Bulls Don't Give Up
by Jerome "Mel" Hickerson
Greetings tonight from beautiful San Diego, where the weather is simply incredible after the heat we’ve seen in the eastern part of the country. You may have to forgive me if I am a bit brief this weekend.
We didn’t have any economic data to review before Friday’s bell, but we did get a report on Wholesale Inventories at 10:00am. Most world markets were higher overnight, with Shanghai up 2.3%. Futures were bouncing a bit going into the open but still pointed to a modestly weak open.
The session opened on low volume with low volatility. The SPX moved upward in a zig-zag fashion setting the morning high at 10:41. The index then retreated a bit over the next half hour before spending more than two hours in a very tight two point range. But the last couple of hours surged higher as sellers were scarce and some buyers came in.
This was truly a low volume levitation as we saw the lowest volume of 2010. The last hour really fit the mold of shorts covering rather than bullish investors. But Price is the Ultimate Indicator and Price had a very bullish week.
Friday was also the narrowest range in the last seven sessions; as was Thursday. So we’ve seen back-to-back NR7 days; this last occurred on May 12th and 13th and also as the market topped on April 9th and 12th. Whether this proves to be a short-term topping pattern we won’t know for several days, but it certainly fits the characteristics.
A quick glance at the daily chart shows five consecutive higher highs and higher lows. The weekly chart shows an inside reversal week. We’ve seen two inside reversal weeks previously in the last year: 5/29/09 and 2/12/10. There have been only three other inside weeks during the last year; only one resulted in the market turning downward (and that week was a downward reversal week.) The daily and weekly chart patterns really suggest that we could go higher.
Last weekend I wrote that I expected a bounce this week. I admit that I was looking for 1060, not nearly 1080. Now that we’ve bounced beyond the mid-point of the downward channel, it seems possible that we could go as high as 1110 – but again I am not expecting that high.
Any move above the 10 month moving average (at around 1100) would have to suggest that the rally is reviving. If we get close to 1100, I expect fierce resistance.
My outlook for next week is for some weakness, at least early in the week. Friday closed right on the 20 day moving average. The 50 DMA sits above at 1100. A swift rejection of either moving average could send us quickly to a retest of 1040.
But earnings begin and it is options expiration; volatility associated with either will likely overwhelm technicals. So be ready for anything.
Day Trade Systems Update: (Signals today)
* SSO at: 11:25
* GDX at: 12:45
* GDX at: 1:50
Our trade systems went 3-for-3 on Friday but we were taking small bites. You have to be willing to take what the market gives; trying for more on tight range days usually results in more frustration than profit.
One other important note from Friday’s action: We really wanted to trade short-side. All of our experience was literally screaming to take a short position. But everything we saw internally kept whispering “we’re going higher.” This is a good example of why we trade what we see and not what we think.
Mel’s Missives from the Matrix:
- Total tick for the day was 315,000 and the average tick for the day was 205. There were 242 ticks greater than 600 and 28 ticks more extreme than -600. There were 27 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 10.06 points. The intraday trading range - 9:35 to the close - was 10.06. The 5 DMA of daily range is 19.89.
- Evidence of the intraday trend: At 10am volume was 71.76% of the 10 day average. By noon the volume was 72.52% of the 10 day average, and by 2pm volume was 71.99% of the 10 day average.
- The day's volume was 70.3% of the average daily volume for the last year. Volume was 71.4% of the last 10 day average and 77% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 2:45 and 3:00 when relative volume increased 19.8% while the SPX was rising 0.27%. The largest drop in relative volume came between 3:00 and 3:15 when relative volume dropped -29.5% while the SPX was rising 0.07%.
- 54% of the SPX stocks closed with two day RSI above 90. 78% closed with RSI above 80. 1% closed with RSI below 20 and 1% closed with RSI below 10.
- 95.2% of the SPX are above their five day moving average, 87.8% are above their 10 day average, 48.2% are above their 20 day moving average, 32.2% are above their 50 day moving average, 28% are above their 100 day moving average, and 37% are above their 150 day moving average.
- 55% of the SPX closed above their most recent previous high.
- 2% of the SPX stocks closed below their most recent previous lows.
- 388 SPX issues advanced and 101 issues declined, a net SPX advance/decline of 287.
- Evidence of the intraday trend: At 10am, 51.4% of the SPX components were in the top half of the range. By noon, 48% were in the top half of the range, and by 2pm, 64.4% were in the top half of the range.
- 86.6% of stocks closed in the top half of the day's range. (13.2% closed in bottom half.)
- 33.4% of stocks closed in the top 10% of the day's range. 56.6% of stocks closed in the top 20% of the day's range.
- 0.6% of stocks closed in the bottom 10% of the day's range. 2% of stocks closed in the bottom 20% of the day's range.
- 3.4% of stocks closed within 2% of their 52 week high. 11.6% of stocks closed within 5% of their 52 week high.
- 67% of stocks closed within 50% of their 52 week low. 37.4% of stocks closed within 25% of their 52 week low.
- 45.8% of stocks closed within ¼% of their high for the day.
- 1.2% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 45.6% of the SPX components were up since the open. By noon, 54% were up since the open, and by 2pm, 63% were up since the open.
- 77.8% of the SPX closed up from the previous close; 78.2% closed higher than the open.
- Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +169%.
- Financials -- Outperformed the SPX by +55%.
- Industrials -- Outperformed the SPX by +27%.
- Utilities -- Outperformed the SPX by +7%.
- Consumer Discretionary -- Outperformed the SPX by +25%.
- Sectors weaker than the SPX for Friday:
- Energy -- Underperformed the SPX by -14%.
- Technology -- Underperformed the SPX by -20%.
- Consumer Staples -- Underperformed the SPX by -71%.
- Health Care -- Underperformed the SPX by -47%.
- The $SOX index strength was stronger relative to the SPX Friday by 0.37%.
- The XLF outperformed the SPX by 0.55% Friday.
- The 2 Day RSI of the SPX is 96. The Dow RSI is 96, the NASDAQ is 95 and the Russell is 90.
- Over the last four sessions, the average session closed 82.15% of the range above the low. Friday closed at 97.1% of the daily range.
- Upside momentum moved upward Friday, from Thursday’s 3.77 to today’s 4.93. The ratio of SPX components giving a crossover sell signal compared to buy signals moved bullishly to S 7.13 to 1.
- The ISEE Equity 10 day moving average Friday was 176.2. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 171 SPX components moved upward and 169 components downward during the after hours with 73 million shares traded.
Have a great weekend everyone!
-Mel
