Bulls Recover Their Mojo
Market Recap:
Expectations that the Chinese will take more stimulative action helped lift Asian shares overnight. But European markets were mostly lower this morning. U.S. futures were pointing to a flat open. Initial Claims for Unemployment Insurance for the week ending 4/7 rose 10,000 to 367K, which was above the consensus estimate for 359K and last week’s revised total of 367k (from 357k). Continuing Claims for the week ending 3/31 came in at 3.251M vs. consensus of 3.347M. The Labor Department reported the Producer Price Index for March was unchanged, which was below the consensus estimate for a rise of +0.3%. When you strip out food and energy, the Core PPI came in at +0.3%, which was above the consensus for +0.2% and last month’s +0.2%.
Thursday's session began without a significant gap and moved rapidly higher for the opening half hour. Indices then rested for thirty minutes before surging upward again. Another surge higher followed during the noon hour but the mid afternoon showed a little weakness yet the highs of the day were in the final minutes.
Our Market Leaders Board reflects the strength that was enjoyed by the market today. The Financials gained nearly 2% while Technology and the Dow lagged a bit behind.
SPX big winners were Alpha Natural Resources (ANR) 9.73%, Rowan Companies Inc (RDC) 9.26%, and US Steel Corp (X) 7.45%. SPX big losers were First Solar Inc (FSLR) -2.21%, Fastenal Company (FAST) -1.58%, and Quest Diagnostics Inc (DGX) -1.24%.
SPX five day big winners are Supervalu Inc (SVU) 21.89%, Alpha Natural Resources (ANR) 8.94%, and Hewlett-Packard Co (HPQ) 7.86%. SPX five day big losers are Constellation Brands Inc (STZ) -12.96%, WPX Energy Inc (WPX) -10.37%, and Carmax Inc (KMX) -8.91%.
New Ten Day Highs: AVY, CF, CNX, ESV, EXPD, HPQ, INTC, ISRG, IRM, MCK, NSC, ORLY, RTN, RDC, SWY, SRE, SHW, SBUX, SRCL, TIE, MBI, VRSN, WM, WPI
New Ten Day Lows: ABT, AES, ALL, AEE, APA, BCR, BDX, BMY, CNP, CVX, XEL, CMS, KO, CCE, CAG, SAI, CVS, D, DTE, DUK, EIX, EXC, FAST, BEN, GIS, HNZ, HRL, ITT, JNS, JNJ, LH, LLY, MWW, NTAP, NI, POM, PEP, PFE, PG, PGN, PLD, RRC, SCG, SHLD, SJM, SWN, SE, TSN, AMZN
Volume & Breadth Indicators
For the SPX Index there were 466 components advancing and 30 components declining. On the NYSE 3,145 issues were traded with 2,505 advancing issues and 551 retreating issues, a ratio of 4.55 to one advancing. There were 44 new highs and 12 new lows. The five day moving average of New Highs is 37 while the five day moving average of New Lows is 42 and the ten day moving average of Net Advancing is -199.
Advancing volume was higher at a ratio of 10.61 to one. The closing TRIN was 0.46 and the final tick was 782. The five day average of TRIN is 1.48 and the ten day average of TRIN is 1.26. The NYSE Composite Index gained 1.61% today while the SPX gained 1.36%.
For the NYSE, relative to the previous 30 session average, volume was -6.30% below the average. Of the last 15 sessions 6 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 17 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 83.4% of the average daily volume for the last year. Volume was 91.5% of the last 10 day average and 92.6% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 240,000 and the average tick for the day was 155. There were 57 ticks greater than 600 and 3 ticks more extreme than -600. There were 3 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Looking at the one-minute tick data, there were 74 ticks greater than 500 and 13 ticks more extreme than -500. 68.7% one-minute ticks were positive. There were 15 ticks greater than 900 and 1 ticks more extreme than -900. The tick action suggests institutional accumulation.
The tick data today shows that the buyers completely ruled from start to finish.
The intraday volume pattern has a large spike of volume on the morning surge of the SPX as well as a surge of volume before the close. The Nightly Breadth Indicators continue to look more mixed than bullish but the McClellan Oscillator remains stubbornly near oversold.
Moving Average and Support/Resistance Indicators:
81.6% of the SPX are above their five day moving average, 40.6% are above their 10 day average, 31.4% are above their 20 day moving average, 47.6% are above their 50 day moving average, and 76% are above their 200 day moving average.
There were no significant moving average crossovers today. Our moving average Power Rating is 58 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Thursday:
- Basic Materials -- Outperformed the SPX by +135%.
- Energy -- Outperformed the SPX by +80%.
- Financials -- Outperformed the SPX by +49%.
- Industrials -- Outperformed the SPX by +76%.
Sectors weaker than the SPX for Thursday:
- Technology -- Underperformed the SPX by -37%.
- Consumer Staples -- Underperformed the SPX by -129%.
- Utilities -- Underperformed the SPX by -123%.
- Health Care -- Underperformed the SPX by -83%.
- Consumer Discretionary -- Underperformed the SPX by -16%.
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 (30) totaled 1,416,140 shares traded (47,205 average per stock.) 18 components are on an uptrend (14 new uptrends today) and 12 components are on a downtrend (no new downtrends today.) There were 1 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -2.28% below the 20-Day average.
The Energy sector advancing issues (43) totaled 2,292,245 shares traded (53,308 average per stock.) 11 components are on an uptrend (10 new uptrends today) and 32 components are on a downtrend (no new downtrends today.) There were no New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -3.51% below the 20-Day average.
The Financials sector advancing issues (80) totaled 5,891,191 shares traded (73,640 average per stock) and declining issues (1) totaled 56,698 shares traded (56,698 average per stock.) 33 components are on an uptrend (28 new uptrends today) and 48 components are on a downtrend (no new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.19% below the 20-Day average.
The Industrials sector advancing issues (60) totaled 1,537,674 shares traded (25,628 average per stock) and declining issues (1) totaled 60,966 shares traded (60,966 average per stock.) 26 components are on an uptrend (24 new uptrends today) and 35 components are on a downtrend (no new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -2.36% below the 20-Day average.
The four 'risk sectors' totaled 213 advancing issues and 2 declining issues today with 76 new uptrends and 0 new downtrends.
The Technology sector advancing issues (71) totaled 4,681,985 shares traded (65,943 average per stock) and declining issues (6) totaled 958,174 shares traded (159,696 average per stock.) 34 components are on an uptrend (25 new uptrends today) and 45 components are on a downtrend (1 new downtrends today.) There were 3 New Highs and 1 New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -.74% below the 20-Day average.
The Consumer Staples sector advancing issues (32) totaled 1,169,744 shares traded (36,555 average per stock) and declining issues (9) totaled 274,764 shares traded (30,529 average per stock.) 17 components are on an uptrend (5 new uptrends today) and 25 components are on a downtrend (no new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.3% below the 20-Day average.
The Utilities sector advancing issues (29) totaled 706,565 shares traded (24,364 average per stock) and declining issues (2) totaled 62,361 shares traded (31,181 average per stock.) 5 components are on an uptrend (3 new uptrends today) and 27 components are on a downtrend (no new downtrends today.) There were 1 New Highs and 2 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.59% below the 20-Day average.
The Health Care sector advancing issues (44) totaled 1,306,102 shares traded (29,684 average per stock) and declining issues (7) totaled 681,690 shares traded (97,384 average per stock.) 21 components are on an uptrend (12 new uptrends today) and 30 components are on a downtrend (1 new downtrends today.) There were 2 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.17% below the 20-Day average.
The Consumer Discretionary sector advancing issues (77) totaled 2,746,293 shares traded (35,666 average per stock) and declining issues (4) totaled 108,385 shares traded (27,096 average per stock.) 40 components are on an uptrend (26 new uptrends today) and 41 components are on a downtrend (1 new downtrends today.) There were 3 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -.91% below the 20-Day average.
Based on the SPX sector data, we are on a Neutral signal for the SPX and the Russell 2000.
What We Learned from Thursday's Action:
Thursday was session 1 to close above the 5 DMA, session 6 to close below the 10 DMA, session 6 to close below the 20 DMA, and session 1 to close above the 50 DMA. This was also session 3 for the 5 DMA to close below 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 6.23 points below the 10 DMA.
The SPX 5 DMA is 1379.03, 10 DMA is 1393.8, 20 DMA is 1399.37, 50 DMA is 1374.79, 100 DMA is 1316.29, and 200 DMA is 1271.55.
On Thursday the SPX traded above the opening range but did not trade below the opening range. 87.8% of the SPX closed up from the previous close; 88.6% closed higher than the open. During Thursday's session the SPX gained 18.8 points from open to close. The SPX intraday trading range was 16.99 points. The 5-Day average intraday trading range is 13.61 points, the 10-Day average is 12.93 points, and the 20-Day average is 11.19 points. The trading range is expanding. The 5-Day SPX gain is -0.81%, the 10-Day gain is -1.28%, and the 15-Day gain is -1.09%.
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.
The biggest concern for the bears today is that the Sox and the Dow Jones Transportation Index kicked it out of the park today. These leaders surged enough to put the correction premise in doubt. But the advancing volume on the SPX is at a level that frequently leads to a retracement and the advancing volume on the Russell 2000 and the NASDAQ is very near those levels.
Looking Ahead:
The Market Environment for Friday is zero. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be higher. Mel's 10 Day Oscillator is 25 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are neutral on Friday's bias.
The strength of today's rally was a bit surprising after watching the futures during the pre-market. But the strength of the last couple of days was not unexpected. As we wrote here Tuesday night, "Thursday's close should be higher than Wednesday's open." A trader who bought TNA at Wednesday's open and sold at today's close netted close to $4 on the trade. This was truly a super oversold snapback rally.
Friday's session isn't so easy to predict. We are kind of in no man's land. But we continue to look for the "correction" to resume although the daily stochastic appears to be warning that higher prices could be coming.
For whatever this may be worth, the last time AAPL closed red while the SPX gained more than 1% was November 11th. Eight of the next nine days were down days for the SPX while it lost more than 100 points.
SPX levels to watch include 1390; a close above is bullish and a close below is bearish. For the Russell 2000, keep an eye on the 815 level.
Friday, April 13
Economics
8:30 CPI
8:30 Core CPI
9:55 Michigan Sentiment
02:00 CNY Industrial Production
02:00 CNY Real GDP
02:00 CNY Retail Sales
06:00 EUR German CPI
08:30 GBP PPI
Earnings
Before: IGTE, INFY, JPM, SJR, WFC
Jobless claims came in at 380,000, more than the expected 358,000. The trade deficit was $46 billion, less than the expected $51.0 billion. The PPI was flat compared to the rise of 0.3% that was expected. On Friday we will get the CPI and consumer sentiment.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel