Consolidation?
by Jerome "Mel" Hickerson
Overnight futures peaked around 7am but took a seven point dive on the news that initial jobless claims rose by 19,000 for the week.
The session began with a two point downward gap and quickly continued downward seven more points to put the low of the day on the chart at 9:36am. A quick five point rebound followed with the SPX trading quietly sideways with a positive bias the rest of the session. Honestly, it was quite dull as most of the day was confined to a five point trading range with no volatility. It appeared that traders were being cautious and waiting for Friday’s big kahuna of economic indicators, the NonFarm Payroll data.
Looking at the Nine Sectors Report tonight brings three changes; all negative. Considering that the index lost a mere 1.43 points, having three changes is a bit surprising.
While there are many things about this current market that seem bullish, such as market breadth and the unwillingness to sell off even with “bad” news and overbought conditions, in light of the Nine Sectors Report, I’ll hold the Sell signal again tonight. (But I am entirely in cash ahead of the NFP data – gambling on which way that goes is not for me.)
This makes three successive tight range days; a clear characteristic of a topping process. But unlike bottoms, which happen quickly, a topping process can sometimes take a very long time.
Trade Suggestion: If tomorrow’s session gaps upward more than six SPX points, fade the gap. Sell the SPX short using a 10 SPX point stop and a 20 SPX point target. This is usually a high reward/low risk play after a gap upward on the NFP data.
Trading these tight range days is not easy, especially when there is really very little volatility even within the tight range. We continue to simply take what the market offers and bide our time waiting for volatility to return.
Friday, August 6
Economics
08:30 Nonfarm Payrolls -116k cons
08:30 Unemployment Rate 9.6% cons.
08:30 Hourly Earnings 0.1% cons.
08:30 Average Workweek 34.1 cons.
03:00 Consumer Credit
02:45 France Merchandise Trade
04:00 Italy GDP
04:00 Italy Industrial Production
06:00 German Industrial Production
Earnings
Before: AIG, BRNC, BAM, CSUN, DRQ, JRCC, MIR, POM, WRCX
The government's closely-watched jobs report is expected to show the U.S. economy lost 116,000 jobs in July after a decline of 125,000 jobs the month before. The unemployment rate is forecast to rise to 9.6% in the month from 9.5%. Insurance giant AIG is also expected to post quarterly results at some point Friday.
Mel’s Missives from the Matrix:
- Total tick for the day was 18,000 and the average tick for the day was 12. There were 37 ticks greater than 600 and 37 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000.
- The day's range was 7.75 points. The intraday trading range - 9:35 to the close - was 7.56. The 5 DMA of daily range is 11.37.
- Evidence of the intraday trend: At 10am volume was 82.6% of the 10 day average. By noon the volume was 81.41% of the 10 day average, and by 2pm volume was 80.76% of the 10 day average.
- The day's volume was 74.8% of the average daily volume for the last year. Volume was 78.9% of the last 10 day average and 85.5% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 1:00 and 1:15 when relative volume increased 18.1% while the SPX was dropping -0.11%. The largest drop in relative volume came between 11:15 and 11:30 when relative volume dropped -33.2% while the SPX was rising 0.06%.
- 14% of the SPX stocks closed with two day RSI above 90. 23% closed with RSI above 80. 14% closed with RSI below 20 and 5% closed with RSI below 10.
- 63.8% of the SPX are above their five day moving average, 67.2% are above their 10 day average, 72% are above their 20 day moving average, 70% are above their 50 day moving average, 52.6% are above their 100 day moving average, and 56.2% are above their 150 day moving average.
- 19% of the SPX closed above their most recent previous high.
- 20% of the SPX stocks closed below their most recent previous lows.
- 199 SPX issues advanced and 286 issues declined, a net SPX advance/decline of -87.
- Evidence of the intraday trend: At 10am, 70% of the SPX components were in the top half of the range. By noon, 55.8% were in the top half of the range, and by 2pm, 67% were in the top half of the range.
- 68.6% of stocks closed in the top half of the day's range. (31.2% closed in bottom half.)
- 18.8% of stocks closed in the top 10% of the day's range. 34% of stocks closed in the top 20% of the day's range.
- 3.8% of stocks closed in the bottom 10% of the day's range. 9% of stocks closed in the bottom 20% of the day's range.
- 10.4% of stocks closed within 2% of their 52 week high. 22.4% of stocks closed within 5% of their 52 week high.
- 80.2% of stocks closed within 50% of their 52 week low. 45.4% of stocks closed within 25% of their 52 week low.
- 26.8% of stocks closed within ¼% of their high for the day.
- 6.4% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 24.8% of the SPX components were up since the open. By noon, 27.8% were up since the open, and by 2pm, 37.4% were up since the open.
- 39.8% of the SPX closed up from the previous close; 66.4% closed higher than the open.
- Sectors stronger than the SPX for Thursday:
- Basic Materials -- Outperformed the SPX by +37%.
- Energy -- Outperformed the SPX by +32%.
- Industrials -- Outperformed the SPX by +15%.
- Health Care -- Outperformed the SPX by +2%.
- Consumer Discretionary -- Outperformed the SPX by +28%.
- Sectors weaker than the SPX for Thursday:
- Financials -- Underperformed the SPX by -25%.
- Technology -- Underperformed the SPX by -29%.
- Consumer Staples -- Underperformed the SPX by -33%.
- Utilities -- Underperformed the SPX by -1%.
- The $SOX index strength was weaker relative to the SPX Thursday by -0.53%.
- The XLF underperformed the SPX by -0.25% Thursday.
- The 2 Day RSI of the SPX is 68. The Dow RSI is 74, the NASDAQ is 51 and the Russell is 34.
- Over the last four sessions, the average session closed 77.35% of the range above the low. Thursday closed at 86.8% of the daily range.
- Upside momentum increased Thursday, from Wednesday’s 1.78 to today’s 2.09. The ratio of SPX components giving a crossover sell signal compared to buy signals also increased very slightly to B 4.62 to 1.
- The ISEE Equity 10 day moving average Thursday was 163.1. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10 and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 291 SPX components moved upward and 133 components downward during the after hours with 136 million shares traded.
Trade 'em well on Friday everyone!
-Mel
