Chop and Grind Higher
by Jerome "Mel" Hickerson
The futures were flat at Friday’s open and the SPX didn’t really know which way to go. The open was basically a flat chop sideways for 30 minutes until housing data hit the tape and the SPX nosedived seven points setting the low of the day at 10:06. Then, as has been a common pattern lately, buyers starting chasing after the dip. By around 10:20 the index had clawed back to the opening price and the rest of the day was basically a sideways grind bumping repeatedly into resistance around the 1106 level. Friday’s session was a low range, low volume, difficult to day trade affair.
We’ve reached a month-end as well as a weekend so this is a good time to review charts. But let’s begin with the daily chart. The daily chart shows five successive lower highs followed by Thursday’s reversal day with then a higher high and higher close on Friday. This pattern suggests more upside to come.
Stepping back to the weekly chart we see a slightly lower inside week. Inside weeks are relatively uncommon; we had two in all of 2009 and have now had two already in 2010, both in the last three weeks. An inside week suggests that the market is having serious doubts about direction here. Since 2008, we’ve had nine inside weeks; all but two (two weeks ago and the last week of May) traded significantly lower at some point in the following week. All examples traded lower within four weeks except for the two most recent examples but they remain within the four week timeframe. So while the daily chart pattern may be suggesting higher the weekly chart is indecisive but odds favor trading short-side if your trade window is sufficiently long enough.
Now let’s move out to the monthly chart. Clearly, the stair-stepping upward was finally broken in February. We pointed out in November that the monthly momentum upward was waning, and now we have painted a lower low and a lower monthly high. But I believe pronouncing the rally over would be premature until an entire month, high and low, trades below the 10 month moving average, currently at 1033 and rising.
Frequent readers know that I follow closely the trend of the XLF to suggest future action of the SPX; let’s see what it might be saying here. When I look at the XLF chart, I see five successive months with either a lower high or a lower close. Yes, it’s been pretty much sideways since the end of October as the $14 area has provided strong support. Notice that 13.89 is the 10 month moving average and that XLF did trade below that during February, although the XFL bounced to close near the high for the month. But until the XLF trades above its October high, I do not see the SPX breaking significantly above 1150. For the short term, the XLF seems to be suggesting sideways choppy range bound trading.
For next week, our model is neutral for Monday, but suggesting lower prices during the week. Several cycles are coming to a turn, including a significant Bradley turn date (March 1st) and full moon (February 28th). If we see a significant turn, it’s not easy to judge which way it will go. My suspicion is that we are topping and that any turn is a downward move; I base this upon suggestions from the model (although those suggestions are not terribly strong) and from the fact that the SPX is near the top of the recent trading range.
SPX Summary for Friday, February 26, 2010
268 Advancers/219 Decliners
For the week: 202 Advancers/294 Decliners
Today's SPX component winners and losers:
• Largest one day loser is AIG with -10.07%
• Largest three day loser is HRB with -12.27%
• Largest five day loser is HRB with -18.09%
• Largest ten day loser is HRB with -16.75%
• Largest one day winner is IPG with 10.93%
• Largest three day winner is CCE with 32.56%
• Largest five day winner is MIL with 32.10%
• Largest ten day winner is MIL with 36.78%
*** SPX Technical Summary ***
The lowest 14 day RSI component is HRB; the highest 14 day RSI component is MIL. The average 14 day RSI of all 500 components is 64.
The greatest positive five day momentum component is MIL; the greatest negative five day momentum component is HRB. The average five day momentum of all 500 components is -0.28.
57.60% of the SPX components are giving a crossover Buy signal; 9.60% of the SPX components are giving a Sell signal. This is a 6.0 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 3 components.
• From Buy to Neutral: 59 components. <-------
• From Neutral to Sell: 13 components.
• From Neutral to Buy: 16 components.
Monday, March 1
Economics
08:30 Personal Income 0.4%cons.
08:30 Personal Spending 0.4% cons.
08:30 PCE Prices- Core 0.1% cons.
10:00 Construction Spending -0.6% cons.
Earnings
Before: AMAG, CEDC, CCO, DISH, EIX, EP, IPI, ME, OSG, PWRD, KGS, KWK, SGMS, BID, SUG, TWGP, WCRX
After: ABM, CKEC, FIX, DBRN, MBI, MDR, MR, NTRI, QCOR, WRC
Auction
11:30 3-Month Auction
11:30 6-Month Auction
Mel’s Random Hits:
• Total tick for the day was +258,000. Breadth opened neutral and gradually got stronger throughout the day.
• Total tick for the week was over 800,00. Breadth remains stronger than the index.
• The day's range was 9.68 points.
• The range for the week was 26.27 points; 2.37%.
• The week ended with a 4.68 point loss, the first weekly loss of the last three weeks.
• The day's volume was 73.52% of the average daily volume for the last year. Volume was 86% of the last 10 day average and 83% of Thursday.
• The SPX remains above the 10 day average, above the 20 MA, above the 100 MA, but below the 50 MA. From a technical viewpoint, obtaining and closing above the 50 DMA is important; currently at 1108.72.
• 12% of the SPX stocks closed with two day RSI above 90. 27% closed with RSI above 80. 16% closed with RSI below 20 and 8% closed with RSI below 10.
• 55.0% of the SPX are above their five day moving average, 59.8% are above their 10 day average, and 73.4% are above their 20 day moving average.
• 4% of the SPX stocks closed below their most recent previous lows.
• 42% of the SPX closed above their most recent previous high.
• 57.6% of stocks closed in the top half of the day's range. (42.4% closed in bottom half.)
• 14.8 of stocks closed in the bottom 20% of the day's range.
• 7.6% of stocks closed in the top 10% of the day's range.
• 12.6% of stocks closed within 2% of their 52 week high.30.2% of stocks closed within 5% of their 52 week high.
• 27.4% of stocks closed within 50% of their 52 week low. 8.8% of stocks closed within 25% of their 52 week low.
• 11.0% of stocks closed within ¼% of their high for the day.
• 13.0% of stocks closed within ¼% of their low for the day.
• 53.8% of the SPX closed up from the previous close; 49.4% closed higher than the open.
• Sectors weaker than the SPX for the day: Basic Materials, Energy, Consumer Staples, Technology, Utilities, and Health Care.
• Sectors stronger than the SPX for the day: Financials, Industrials, and Consumer Discretionary.
• The $SOX index strength was just slightly weaker than the SPX Friday.
• The 2 Day RSI of the SPX is 71. The Dow RSI is 57, NASDAQ is 75 and Russell 62.
• Over the last four sessions, the average session closed 68% of the range above the low.
• Upward momentum reversed from yesterday’s 0.33 to today’s -0.28. The ratio of SPX components giving a crossover buy signal compared to sell signals is at to 6 to 1. Notice (above) the large number of components moving from Buy to Neutral.
• 214 SPX components moved upward and 174 components downward during the after hours.
Have a great weekend everyone!
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"Mel"
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