Bulls Pound Indices Higher
Market Recap:
The bulls were attempting to return to form this morning in response to solid the PMI reports out of Europe and green numbers from the major foreign markets as the first session of the month bullishness continues. There was no premarket economic news to review in the U.S. but we received reports on Construction Spending and the ISM Manufacturing after the open.
The Tuesday session opened with a significant gap upward and never looked back. Intraday pullbacks were rare and tiny as the bulls romped throughout the morning and early afternoon. The afternoon was consolidation along with what appears to be a double intraday top. The bulls managed a rare feat today as they complete shut down the bears; the bears ended the day with zero ticks greater than 600. This happens about once a year.
Looking at our Market Leaders board this evening we see total agreement among the leaders as everyone was up, up, and away today. Five of the ten leaders closed at 52 week highs (which most often are two year highs at this point.) Only two of the ten are off their highs more than a percent and a fraction but those two are Emerging Markets and China.
Market Trend: Nine Sectors Report
Turning to our Nine Sectors Report we have four changes to four key sectors as Materials and Energy move from Neutral to Buy and Financials and Industrials move from Sell to Neutral. We will continue to hold the Sell signal for another session.
In our weekend report to subscribers we wrote: “We've been looking for a market correction and the world events may have been the catalyst to get things started; we remain unconvinced after so many false starts. But even if this is the start of a new trend, a trend change is often marked by volatility, both up and down. An early week bounce, possibly violent, and possibly after a gap down on Monday would not be surprising at all.” We are thinking that this bounce qualifies as “violent”; but no one should have been too greatly surprised as this type of bounce was written into the technical aspects at Friday’s close. We were a bit surprised to see things go beyond 1302 but we were long most of the rally, entering SSO near noon on Friday and exiting too early this morning near 1302.
Looking ahead, we won't be surprised to see anything tomorrow. We had expected the rally to last until tomorrow's close but the data this evening suggests it may have exhausted itself today.
Volume & Breadth Indicators
For the SPX Index there were 426 components advancing and 57 components declining. On the NYSE 3,146 issues were traded with 2,520 advancing issues and 554 retreating issues, a ratio of 4.55 to one advancing. There were 330 new highs and 8 new lows. The five day moving average of New Highs is 164 while the five day moving average of New Lows is 13 and the ten day moving average of Net Advancing is 186.
Advancing volume was higher at a ratio of 7.43 to one. The closing TRIN was 0.61 and the final tick was 970. The five day average of TRIN is 1.06 and the ten day average of TRIN is 1.24. The NYSE Composite Index gained 1.85% today while the SPX gained 1.64%.
For the NYSE, relative to the previous 30 session average, volume was 15.2% above the average. Of the last 15 sessions 13 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 19 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 113.4% of the average daily volume for the last year. Volume was 99.3% of the last 10 day average and 116.9% of the previous day’s volume.
An outrageously positive session, with strong breadth and the broad NYSE Composite Index outperforming the SPX. But it is a bit surprising to see the ten day Net Advancing remain below 200.
Total tick for the day was 431,000 and the average tick for the day was 278. There were 193 ticks greater than 600 and no ticks more extreme than -600. There were 10 ticks greater than 1000 and no ticks more extreme than -1000.
The last day with the tick this strong was last March 5th. But in reviewing the data we found it interesting to note that prior to March 5th the closest to what we saw to today was February 2nd. You may recall that the February 2nd session was sandwiched in between two powerful moves lower. It is counterintuitive but true that days such as today are often found on downturns for the market, just as the strongest market rallies are often found during bad economic times.
Intraday volume patterns today are difficult to determine because the session was really mostly a continuous ramp higher. Looking at the Nightly Breadth Indicators is interesting because all of the New High/New Low ratios declined and that strikes us as a bit strange on a session such as this.
Moving Average and Support/Resistance Indicators:
79.6% of the SPX are above their five day moving average, 75% are above their 10 day average, 70.4% are above their 20 day moving average, 73.8% are above their 50 day moving average, and 88.8% are above their 200 day moving average.
There were no significant moving average crossovers today.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +119%.
- Energy -- Outperformed the SPX by +3%.
- Financials -- Outperformed the SPX by +42%.
- Technology -- Outperformed the SPX by +3%.
- Health Care -- Outperformed the SPX by +15%.
Sectors weaker than the SPX for Tuesday:
- Industrials -- Underperformed the SPX by -28%.
- Consumer Staples -- Underperformed the SPX by -96%.
- Utilities -- Underperformed the SPX by -66%.
- Consumer Discretionary -- Underperformed the SPX by -52%.
In Late Trading:
206 SPX components moved upward and 150 components downward during the after hours with 122 million shares traded.
Wednesday, February 2
Economics
07:00 MBA Mortgage Applications
07:30 Challenger Job Cuts
08:15 ADP Employment Change
10:30 Crude Inventories
Euro-Zone Producer Price Index
New Zealand Participation Rate
POMO Schedule
Treasury Coupon Purchase: 2/15/2021-11/15/2027: $1.5-2.5 bln
Earnings
Before: AGN, AOL, ARW, AVY, CAM, CGX, DWSN, EVR, GNW, HSY, HSP, IACI, KKR, LVLT, LZ, MMP, MAN, MRO, MAT, NDAQ, MUS, ODFL, PCCC, SU, TMO, TWX, WHR, WEC
After: NDN, ACE, ARE, ATW, BBBB, CACI, CNW, CNQR, CUTR, DNB, EQR, GMCR, SOLR, INSP, ICO, ISIL, JOEZ, LNC, NETL, OTEX, PMT, RNOW, SIGI, SFLY, SPR, STLY, TTEK, V, VMC, WRB, YUM, WLT, WGL.
A report from payroll services firm ADP is expected to show that employers in the private sector added 150,000 workers in January after boosting payrolls by 297,000 inthe previous month. Separately, outplacement firm Challenger, Gray & Christmas issues its report on planned job cuts in January. Meanwhile, the U.S. government's weekly crude oil inventories report and readings on mortgage applications are also on tap.
Good trading.
-Mel