Bulls Remain in Control During Shortened Session
Market Recap:
SPX big winners were Alexander & Baldwin Inc (ALEX) 7.75%, Eog Resources Inc (EOG) 6.61%, and Alpha Natural Resources (ANR) 6.32%. SPX big losers were Fossil Inc (FOSL) -3.86%, J.C. Penney Company Inc (JCP) -3.77%, and Lowe's Companies Inc (LOW) -3.57%.
SPX five day big winners are Constellation Brands Inc (STZ) 27.31%, Peabody Energy (BTU) 24.1%, and Micron Technology Inc (MU) 22.38%. SPX five day big losers are Alexander & Baldwin Inc (ALEX) -44.14%, O'reilly Automotive Inc (ORLY) -12.53%, and Wellpoint Inc (WLP) -11.32%.
New Ten Day Highs: MMM, ABT, ANF, AFL, AKAM, ATI, AGN, ALL, MO, AEP, AXP, AMT, ABC, AMGN, APC, APA, AIZ, T, ADP, AN, AVB, BHI, BAX, BDX, XL, BXP, BRK.B, CPB, CFN, CTL, CF, CHRW, CVX, CTAS, CTXS, KO, CCE, CL, CMA, CSC, CPWR, COP, CNX, CMI, CVS, DVA, DF, DE, DELL, DNR, DVN, DTV, DFS, DPS, DUK, EMN, ETN, ECL, EIX, ESV, ETR, EFX, EQR, XOM, FDX, FIS, FITB, FHN, FISV, FLS, FLR, FMC, FRX, BEN, FCX, GME, GCI, GPS, GIS, GNW, GILD, GR, GWW, HAL, HAR, HIG, HCP, HCN, HSY, HES, HRL, HST, HBAN, IPG, INTU, ISRG, IVZ, JEC, JNS, JDSU, JNJ, KMB, KIM, LLL, LM, LEN, LUK, LXK, LLY, LTD, LLTC, L, LO, MTB, MRO, MA, MKC, MHP, MCK, MRK, MET, PCS, MU, MON, MCO, MS, MUR, MYL, NBR, NDAQ, NSM, NYT, NWSA, NBL, NU, NTRS, NOC, NUE, NYX, OXY, ODP, OMC, ORCL, OI, PDCO, BTU, PBCT, POM, PEP, PM, PXD, PCL, PNC, PPL, PX, PLD, PRU, PSA, PHM, RF, RAI, RDC, CRM, CVG, SCHW, SNI, SEE, SHLD, SIAL, SPG, SLM, SWN, S, STJ, SPLS, HOT, STI, TROW, TSO, BK, TMO, TWC, TWX, TIE, TMK, TSS, TRV, UPS, X, DRYS, QLD, MBI, USB, VLO, VTR, VRSN, VZ, VNO, VMC, WMT, WPI, WU, WY, WHR, AAPL, GS, GOOG
New Ten Day Lows: AET, CVH, HD, RSH, UNH, VXX, SH, VFC, WLP, ICE
Volume & Breadth Indicators
For the SPX Index there were 384 components advancing and 112 components declining. On the NYSE 3,127 issues were traded with 2,387 advancing issues and 615 retreating issues, a ratio of 3.88 to one advancing. There were 296 new highs and 5 new lows. The five day moving average of New Highs is 204 while the five day moving average of New Lows is 18 and the ten day moving average of Net Advancing is 588. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 3.43 to one. The closing TRIN was 1.14 and the final tick was 148. The five day average of TRIN is 1.12 and the ten day average of TRIN is 1.42. The NYSE Composite Index gained 0.89% today while the SPX gained 0.62%.
For the NYSE, relative to the previous 30 session average, volume was -45.22% below the average. Of the last 15 sessions 5 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, 5 of last 10. For the SPX, the day's volume was 69.6% of the average daily volume for the last year. Volume was 76.9% of the last 10 day average and 77.6% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 142,000 and the average tick for the day was 92. There were 22 ticks greater than 600 and 1 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Moving Average and Support/Resistance Indicators:
92.2% of the SPX are above their five day moving average, 91.2% are above their 10 day average, 87.2% are above their 20 day moving average, 66.2% are above their 50 day moving average, and 59.4% are above their 200 day moving average.
There were two significant moving average crossovers Tuesday as both Emerging Markets and Germany’s 5 DMA crossed above the 20 DMA. Our moving average Power Rating is 42 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +75%.
- Energy -- Outperformed the SPX by +186%.
- Industrials -- Outperformed the SPX by +43%.
- Technology -- Outperformed the SPX by +12%.
Sectors weaker than the SPX for Tuesday:
- Financials -- Underperformed the SPX by -13%.
- Consumer Staples -- Underperformed the SPX by -15%.
- Utilities -- Underperformed the SPX by -85%.
- Health Care -- Underperformed the SPX by -62%.
- Consumer Discretionary -- Underperformed the SPX by -73%.
Checking the sectors of the SPX after Tuesday: (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 748,448 shares traded (24,948 average per stock) and declining issues (no) totaled no shares traded (no average per stock.) 29 components are on an uptrend (5 new uptrends Tuesday) and 1 components are on a downtrend (no new downtrends Tuesday.) There were 2 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed .9% above the 20-Day average.
The Energy sector advancing issues (42) totaled 1,561,614 shares traded (37,181 average per stock) and declining issues (2) totaled 62,138 shares traded (31,069 average per stock.) 44 components are on an uptrend (2 new uptrends Tuesday) and no components are on a downtrend (no new downtrends Tuesday.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.48% above the 20-Day average.
The Financials sector advancing issues (71) totaled 2,101,268 shares traded (29,595 average per stock) and declining issues (10) totaled 473,424 shares traded (47,342 average per stock.) 80 components are on an uptrend (1 new uptrends Tuesday) and 1 components are on a downtrend (no new downtrends Tuesday.) There were 10 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.72% above the 20-Day average.
The Industrials sector advancing issues (53) totaled 667,932 shares traded (12,602 average per stock) and declining issues (8) totaled 358,619 shares traded (44,827 average per stock.) 57 components are on an uptrend (7 new uptrends Tuesday) and 4 components are on a downtrend (no new downtrends Tuesday.) There were 2 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 .68% above the 20-Day average.
The four 'risk sectors' totaled 196 advancing issues and 20 declining issues Tuesday with 15 new uptrends and 0 new downtrends. 97.2% of Risk Sector components are uptrending.
The Technology sector advancing issues (73) totaled 3,194,133 shares traded (43,755 average per stock) and declining issues (6) totaled 292,448 shares traded (48,741 average per stock.) 73 components are on an uptrend (6 new uptrends Tuesday) and 6 components are on a downtrend (1 new downtrends Tuesday.) There were 8 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 .66% above the 20-Day average.
The Consumer Staples sector advancing issues (31) totaled 678,326 shares traded (21,881 average per stock) and declining issues (9) totaled 185,549 shares traded (20,617 average per stock.) 37 components are on an uptrend (no new uptrends Tuesday) and 4 components are on a downtrend (no new downtrends Tuesday.) There were 13 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed .82% above the 20-Day average.
The Utilities sector advancing issues (11) totaled 173,420 shares traded (15,765 average per stock) and declining issues (20) totaled 230,675 shares traded (11,534 average per stock.) 30 components are on an uptrend (no new uptrends Tuesday) and 1 components are on a downtrend (no new downtrends Tuesday.) There were 4 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed .38% above the 20-Day average.
The Health Care sector advancing issues (32) totaled 427,301 shares traded (13,353 average per stock) and declining issues (19) totaled 701,830 shares traded (36,938 average per stock.) 45 components are on an uptrend (1 new uptrends Tuesday) and 7 components are on a downtrend (1 new downtrends Tuesday.) There were 10 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.58% above the 20-Day average.
The Consumer Discretionary sector advancing issues (42) totaled 1,216,410 shares traded (28,962 average per stock) and declining issues (38) totaled 1,263,211 shares traded (33,242 average per stock.) 60 components are on an uptrend (5 new uptrends Tuesday) and 21 components are on a downtrend (4 new downtrends Tuesday.) There were 4 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed .45% above the 20-Day average.
Based on the SPX sector data, we are on a Buy for the SPX and the Russell 2000.
What We Learned from Tuesday's Action:
Tuesday was session 5 to close above the 5 DMA, session 3 to close above the 10 DMA, session 6 to close above the 20 DMA, and session 3 to close above the 50 DMA. This was also session 16 for the 5 DMA to close above 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 32.77 points above the 10 DMA.
The SPX 5 DMA is 1352.52, 10 DMA is 1341.25, 20 DMA is 1334.55, 50 DMA is 1340.72, 100 DMA is 1360.26, and 200 DMA is 1301.31.
On Tuesday the SPX traded above the opening range but did not trade below the opening range. 68.8% of the SPX closed up from the previous close; 72% closed higher than the open. During Tuesday's session the SPX gained 8.27 points from open to close. The SPX intraday trading range was 11.25 points. The 5-Day average intraday trading range is 12.15 points, the 10-Day average is 14.24 points, and the 20-Day average is 15.61 points. The trading range is contracting. The 5-Day SPX gain is 4.09%, the 10-Day gain is 1.18%, and the 15-Day gain is 3.76%.
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.
Looking Ahead:
The Market Environment for Wednesday is -4. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be sideways. Mel's 5-Day Oscillator is 78and Mel's 10-Day Oscillator is 50 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are bearish for Wednesday's session.
Tuesday was yet another session completely owned by the buyers; there were rarely any negative ticks. But this can be typical of shortened pre-holiday sessions. The wild thing is that the Russell 2000 is outperforming the other indices by so much.
Let’s review all of the data that is at extremes. Nine times over the last 12 months we have seen the risk sectors more than 3% over their Pivots. Eight occurrences brought on selling with the exception being in early January. No strategy works every time but even with the January failure there were some warning signs as some of the data was outside the bearish range (see chart and bold italicized numbers). It is interesting to notice the wide range of McClellan numbers as the market was several times not severely overbought yet declined when the risk sectors were so far above their Pivots.
Troubling for the bears here is that the breadth data very much looks similar to early January. We have shown the breadth chart the last couple of nights so we won’t show it again but Tuesday’s data did nothing to alter the pattern of extreme bullish market breadth.
Still, it would appear that odds may favor something of a pullback here as the McClellan Oscillator is at multi-year highs (July 27th, 2010 came closest – the Russell dropped more than 10% over the following month.)
Wednesday, July 4
US Economics
U.S. markets closed.
1:30 AUD Retail Sales
7:55 EUR German Purchasing Manager Index
8:30 GBP Purchasing Manager Index Services
9:00 EUR Euro-Zone Retail Sales
12:30 Germany to sell EU4b 5-year notes
Thursday, July 5
US Economics
8:30 am: Initial Jobless Claims, est. 385k, prior 386k
8:30 am: Continuing Claims, est. 3305K, prior 3296K
10:00 am: ISM Non-Manufacturing Index, est. 53.0, prior 53.7
11:00 am: EIA Petroleum Status
11:00 am: Fed to purchase $4.5b-$5.5b notes in 8 to 10-year range
1:30 AUD Trade Balance
2:30 CNY China HSBC Services PMI
10:00 EUR German Factory Orders
11:00 GBP Bank of England Rate Decision
11:45 EUR European Central Bank Rate Decision
23:30 AUD AiG Performance of Construction Index
9:30 Spain to sell bonds
10:00 France to sell bonds
Earnings
After:
Xyratex (XRTX) EPS 29c, revs 327.03M
Factory orders rose 0.7%, more than the expected 0.1%. On Thursday we will get the ISM non manufacturing index, oil inventories, jobless claims and the ADP employment report.
Have a great holiday!
Thank you for reading. Think on it, trade on it, and be well.
-Mel