Bulls Get Help From Greece Bailout Plan
by Jerome "Mel" Hickerson, MarketsPath.com
Overnight futures surged on rumors of a rescue/bailout plan for Greece. The regular session opened with a gap upward, quickly sold back a portion of that gap, then popped back upward. About 10:15 the SPX seemed to run out of steam and spent the next hour selling giving up more than ten points. The index was at a test of the session lows when news broke regarding a Greece financial bailout by Germany. Within five minutes the SPX popped six points and then continued to surge for another half hour, setting the high of the day at 12:19. At 12:40, news struck again, suggesting that any bailout news was premature. The SPX quickly dropped more than seven points in two minutes. And that pretty much ended the excitement of the session as the index spent the next three hours chopping sideways with a slight downward bias.
Let’s take a quick look at the daily chart. We finally see the SPX with three days of higher highs and higher lows. The last time this happened was January 14th when the index set the 52 week high. Today’s bullish action was vital; the SPX was vulnerable coming into today’s session. But the same can be said about tomorrow; the index needs to show some sustained strength and move positively again. A quick giveback of today’s gain would refuel the bears whereas any break above 1080 is likely to spur some short covering.
For tomorrow, our model is continuing to call for more upside. I realize how many of you are bearish, but I call what I see in the data. The data is calling for the likelihood of several more days of upside, certainly not every day, but from the data I am looking at, I think we break above the 1080-1085 zone of resistance and seem likely to revisit 1100 in the upcoming days. Of course, news may yet drive us back down. But betting on the news is a difficult game to play; I prefer to bet on the historical odds.
The following is an excerpt that subscribers received on Sunday:
Since 2003, the longest weekly SPX losing streak (defined as a loss of more than 1 point in any week - a fraction of a point loss during a week seems too close to a "tie" for me) is four weeks (happened on nine occasions.)
The average SPX gain on week five has been 30.48 points on those nine instances. We are entering the tenth occasion.
I'm not trying to suggest that we see a 30 point increase this week (possible, of course.) But the history of the SPX does suggest that a fifth losing week is a long shot.
Going back further to 2000, there were four examples of a fifth consecutive losing week and the average gain (including the four losses) on the fifth week is 21.43 points.
Going back even further, the decade of the 1990s had only two losing stretches that exceeded four weeks the entire decade. So over the last 20 years, there have only been six losing streaks longer than our current streak (notice that even the bear market of 2008 did not have a longer streak). The average gain on the fifth week has been just under 2% (net including losses) and 4.2% just on the winning weeks.
Historical odds would seem to favor the bulls this week. But we all know that news, and the reaction to the news, will drive.
SPX Summary for Tuesday, February 09, 2010
446 Advancers/47 Decliners
Today's SPX component winners and losers:
• Largest one day loser is ERTS with -9.60%
• Largest three day loser is DNB with -8.50%
• Largest five day loser is WU with -14.33%
• Largest ten day loser is QCOM with -19.35%
• Largest one day winner is HAR with 16.17%
• Largest three day winner is ARG with 40.84%
• Largest five day winner is ARG with 37.43%
• Largest ten day winner is EK with 31.78%
*** SPX Technical Summary ***
The lowest 14 day RSI component is BSX; the highest 14 day RSI component is EL. The average 14 day RSI of all 500 components is 37.
The greatest positive five day momentum component is ARG; the greatest negative five day momentum component is WU. The average five day momentum of all 500 components is -3.1.
5.60% of the SPX components are giving a crossover Buy signal; 74.40% of the SPX components are giving a Sell signal. This is a 13.3 to 1 ratio of Sell signals over Buy signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 4 components.
• From Buy to Neutral: 12 components.
• From Neutral to Sell: 52 components.
• From Neutral to Buy: 9 components.
Wednesday, February 10
Economics
08:30 Trade Balance -35.0 bln. Cons.
10:30 Crude Inventories
02:00 Treasury Budget -$60.0 bln.
Earnings
Before: MT, CCE, CSC, DF, DISCA, ELN, ICE, JNY, ID, LVLT, LPX, MMC, MTOX, NYT, SNI, SON, S, WYN
After: ATVI, ALL, STV, SCOR, DVA, ELON, EQIX, MAS, PAA, PL, PRU, SWIR, WATG
Speeches
12:45 Charles Plosser
Auctions
01:00 10-Yr Note Auction
Mel’s Random Hits:
• Total tick for the day was +128,000. The bulls had control of the tape but surrendered control around 11am. The bears were making a nice power grab until the Greece news broke around 11:30. At that time, the index was very vulnerable but the market responded will an amazing surge. The bears had brief control around 1:30 and 3:00 but made little headway as most of the afternoon traded in a coil pattern.
• The day's range was 19.22 points.
• The day's volume was 93.31% of the average daily volume for the last year. Volume was 97.18% of the last 10 day average but 124% of Monday.
• 3% of the SPX stocks closed with two day RSI above 90. 12% closed with RSI above 80. 11% closed with RSI below 20 and 5% closed with RSI below 10.
• 53.0% of the SPX are above their five day moving average, 30.6% are above their 10 day average, and 16.2% are above their 20 day moving average. Nice improvements on these numbers for today but the numbers still suggest an oversold condition.
• 9% of the SPX stocks closed below their most recent previous lows.
• 26% of the SPX closed above their most recent previous high.
• 54.6% of stocks closed in the top half of the day's range. (45.5% closed in bottom half.)
• 5.4% of stocks closed in the bottom 20% of the day's range.
• 1.8% of stocks closed in the top 10% of the day's range.
• 2.4% of stocks closed within 2% of their 52 week high. 8.8% of stocks closed within 5% of their 52 week high.
• 30.0% of stocks closed within 50% of their 52 week low. 9.8% of stocks closed within 25% of their 52 week low.
• 2.8% of stocks closed within ¼% of their high for the day.
• 2.6% of stocks closed within ¼% of their low for the day.
• 90.2% of the SPX closed up from the previous close; 62.2% closed higher than the open. Evidence of the large gap upward.
• Sectors weaker than the SPX for the day: Financials, Consumer Staples, Health Care, Technology, and Utilities.
• Sectors stronger than the SPX for the day: Energy, Basic Materials, Industrials, and Consumer Discretionary.
• The $SOX index strength was stronger again than the SPX today.
• The 2 Day RSI of the SPX is 60. The Dow RSI is 63, NASDAQ is 63 and Russell 59. A huge once day change in these numbers.
• Over the last five sessions, the average session closed 38% of the range above the low.
• Downside momentum increased from yesterday’s -2.98 to today’s -3.10. The ratio of SPX components giving a crossover sell signal compared to buy signals has jumped to 13.3 to 1. The index really needs at least another positive session to avoid greater technical damage.
• 215 SPX components moved upward and 141 components downward during the after hours with 124 million shares traded.
Have a great Wednesday everyone.
-----------
"Mel"
Today we closed out of:
Ultra S&P 500 ProShares (SSO) +1.44%
Ultra S&P 500 ProShares (SSO) +0.72%
