Bulls Continue to Counter-Punch While Bears Stagger
by Jerome "Mel" Hickerson
Market Recap:
Non-farm payrolls dropped 54,000 in August vrs an expected drop of 110,000. Prior months were also revised upward. Futures exploded higher 13 points as a result of the data release.
The session began with the SPX quickly gapping above 1100 to put the high of the day on the chart at 9:41. ISM data released at 10 am was disappointing and the index quickly surrendered ten points to put the low of the day in at 10:58 am. But this day once again belonged to the bulls as the bears fumbled the ball back and the index spent the rest of the session clawing higher to close the week just off the daily and weekly highs. It was a remarkable comeback for the index in the face of disappointing economic news.
This was a most interesting week. The economic news was less bad than previous weeks but hardly good. And honestly, the better economic news looks like outliers that will be “corrected” down the road. This market was just hungry for a relief rally.
The real issue now is whether this remains just a relief rally or whether something more can be made of it. The technicals this weekend are certainly much different than they were at the beginning of the week. We’ve always believed that one more trip to 1100 would be a prelude to a retest of 1010 but the way we found ourselves above 1100 now raises some doubt about the retest.
But let’s make no mistake. The market remains vulnerable to sudden knee-jerk reactions to news events. While the technicals are greatly improved this week, any sudden catalyst can send this market reeling again. And any trip below 1060 would certainly raise the odds of testing 1010 again.
Looking at the Market Leaders board we still see Emerging Markets and the Dow leading the way higher with SOX as the weakness. Even the XLF has begun to join in with this rally; if the SOX begins to participate, we are much more likely to go higher.
Market Trend: Nine Sectors Report
There were no changes on the Nine Sectors Report from Friday. But we’ve reached a point where the market most often takes a breather; the Utilities Sector looks most likely to show weakness first. We look for some general market weakness early next week.
The Nine Sectors swing signal finishes the summer (Memorial Day to Labor Day) with a net gain of 218 points while the index gained ten points.
Volume & Breadth Indicators
For the SPX Index there were 462 Advancers/26 Decliners. On the NYSE 3,137 issues were traded with 2,370 advancing issues and 666 retreating issues, a ratio of 3.56 to 1 advancing. There were 244 new highs and 4 new lows. The 5 day moving average of New Highs is 151 while the 5 day moving average of New Lows is 32 and the 10 day moving average of Net Advancing is 354. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 10.14 to 1. The closing TRIN was 0.35 and the final tick was 1169. The NYSE Composite Index gained 1.27% today.
For the NYSE, relative to the previous 30 session average, volume was -7.37% below the average. Of the last 15 sessions 8 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 21 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 73.8% of the average daily volume for the last year. Volume was 90.1% of the last 10 day average and 98.9% of the previous day’s volume.
Advancing volume once again outperforms the advancing issues ratio. Yet another huge final tick. This is the first time since the March 2009 lows that we have had three successive days of greater than 1000 final ticks. This strongly suggests that something has changed within the marketplace; bears should at least take notice of the possibility.
Further, total tick for the day was 175,000 and the average tick for the day was 114. There were 92 ticks greater than 600 and 32 ticks more extreme than -600. There were 3 ticks greater than 1000 and 1 ticks more extreme than -1000. The tick action suggests institutional accumulation.
The tick action Friday was rather mild; after the open, volume was low and institutional activity appeared to be weak. Looking at the Indicators, we see that the McClellan Summation Index moved into positive territory, something we’ve been watching for all week. Other indicators also moved bullishly.
One item to keep in mind is the Advance/Decline line Friday brought the NYSE A/D line to just below the all-time high. This suggests that the SPX has room to run higher.
Moving Average Indicators:
24.00% of the SPX components are giving a crossover Buy signal; 15.00% of the SPX components are giving a Sell signal. This is a 1.6 to 1 ratio of Buy signals over Sell signals.
97% of the SPX are above their five day moving average, 96.4% are above their 10 day average, 85.6% are above their 20 day moving average, 69.4% are above their 50 day moving average, 48.8% are above their 100 day moving average, and 49.6% are above their 150 day moving average. Note: When the percentage above the 20 DMA approaches 90%, a pullback becomes likely.
Both the Russell small caps and Emerging markets saw their 5 DMA cross above the 20 DMA. Other indices are almost certain to do the same next week. This is a very simple yet reliable bullish indicator.
Elsewhere on the Moving Averages chart we see that several of the averages have now turned upward. But we should note that Friday’s action saw the SPX touch the 100 DMA and turn downward. There is still massive overhead resistance, especially in the 1120 to 1130 area.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Financials -- Outperformed the SPX by +70%.
- Industrials -- Outperformed the SPX by +18%.
- Technology -- Outperformed the SPX by +26%.
- Consumer Discretionary -- Outperformed the SPX by +15%.
Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -15%.
- Energy -- Underperformed the SPX by -17%.
- Consumer Staples -- Underperformed the SPX by -76%.
- Utilities -- Underperformed the SPX by -100%.
- Health Care -- Underperformed the SPX by -38%.
Stocks on the Move:
Today's SPX component winners and losers:
- Largest one day loser is CPB with -3.03%
- Largest three day loser is BF/B with -3.53%
- Largest five day loser is BF/B with -4.99%
- Largest ten day loser is SNDK with -10.83%
- Largest one day winner is MWW with 6.85%
- Largest three day winner is ODP with 17.94%
- Largest five day winner is MWW with 13.13%
- Largest ten day winner is LNC with 22.14%
In Late Trading:
216 SPX components moved upward and 145 components downward during the after hours with 75 million shares traded. After hours volume was light.
Week of September 06 - September 10 Overview
Date/Time Release/Consensus
09/08/10 10:30 Crude Inventories/NA
09/08/10 14:00 Fed's Beige Book/NA
09/08/10 15:00 Consumer Credit/-$5.25B
09/09/10 8:30 Initial Claims/470K
09/09/10 8:30 Continuing Claims/4445K
09/09/10 8:30 Trade Balance/-$47.2B
09/10/10 10:00 Wholesale Inventories
Tuesday, September 7
No significant U.S. releases.
Australia Interest Rate Decision
Swiss Unemployment Rate 3.6% cons.
German Factory Orders 3.2% cons.
New Zealand Manufacturing Activity 0.9% cons.
Japan Machine Orders 2.0% cons.
JapanTrade Balance 865.0B Yen cons.
Earnings
Before: AHII, CASY, PIKE
After: FLOW, MIND, NAV, PBY, PVH
Auction
11:30 3-Month Bill
11:30 6-Month Bill
01:00 3-Yr Note
Have a great holiday weekend!
-Mel
