS, DTE, DUK, DD, ROST, ECL, EIX, ETR, EFX, EXPE, ESRX, FDO, FRX, GR, HCP, HD, HUM, TEG, INTC, IRM, KMB, KLAC, LH, LLY, MAS, MRK, MOLX, NI, PAYX, PCG, PPL, PGN, PEG, PSA, RTN, SNI, SRE, SHW, SNA, S, SRCL, SYY, TGT, UPS, VZ, WMT, DIS, WPO, AAPL
New Ten Day Lows: BHI, DTV, HAL, KR, MCD, SWY, SLE, SWN, VXX
Market Recap – Weekly Review:
The SPX gained 47.62 points during the week (3.73%). The range for the week was 62.31, 4.87%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 49. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was 234,000. (This is rather weak for such a strong week.) On the NYSE, the advance/decline line increased during the week by 4,238 and the 10 day average of Net Advancing increased by 162. There were 273 New Highs and 285 New Lows. The week closed at 94.56% of the weekly range.
For the week, Russell 2000 advancing issues (1,717) totaled 34,568,978 shares traded (20,133 average per stock) and declining issues (202) totaled 6,353,254 shares traded (31,452 average per stock.) 702 components are on a weekly uptrend (342 new uptrends this week) and 1,228 components are on a weekly downtrend (11 new downtrends this week.) There were 65 New Highs and 108 New Lows.
For the week, SPX advancing issues (472) totaled 132,870,475 shares traded (281,505 average per stock) and declining issues (27) totaled 9,619,183 shares traded (356,266 average per stock.) 159 components are on a weekly uptrend (78 new uptrends this week) and 340 components are on a weekly downtrend (no new downtrends this week.) There were 32 New Highs and 33 New Lows.
For the week, NASDAQ Composite Index advancing issues (1,639) totaled 52,763,904 shares traded (32,193 average per stock) and declining issues (838) totaled 28,425,986 shares traded (33,921 average per stock.) There were 35 New Highs and 33 New Lows.
This was obviously a strong week but follow-through next week is vital. The major indices still have more components on weekly downtrends than weekly uptrends.
Checking the sectors of the SPX for the week:
The Basic Materials sector advancing issues (27) totaled 4,568,111 shares traded (169,189 average per stock) and declining issues (3) totaled 1,053,626 shares traded (351,209 average per stock.) 9 components are on a weekly uptrend (6 new uptrends this week) and 21 components are on a weekly downtrend (no new downtrends this week.) There were 2 New Highs and 7 New Lows.
The Energy sector advancing issues (35) totaled 9,945,707 shares traded (284,163 average per stock) and declining issues (9) totaled 4,241,578 shares traded (471,286 average per stock.) 2 components are on a weekly uptrend (no new uptrends this week) and 42 components are on a weekly downtrend (no new downtrends this week.) There were no New Highs and 7 New Lows.
The Financials sector advancing issues (80) totaled 34,884,735 shares traded (436,059 average per stock) and declining issues (1) totaled 410,281 shares traded (410,281 average per stock.) 21 components are on a weekly uptrend (19 new uptrends this week) and 60 components are on a weekly downtrend (no new downtrends this week.) There were 2 New Highs and 2 New Lows.
The Industrials sector advancing issues (59) totaled 11,653,361 shares traded (197,515 average per stock) and declining issues (2) totaled 355,833 shares traded (177,917 average per stock.) 13 components are on a weekly uptrend (8 new uptrends this week) and 48 components are on a weekly downtrend (no new downtrends this week.) There were no New Highs and 3 New Lows.
The four 'risk sectors' totaled 201 advancing issues and 15 declining issues this week with 33 new uptrends and 0 new downtrends.
The Technology sector advancing issues (74) totaled 31,740,960 shares traded (428,932 average per stock) and declining issues (3) totaled 950,956 shares traded (316,985 average per stock.) 16 components are on a weekly uptrend (10 new uptrends this week) and 61 components are on a weekly downtrend (no new downtrends this week.) There were 2 New Highs and 7 New Lows.
The Consumer Staples sector advancing issues (38) totaled 7,303,964 shares traded (192,210 average per stock) and declining issues (3) totaled 1,331,933 shares traded (443,978 average per stock.) 22 components are on a weekly uptrend (6 new uptrends this week) and 19 components are on a weekly downtrend (no new downtrends this week.) There were 6 New Highs and 1 New Lows.
The Utilities sector advancing issues (32) totaled 4,560,532 shares traded (142,517 average per stock) and declining issues (no) totaled no shares traded (no average per stock.) 26 components are on a weekly uptrend (3 new uptrends this week) and 6 components are on a weekly downtrend (no new downtrends this week.) There were 14 New Highs and no New Lows.
The Health Care sector advancing issues (51) totaled 9,870,800 shares traded (193,545 average per stock) and declining issues (1) totaled 148,881 shares traded (148,881 average per stock.) 22 components are on a weekly uptrend (11 new uptrends this week) and 30 components are on a weekly downtrend (no new downtrends this week.) There were no New Highs and no New Lows.
The Consumer Discretionary sector advancing issues (76) totaled 18,342,305 shares traded (241,346 average per stock) and declining issues (5) totaled 1,126,095 shares traded (225,219 average per stock.) 28 components are on a weekly uptrend (15 new uptrends this week) and 53 components are on a weekly downtrend (no new downtrends this week.) There were 6 New Highs and 6 New Lows.
Volume & Breadth Indicators
For the SPX Index there were 408 components advancing and 88 components declining. On the NYSE 3,125 issues were traded with 2,139 advancing issues and 897 retreating issues, a ratio of 2.38 to one advancing. There were 75 new highs and 34 new lows. The five day moving average of New Highs is 55 while the five day moving average of New Lows is 57 and the ten day moving average of Net Advancing is -27.
Advancing volume was higher at a ratio of 2.63 to one. The closing TRIN was 0.82 and the final tick was 651. The five day average of TRIN is .93 and the ten day average of TRIN is 1.17. The NYSE Composite Index gained 0.45% today while the SPX gained 0.8%.
For the NYSE, relative to the previous 30 session average, volume was -20.36% below the average. Of the last 15 sessions 6 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 17 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 84.% of the average daily volume for the last year. Volume was 89.8% of the last 10 day average and 85.7% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 240,000 and the average tick for the day was 155. There were 141 ticks greater than 600 and 22 ticks more extreme than -600. There were 9 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Moving Average and Support/Resistance Indicators:
86.8% of the SPX are above their five day moving average, 70.6% are above their 10 day average, 51.8% are above their 20 day moving average, 24.8% are above their 50 day moving average, and 48.4% are above their 200 day moving average.
There was one significant moving average crossover Friday as Emerging Markets had the 50 DMA cross below the 200 DMA. This is the so-called "Death Cross." Our moving average Power Rating is 14 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Financials -- Outperformed the SPX by +34%.
- Industrials -- Outperformed the SPX by +9%.
- Technology -- Outperformed the SPX by +12%.
- Consumer Staples -- Outperformed the SPX by +8%.
- Consumer Discretionary -- Outperformed the SPX by +6%.
Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -2%.
- Energy -- Underperformed the SPX by -79%.
- Utilities -- Underperformed the SPX by -61%.
- Health Care -- Underperformed the SPX by -30%.
Checking the sectors of the SPX from Friday: (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 (21) totaled 465,798 shares traded (22,181 average per stock) and declining issues (8) totaled 469,379 shares traded (58,672 average per stock.) 26 components are on an uptrend (3 new uptrends Friday) and 4 components are on a downtrend (no new downtrends Friday.) There were 2 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 -.16% below the 20-Day average.
The Energy sector advancing issues (19) totaled 1,140,708 shares traded (60,037 average per stock) and declining issues (25) totaled 1,175,720 shares traded (47,029 average per stock.) 25 components are on an uptrend (2 new uptrends Friday) and 19 components are on a downtrend (3 new downtrends Friday.) There were no New Highs and 3 New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed -2.% below the 20-Day average.
The Financials sector advancing issues (70) totaled 5,605,333 shares traded (80,076 average per stock) and declining issues (8) totaled 345,546 shares traded (43,193 average per stock.) 72 components are on an uptrend (22 new uptrends Friday) and 9 components are on a downtrend (1 new downtrends Friday.) 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 -2.1% below the 20-Day average.
The Industrials sector advancing issues (54) totaled 1,938,957 shares traded (35,907 average per stock) and declining issues (7) totaled 124,958 shares traded (17,851 average per stock.) 49 components are on an uptrend (9 new uptrends Friday) and 12 components are on a downtrend (2 new downtrends Friday.) 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 -1.98% below the 20-Day average.
The four 'risk sectors' totaled 164 advancing issues and 48 declining issues Friday with 36 new uptrends and 6 new downtrends. 79.6% of Risk Sector components are uptrending.
The Technology sector advancing issues (65) totaled 5,016,242 shares traded (77,173 average per stock) and declining issues (13) totaled 865,869 shares traded (66,605 average per stock.) 59 components are on an uptrend (9 new uptrends Friday) and 19 components are on a downtrend (2 new downtrends Friday.) There were 1 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 -.73% below the 20-Day average.
The Consumer Staples sector advancing issues (33) totaled 1,255,034 shares traded (38,031 average per stock) and declining issues (8) totaled 491,114 shares traded (61,389 average per stock.) 28 components are on an uptrend (11 new uptrends Friday) and 13 components are on a downtrend (no new downtrends Friday.) There were 4 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -.61% below the 20-Day average.
The Utilities sector advancing issues (29) totaled 801,301 shares traded (27,631 average per stock) and declining issues (3) totaled 171,279 shares traded (57,093 average per stock.) 31 components are on an uptrend (no new uptrends Friday) and 1 components are on a downtrend (1 new downtrends Friday.) There were 9 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 1.14% above the 20-Day average.
The Health Care sector advancing issues (47) totaled 1,683,486 shares traded (35,819 average per stock) and declining issues (5) totaled 118,824 shares traded (23,765 average per stock.) 41 components are on an uptrend (8 new uptrends Friday) and 11 components are on a downtrend (no new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -.84% below the 20-Day average.
The Consumer Discretionary sector advancing issues (70) totaled 2,763,307 shares traded (39,476 average per stock) and declining issues (11) totaled 493,103 shares traded (44,828 average per stock.) 60 components are on an uptrend (15 new uptrends Friday) and 21 components are on a downtrend (no new downtrends Friday.) There were 6 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -1.06% below 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 Friday's Action:
Friday was session 3 to close above the 5 DMA, session 3 to close above the 10 DMA, session 1 to close above the 20 DMA, and session 25 to close below the 50 DMA. This was also session 23 for the 5 DMA to close below 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 20.73 points above the 10 DMA.
The SPX 5 DMA is 1303.89, 10 DMA is 1304.93, 20 DMA is 1313.69, 50 DMA is 1356.57, 100 DMA is 1357.85, and 200 DMA is 1288.32.
On Friday the SPX traded above the opening range but did not trade below the opening range. 75.4% of the SPX closed up from the previous close; 86% closed higher than the open. During Friday's session the SPX gained 10.67 points from open to close. The SPX intraday trading range was 18.04 points. The 5-Day average intraday trading range is 16.26 points, the 10-Day average is 17.18 points, and the 20-Day average is 17.77 points. The trading range is contracting. The 5-Day SPX gain is 3.73%, the 10-Day gain is 0.00%, and the 15-Day gain is 1.59%.
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 Monday is +4. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be higher. Mel's 10 Day Oscillator is 31 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are bullish for Monday's session. (Note: There are a few other warning signs for Monday; even without scheduled economic news, this could be a choppy session.)
Since Tuesday, three of the four sessions posted the high of the day during the closing minutes while the low of the day was in the opening minutes. This is a characteristic of a bullish trend.
Many of our trading friends remain bearish. While they may prove to be correct, we also believe that many confuse the economy with the equities. A trader must be careful to avoid confusing the two; the market often moves upward during poor economic times.
The data we follow turned bullish mid-week. While any system, especially a trend following methodology, is subject to whipsaw, right now this signal continues to look strong. It was interesting to notice that the Russell 2000 dipped about 3% late in the week while the internals hardly budged from their bullish stance. This allowed us to continue buying dips resulting in some nice gains on TNA. But follow-through during the upcoming week is essential or we are very likely to find ourselves testing the lows. For now, we will continue to buy dips.
Looking at the big picture, data that follows a much longer timeframe, our proprietary Volume Index had the fast lines cross above the slow lines this week. This has frequently marked significant market bottoms in the past as it shows that traders are more willing to chase stocks higher rather than bottom-feed on the downward moving stocks.
Monday's trading will likely be greatly influenced by weekend news. Europe's politicians will try to make progress in saving Spain's banks from failure. EU authorities and the Spanish government will hold a conference call to discuss methods for bailing out Spain's banks. It is rumored that Spain will ask for a bailout from the EU, potentially taking bailout funds from the European Financial Stability Facility (EFSF).
SPX levels to watch include 1303; a close above is bullish and a close below is bearish. For the Russell 2000, keep an eye on the 755 level. Market Internals remains on a Buy signal but the daily charts of the major indices remain governed by lower lows and lower highs until the SPX trades above 1335 or the Russell 2000 trades above 789.
Week of June 11 - June 15 Overview
Date/Time Release/Consensus
06/12/12 8:30 Export Prices ex-ag./NA
06/12/12 8:30 Import Prices ex-oil/NA
06/12/12 14:00 Treasury Budget/-$125.0B
06/13/12 7:00 MBA Mortgage Index/NA
06/13/12 8:30 Retail Sales/-0.002
06/13/12 8:30 Retail Sales ex-auto/0
06/13/12 8:30 PPI/-0.007
06/13/12 8:30 Core PPI/0.002
06/13/12 10:00 Business Inventories/0.002
06/13/12 10:30 Crude Inventories/NA
06/14/12 8:30 Initial Claims/375K
06/14/12 8:30 Continuing Claims/3275K
06/14/12 8:30 CPI/-0.002
06/14/12 8:30 Core CPI/0.001
06/14/12 8:30 Current Account Balance/-$130.9B
06/15/12 8:30 Empire Manufacturing/13.5
06/15/12 9:00 Net Long-Term TIC Flows/NA
06/15/12 9:15 Industrial Production/0.001
06/15/12 9:15 Capacity Utilization/0.791
06/15/12 9:55 Mich Sentiment/77
Monday, June 11
Economics
No major U.S. economic reports
11:00 Fed to sell $1b-$1.5b TIPS in 1 to 3-year range
11:30 Treasury selling $30b 3-month bills, $27b 6-month bills
CNY New Yuan Loans
05:00 JPY Consumer Confidence
08:00 EUR Italian GDP
22:45 NZD Card Spending
13:30 Germany to sell EU4b 6-mo bills
17:00 France to sell bills
Earnings
Before:
No major reports
After:
Finisar (FNSR) EPS 21c, revs $244.04M
The trade deficit was $50.1 billion, more than the expected $49.3 billion. There is nothing significant scheduled for Monday.
Personal Note: The latest chemo (and the last FDA approved melanoma drug for us as we have exhausted our options) continues to be pure poison but we have settled on a dosage that we can almost tolerate. The largest problem we face with this drug (now that we have overcome the most toxic side effects) is that it can be pure agony for the joints, especially the knees and wrists. This can make simple tasks such as standing or typing (or merely sleeping) nearly impossible at times. And, of course, the blister-like sores on the fingers and finger tips also make typing difficult. But the drug appears to be effective against the melanoma, at least for now. Life is good.
Thank you for reading. Think on it, trade on it, and be well.
-Mel