Choppy Trading as Indices Show Some Resilience
by Jerome "Mel" Hickerson
Market Recap:
The doom and gloom regarding the economic outlook continued to prevail in the foreign markets as the global rout continued overnight. The pre-market indicators pointed lower suggesting that another test of 1040 could be at hand. Most economic data was to come out after the open: The Chicago PMI at 9:45am, August Consumer Confidence at 10:00am, and the minutes from the latest FOMC meeting to be released at 2:00pm.
But the futures were climbing as the session began as a result of the Case-Shiller home prices report. Yet the session opened with a two point gap downward and followed with a quick trip down to 1041 to put the low of the day on the chart eleven minutes into the session. A quick six point surge before 10am was followed by more strength after the Consumer Confidence report exceeded expectations. But from 10am through 2pm was choppy four point range trading leading up to the FOMC minutes released at 2pm.
The last two hours of the session were reminiscent of a FED day as the index gyrated wildly although within a much smaller range. The end result was a finish back pretty much where the day began, but the choppy trade in the final two hours probably caused a lot of stops to be executed.
Our read on the FOMC was pretty dismal and we found it surprising that the market did not react much more negatively. Movements like the last two hours today are extremely difficult to accurately predict and we find that standing aside and letting the dust settle works better.
Looking at today’s Market Leaders board we see generally upward movement today, although quite small. But the concerning thing is where we see the downward moves: SOX, Technology, and China. Honestly, the action in the SOX index is almost breath taking and should be an eye opener if you are bullish.
As August ends and we begin September, this marks a good time to look at the monthly chart. As we’ve pointed out many times, we like to look at months that trade entirely above or below the ten month moving average as trend changers. September looks like a strong candidate to fulfill the criteria as a change of long-term trend.
Market Trend: Nine Sectors Report
Looking at our Nine Sectors Report we had one change today as a Buy moved into Neutral; still nothing resembling a trend change so we nervously keep the Long signal another day. There’s a lot of concern with this Long signal because of the employment data to be released before the open on Friday and because we are sitting so near the 1047 area which we see as significant if we close below. So if you are long, stay alert and watch carefully. Fast moves come from a setup like this and if you need to cut and run you want to be one of the first out the door. The setup for this Long signal was near perfect but the market is very vulnerable as we move into September.
Volume & Breadth Indicators
For the SPX Index there were 253 Advancers/236 Decliners. On the NYSE 3,153 issues were traded with 1,688 advancing issues and 1,349 retreating issues, a ratio of 1.25 to 1 advancing. There were 140 new highs and 97 new lows. The 5 day moving average of New Highs is 129 while the 5 day moving average of New Lows is 79 and the 10 day moving average of Net Advancing is -353. The Net Advancing data indicates a bearish trend.
Advancing volume was higher at a ratio of 1.52 to 1. The closing TRIN was 0.83 and the final tick was 821. The NYSE Composite Index gained 0.13% today.
For the NYSE, relative to the previous 30 session average, volume was 35.42% above the average. Of the last 15 sessions 8 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 20 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 84.9% of the average daily volume for the last year. Volume was 103.1% of the last 10 day average and 140.7% of the previous day’s volume.
On the NYSE, advancing volume exceeded the ratio of advancing issues; this shows some strength as buyers were buying the upward moving issues. Volume on the NYSE was decent and that final tick suggests that traders were unconcerned about holding overnight.
Further, total tick for the day was 79,000 and the average tick for the day was 51. There were 182 ticks greater than 600 and 142 ticks more extreme than -600. There were 19 ticks greater than 1000 and 10 ticks more extreme than -1000. The tick action suggests institutional accumulation.
Intraday volume spiked on the morning up move and also spiked on the 2pm down move. In this low volume environment, not much can be made of either spike.
Much more interesting is the drop in the Absolute Breadth Index and downward move in the McClellan Summation Index. Both moves are bearish longer term but the SPX generally bounces short-term when the Absolute Breadth Index is in this area.
The tick data reflects the wild afternoon action; the morning was relatively quiet. But institutions appear to have been involved with the afternoon action resulting in heavy ticks both ways. But the accumulation side saw the greater activity.
Moving Average Indicators:
7.80% of the SPX components are giving a crossover Buy signal; 72.60% of the SPX components are giving a Sell signal. This is a 9.3 to 1 ratio of Sell signals over Buy signals.
36.6% of the SPX are above their five day moving average, 24.6% are above their 10 day average, 16.8% are above their 20 day moving average, 29% are above their 50 day moving average, 25.8% are above their 100 day moving average, and 30% are above their 150 day moving average.
It’s important to notice that China’s 20 DMA is crossing below the 50 DMA. In order to get any bullishness into the market, some of these shorter term moving averages must begin to cross above the longer term averages. We have not seen any do that since the first few days of August.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +41%.
- Financials -- Outperformed the SPX by +88%.
- Consumer Staples -- Outperformed the SPX by +3%.
- Utilities -- Outperformed the SPX by +51%.
- Consumer Discretionary -- Outperformed the SPX by +12%.
Sectors weaker than the SPX for Tuesday:
- Energy -- Underperformed the SPX by -9%.
- Industrials -- Underperformed the SPX by -37%.
- Technology -- Underperformed the SPX by -40%.
- Health Care -- Underperformed the SPX by -37%.
Stocks on the Move:
Today's SPX component winners and losers:
Largest one day loser is BRCM with -6.43%
Largest three day loser is SNDK with -7.10%
Largest five day loser is SNDK with -13.14%
Largest ten day loser is SNDK with -23.64%
Largest one day winner is DF with 4.29%
Largest three day winner is LNC with 8.59%
Largest five day winner is LNC with 11.54%
Largest ten day winner is MFE with 57.53%
In Late Trading:
190 SPX components moved upward and 227 components downward during the after hours with 362 million shares traded.
Wednesday, September 1
Economics
08:15 ADP Employment Change
10:00 Construction Spending -0.4% cons.
10:00 ISM Index 53.3 cons.
10:30 Crude Inventories
Australia GDP 0.5% cons.
Swiss Purchasing Managers Index 66.9 cons.
German Purchasing Managers Index
Euro-Zone Purchasing Managers Index
Earnings
Before: BF.B, CHRS, EXPR, GII, GCO, HNZ, JOYG, LTCX, ZLC
After: CWST, CGA, PSS, FCEL, GEF, HOV, MATK, OXM, SAI
Speeches
12:30 Richard Fisher
Before the market opens, payroll processing firm ADP is expected to report that private sector employers added 13,000 jobs in August after adding 42,000 in July. Separately, outplacement firm Challenger, Gray and Christmas will report on planned job cuts. After the start of trading, the Institute for Supply Management's (ISM) index of manufacturing is due. Economists forecast the index to have eased to 53 inAugust from 55.5 in July. Any number above 50 indicates growth in the sector. Meanwhile, the government is expected to report that construction spending fell 0.7% in July, after slipping 0.1% in June. Auto and truck sales are due throughout the day, and the government's weekly oil inventory report also is released Wednesday.
Have a great trading day on Wednesday!
-Mel
