Bulls Continue to Chant "Rally On" After Yet Another Sideways Session
Market Recap:
SPX big winners were Abercrombie & Fitch Co (ANF) 8.37%, Sprint Nextel Corp (S) 8.06%, and JDS Uniphase Corp (JDSU) 7.79%. SPX big losers were Staples Inc (SPLS) -17.35%, Deere & Co (DE) -6.61%, and Alexander & Baldwin Inc (ALEX) -4.58%.
SPX five day big winners are Sprint Nextel Corp (S) 16.92%, Abercrombie & Fitch Co (ANF) 13.94%, and Metropcs Communications Inc (PCS) 12.14%. SPX five day big losers are Staples Inc (SPLS) -13.8%, Monster Beverage Corporation (MNST) -13.27%, and Yahoo! Inc (YHOO) -8.72%.
New Ten Day Highs: MMM, ADBE, AKAM, AMGN, ADP, BLL, BAX, BBT, CHRW, CINF, CTAS, CMA, STZ, DRI, XRAY, DNB, ROST, EL, EXPD, XOM, FISV, FRX, BEN, GD, HRS, HSY, HD, HRL, HST, ISRG, JDSU, JCI, LNC, LLTC, LMT, LOW, PCS, MCHP, MYL, JWN, PDCO, PBCT, PGR, RTN, SHLD, SLM, SJM, S, STJ, SBUX, SYK, STI, SYY, TGT, TXN, TMO, TIF, TRV, UPS, UNH, MBI, VAR, WM, AMZN, GOOG
New Ten Day Lows: ABC, AIV, T, XEL, CMS, ED, DE, DTE, EMC, ETR, EQR, EXPE, TEG, MCO, ODP, SNDK, SO, SPLS
Volume & Breadth Indicators
For the SPX Index there were 321 components advancing and 174 components declining. On the NYSE 3,123 issues were traded with 1,907 advancing issues and 1,119 retreating issues, a ratio of 1.7 to one advancing. There were 99 new highs and 17 new lows. The five day moving average of New Highs is 116 while the five day moving average of New Lows is 15 and the ten day moving average of Net Advancing is 350. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 1.71 to one. The closing TRIN was 0.99 and the final tick was 370. The five day average of TRIN is .91 and the ten day average of TRIN is 1.01. The NYSE Composite Index gained 0.12% today while the SPX gained 0.11%.
For the NYSE, relative to the previous 30 session average, volume was -31.01% below the average. Of the last 15 sessions 5 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 12 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 71.8% of the average daily volume for the last year. Volume was 80.3% of the last 10 day average and 99.6% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 72,000 and the average tick for the day was 46. There were 9 ticks greater than 600 and 4 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000.
Moving Average and Support/Resistance Indicators:
57.6% of the SPX are above their five day moving average, 71.6% are above their 10 day average, 76.8% are above their 20 day moving average, 73.6% are above their 50 day moving average, and 61.6% are above their 200 day moving average.
There were no significant moving average crossovers today. Our moving average Power Rating is 76 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Wednesday:
- Basic Materials -- Outperformed the SPX by +9%.
- Financials -- Outperformed the SPX by +29%.
- Industrials -- Outperformed the SPX by +11%.
- Health Care -- Outperformed the SPX by +15%.
- Consumer Discretionary -- Outperformed the SPX by +21%.
Sectors weaker than the SPX for Wednesday:
- Energy -- Underperformed the SPX by -12%.
- Technology -- Underperformed the SPX by -7%.
- Consumer Staples -- Underperformed the SPX by -5%.
- Utilities -- Underperformed the SPX by -53%.
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 (21) totaled 362,921 shares traded (17,282 average per stock) and declining issues (9) totaled 359,528 shares traded (39,948 average per stock.) 22 components are on an uptrend (3 new uptrends today) and 8 components are on a downtrend (1 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 1.85% above the 20-Day average.
The Energy sector advancing issues (18) totaled 432,441 shares traded (24,025 average per stock) and declining issues (27) totaled 1,297,783 shares traded (48,066 average per stock.) 33 components are on an uptrend (no new uptrends today) and 12 components are on a downtrend (3 new downtrends today.) 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 2.89% above the 20-Day average.
The Financials sector advancing issues (64) totaled 2,341,571 shares traded (36,587 average per stock) and declining issues (16) totaled 710,731 shares traded (44,421 average per stock.) 65 components are on an uptrend (4 new uptrends today) and 16 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 above the daily pivot. The sector 5-Day average closed 1.82% above the 20-Day average.
The Industrials sector advancing issues (41) totaled 873,568 shares traded (21,307 average per stock) and declining issues (19) totaled 531,693 shares traded (27,984 average per stock.) 51 components are on an uptrend (4 new uptrends today) and 9 components are on a downtrend (2 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 2.02% above the 20-Day average.
The four 'risk sectors' totaled 144 advancing issues and 71 declining issues today with 11 new uptrends and 7 new downtrends. 79.2% of Risk Sector components are uptrending.
The Technology sector advancing issues (54) totaled 4,576,955 shares traded (84,758 average per stock) and declining issues (24) totaled 1,835,846 shares traded (76,494 average per stock.) 71 components are on an uptrend (7 new uptrends today) and 8 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 2.77% above the 20-Day average.
The Consumer Staples sector advancing issues (25) totaled 697,641 shares traded (27,906 average per stock) and declining issues (16) totaled 638,214 shares traded (39,888 average per stock.) 32 components are on an uptrend (1 new uptrends today) and 9 components are on a downtrend (1 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 .86% above the 20-Day average.
The Utilities sector advancing issues (4) totaled 55,221 shares traded (13,805 average per stock) and declining issues (25) totaled 514,437 shares traded (20,577 average per stock.) 6 components are on an uptrend (no new uptrends today) and 25 components are on a downtrend (5 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 -.18% below the 20-Day average.
The Health Care sector advancing issues (38) totaled 957,267 shares traded (25,191 average per stock) and declining issues (14) totaled 419,865 shares traded (29,990 average per stock.) 41 components are on an uptrend (1 new uptrends today) and 11 components are on a downtrend (1 new downtrends today.) 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 .82% above the 20-Day average.
The Consumer Discretionary sector advancing issues (56) totaled 2,052,474 shares traded (36,651 average per stock) and declining issues (24) totaled 1,609,858 shares traded (67,077 average per stock.) 63 components are on an uptrend (6 new uptrends today) and 18 components are on a downtrend (3 new downtrends today.) There were 2 New Highs and 1 New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.62% 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 9 to close above the 5 DMA, session 15 to close above the 10 DMA, session 15 to close above the 20 DMA, and session 24 to close above the 50 DMA. This was also session 13 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 7.93 points above the 10 DMA.
The SPX 5 DMA is 1404.45, 10 DMA is 1397.6, 20 DMA is 1381.39, 50 DMA is 1357.16, 100 DMA is 1360.45, and 200 DMA is 1328.71.
On Wednesday the SPX traded above the opening range but did not trade below the opening range. 60.4% of the SPX closed up from the previous close; 66.6% closed higher than the open. During Wednesday's session the SPX gained 1.64 points from open to close. The SPX intraday trading range was 5.38 points. The 5-Day average intraday trading range is 7.99 points, the 10-Day average is 9.02 points, and the 20-Day average is 11.0 points. The trading range is contracting. The daily bar painted an Inside day. The session was an NR7 day (Narrowest Range last 7 days). The 5-Day SPX gain is 0.24%, the 10-Day gain is 2.20%, and the 15-Day gain is 5.06%.
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 -1. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be sideways. Mel's 5-Day Oscillator is 56 and Mel's 10-Day Oscillator is 58 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bearish for Thursday's session.
It can get difficult to write something constructive each night after so many tight range sessions, and especially with our physical condition making it difficult as well. The technicals have simply not been moved much by this type of action but the longer it continues the more likely the bulls remain in charge.
We took advantage of today to continue to build our short positions with today's focus being on adding two layers of TZA.
Please don't get us wrong: We are not a permabear. But the last time the tick action intraday just disappeared like this was in early October of 2007. Check your charts for what happened then; we are not suggesting the same for here and now but the total lack of institutional involvement has been a key prior to all large moves down for the equities.
To review: We are in UVXY averaged at $5.94 and 4.2% of account value. We are in SPXU averaged at $42.58 and 30.4% of account value. We are in TZA averaged at $17.61 and 25.2% of account value. We are 59.81% invested.
Our Market Internals continue to look bullish. But there is a loss of momentum while the internals remain extreme; this most often leads something of a pullback. Yet we are seeing nothing here but slow grind sideways on low volume. The utter lack of institutional involvement is the key for us that continue to keep us short.
Thursday, August 16
Economics
08:30 Initial Jobless Claims – consensus 364K, prior 361K
08:30 Continuing Claims – consensus 3300K, prior 3332K
08:30 Housing Starts – consensus 757K, prior 760K
08:30 Building Permits – consensus 765K, prior 755K
10:00 Philadelphia Fed – consensus -5.0, prior -12.9
11:00 Fed buying $1.5b-$2b Treasuries in 25 to 30-year range
08:30 GBP Retail Sales
09:00 EUR Eurozone CPI
Earnings
Before:
Sear’s Holdings (SHLD) EPS -86c
Wal-Mart (WMT) EPS $1.17
Ross Stores (ROST) EPS 81c
After:
Gap (GPS) EPS 48c
Dollar Tree (DLTR) EPS 47c
Aeropostale (ARO) EPS 2c
The CPI came in flat versus an expected rise of 0.2%. Industrial production rose 0.6%, more than the consensus 0.5%. The Empire State index was - 5.85, much worse than the expected 7.00. The home price index was 37, more than the anticipated 35. Oil inventories dropped 3.7 million barrels, exactly the same as last week. On Thursday we will get housing starts, jobless claims and the Philadelphia Fed survey.
Thank you for reading. Think on it, trade on it, and be well.
-Mel