Carnage in the Street
by Jerome "Mel" Hickerson, MarketsPath.com
After a night in which the futures relentlessly fell, the regular session opened today under relatively intense selling pressure. This resulted in a gap down and the SPX tried to stabilize in the 1086 area. But then a wave of sellers showed up and there were few buyers; the index fell quickly another eight points and tried to stabilize again around 10am. From then until the close, the pattern repeated; wave after wave of sellers without enough buyers. The high of the session was at the open and the low of the session was at the close. Carnage lay everywhere in between.
So what happened today to cause the carnage? Apparently Portugal tried to sell debt and failed. Spain and Italy have joined Greece as European debt concerns. The unemployment numbers this morning were disappointing and all this outweighed any positive earnings news.
Now where do we go?
Picking tops and bottoms is always a dangerous business. But an experienced trader knows that it is somewhat easier to spot a bottom than a top; at the top, the forces that drove the market up always seem to drive farther than anyone can expect. But market bottoms often have similarities that can allow one to sometimes successfully spot them. First, let’s be clear: I am discussing short term bottoms and not going to get into a discussion regarding long term bottoms because this is obvious not it. But on a short term basis, could we have seen it today? I think it’s possible because we met many of the identifiable traits: Trend down day with heavy distribution, volume heavier than the recent average, oversold conditions being ignored, and closing at the low of the session. We may yet continue down on Friday, but my expectation is that we bounce sometime Friday or Monday.
On Friday, we get the monster of all economic news: The monthly nonfarm payroll data and the annual benchmark revision. Once a year the Bureau of Labor and Statistics goes back five years to revise the data; tomorrow’s data will include the revisions and it is widely expected to be horrendous.
My concern is that the data will have a positive reaction from the market regardless of how bad the numbers might be. History shows that a positive reaction to the nonfarms payroll data is a negative for the SPX going forward and that a negative reaction ironically is a positive over the next several days. So a gap down on Friday would seem to have more bullish implications than a gap up.
SPX Summary for Thursday, February 04, 2010
11 Advancers/487 Decliners
Today's SPX component winners and losers:
• Largest one day loser is WFR with -14.63%
• Largest three day loser is MA with -12.60%
• Largest five day loser is GCI with -15.72%
• Largest ten day loser is X with -23.48%
• Largest one day winner is ANF with 4.01%
• Largest three day winner is LXK with 18.48%
• Largest five day winner is LXK with 16.26%
• Largest ten day winner is EK with 32.97%
*** SPX Technical Summary ***
The lowest 14 day RSI component is ADSK; the highest 14 day RSI component is EL. The average 14 day RSI of all 500 components is 33.
The greatest positive five day momentum component is LXK; the greatest negative five day momentum component is GCI. The average five day momentum of all 500 components is -2.17.
8.40% of the SPX components are giving a crossover Buy signal; 58.00% of the SPX components are giving a Sell signal. This is a 6.9 to 1 ratio of Sell signals over Buy signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 39 components.
• From Buy to Neutral: 12 components.
• From Neutral to Sell: 18 components.
• From Neutral to Buy: 7 components.
Since there were so few SPX winners today, I’ll list them:
ANF, AGN, BIG, CSCO, COST, EQR, GPS, RX, KIM, M, TSS
A close examination of the winners from today’s action shows two distinct things: 1) Many winners gapped up, then traveled downward managing to qualify as a winner by closing above the previous day’s close even though well below their open, and, 2) The other winners such as BIG and COST are the preferred refuge stocks during a recession.
Friday, February 4
Economics
08:30 Nonfarm Payrolls 50k cons.
08:30 Unemployment Rate 10.0% cons.
08:30 Average Workweek 33.2 cons.
09:45 Hourly Earnings 0.2% cons.
03:00 Consumer Credit -9.2 b cons.
Earnings
Before: AET, AYE, BZH, SPG, SEP, TSN, WY, YRCW
Speeches
05:15 James Bullard
The big report of the day is the January jobs report from the Labor Department. Employers are expected to have added 13,000 jobs to their payrolls in the month after cutting 85,000 in the previous month. The unemployment rate, generated by a separate survey, is expected to hold steady at 10%.
Mel’s Random Hits:
• Total tick for the day was -485,000. The last similar session was April 20, 2009. There were no periods of positive breadth. This is extreme and a bounce usually follows, but not always the next session.
• The day's range was 34.44 points. And it was all down.
• The day's volume was 106.67% of the average daily volume for the last year. Volume was 110.32% of the last 10 day average.
• 0.6% of the SPX stocks closed with two day RSI above 90. 4% closed with RSI above 80. 74% closed with RSI below 20 and 28% closed with RSI below 10.
• 8.4% of the SPX are above their five day moving average, 10.4% are above their 10 day average, and 8.0% are above their 20 day moving average. IMPORTANT NOTE: 8% above their 20 DMA is a significant level. Bounces are typically seen at about the 15% level. During the market bottom early last March, this number bottomed out at about 7%.
• 90% of the SPX stocks closed below their most recent previous lows.
• 1% of the SPX closed above their most recent previous high.
• 3.4% of stocks closed in the top half of the day's range. (96.6% closed in bottom half.)
• 85.0 of stocks closed in the bottom 20% of the day's range.
• 0.2% of stocks closed in the top 10% of the day's range.
• 0.6% of stocks closed within 2% of their 52 week high. 6.8% of stocks closed within 5% of their 52 week high.
• 30.8% of stocks closed within 50% of their 52 week low. 10.0% of stocks closed within 25% of their 52 week low.
• 0.6% of stocks closed within ¼% of their high for the day.
• 60.8% of stocks closed within ¼% of their low for the day.
• 2.2% of the SPX closed up from the previous close; 3.0% closed higher than the open. Wow.
• Sectors weaker than the SPX for the day: Basic Materials, Financials, and Energy.
• Sectors stronger than the SPX for the day: Staples, Utilities, Consumer Industrials, Health Care, Technology, and Consumer Discretionary.
• The $SOX index strength was weaker than the SPX today.
• The 2 Day RSI of the SPX is 16. The Dow RSI is 12, NASDAQ is 10 and Russell 9. The average was last 12 on January 27th (closed +5).
• Over the last five sessions, the average session closed 48% of the range above the low.
• Upward momentum quickly turned negative from yesterday’s 0.38 to today’s -2.17. The ratio of SPX components giving a crossover sell signal compared to buy signals has jumped to 8.4 to 1.
• More than a 3% SPX loss today; this has happened three times during the 11 month rally: 3/30 (up 6.8% the next four sessions), 4/17 (up 4.02% the next four sessions), and 6/22 (up 3.79% the next five sessions.)
• 213 SPX components moved upward and 173 components downward during the after hours with 184 million shares traded. Volume after hours was heavy.
Have a great Friday everyone.
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"Mel"
ETF’s we trade:
Ultra S&P500 ProShares (NYSE: SSO)
Ultra Dow30 ProShares (NYSE: DDM)
Ultra QQQ ProShares (NYSE: QLD)
PS UTLRSHRT QQQ (NYSE: QID)
UltraShort S&P500 ProShares (NYSE: SDS)
UltraShort Dow30 ProShares (NYSE: DXD)
PowerShares QQQ Trust (NASDAQ: QQQQ)
Direxion Daily Small Cp Bear 3X (NYSE:TZA)
Direxion Daily Small Cp Bull 3X (NYSE:TNA)
