50 DMA Becomes Overhead Resistance
by Jerome "Mel" Hickerson
It was a volatile night for the futures as the ES was actually in positive territory at times. Then the Labor Department reported that initial claims for unemployment insurance for the week ending August 7 rose by 2,000 to 484K. The week’s total was 22K above the Reuters consensus for a reading of 464K. Continuing Claims for unemployment for the week ending July 31 were below consensus at 4.452M vs. expectations for 4.543M and last week’s 4.570M. Then the government reported that Import Prices for the month of June rose by +0.2%, which was less than the consensus for an increase of +0.4%. Export prices fell by -0.2%, below expectations for +0.1%, but above last month’s revised -0.7%. Futures plummeted after 7:30am.
The session began with an eight point gap downward, continued down another four points and quickly put the low of the day on the chart just two minutes into the session. The SPX battled back, and while it felt weak, the index closed significantly off the morning lows after putting the high of the day on the chart at 15:34.
Today’s action was all about the overnight gap. If you came home from working all day and see the -59 on the Dow, you might assume that the action today was downward. Yet after the open, the action was more sideways with an upward bias than anything else.
From a technical standpoint, significant damage has been done to the index over the last couple of sessions. While the 5 DMA of the SPX remains above the 20 DMA, several other indices have already crossed over (SOX, RUT, XLF, Russell Tech). These crosses are frequently a short-term bearish signal.
Our Nine Sectors Report remains completely on Sell; quite bearish looking. But we have other internal data suggesting an imminent bounce so we will leave the signal on Neutral. One stat I am watching is the percentage of the SPX components above their 20 DMA. When that percentage drops near 20%, we often find a bounce, especially when it drops to near 20% on a day when the total tick is positive.
When you step back and look at things, the market was really quite resilient today. Cisco was a big loser after their earnings report, dragging down the market today. The unemployment claims data was uninspiring. And the dollar remained strong, pushing down on the equities. Yet the indices fought back off the lows and held up reasonably well. This may suggest that a bottom for this spike down is not too far away.
It was sort of a slower trading day as the market was less volatile, but we were in and out and made some money. We also had a non-portfolio overnight swing trade in TNA that was good for $1.50. Overall, it was a pretty good day to trade.
Friday, August 13
Economics
08:30 CPI
08:30 Core CPI
08:30 Retail Sales
08:30 Retail Sales ex-Auto
09:55 Michigan Sentiment
10:00 Business Inventories
German GDP
France GDP
France Non Farm Payrolls
Euro Zone GDP
Earnings
Before: ADES, CTFO, JCP
Investors will take in top-tier reports on inflation, retail sales and consumer sentiment in the morning. The Consumer Price Index, the government's main inflation gauge, is expected to show an increase of 0.2% in July after prices fell 0.1% the month before. Core CPI, which excludes volatile food and energy prices, is forecast to be up 0.1% after a gain of 0.2% in June. At the same time, a report from the Commerce Department is expected to show that retail sales rose 0.5% in July after falling the same amount the month before. Retail sales outside of the auto sector are forecast to be up 0.2%. After the market opens, the University of Michigan Consumer Sentiment Index for early August is expected to edge up to 70 from 67.80. In addition, a report on June business inventories is due later in the morning.
Mel’s Missives from the Matrix:
- Total tick for the day was 98,000 and the average tick for the day was 63. There were 150 ticks greater than 600 and 79 ticks more extreme than -600. There were 15 ticks greater than 1000 and 5 ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 10.03 points. The intraday trading range - 9:35 to the close - was 9.74. The 5 DMA of daily range is 15.57.
- Evidence of the intraday trend: At 10am volume was 138.4% of the 10 day average. By noon the volume was 120.99% of the 10 day average, and by 2pm volume was 113.45% of the 10 day average.
- The day's volume was 92.6% of the average daily volume for the last year. Volume was 111.1% of the last 10 day average and 97.4% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 10:30 and 10:45 when relative volume increased 30.2% while the SPX was rising 0.27%. The largest drop in relative volume came between 11:00 and 11:15 when relative volume dropped -38.0% while the SPX was dropping -0.17%.
- 1% of the SPX stocks closed with two day RSI above 90. 2% closed with RSI above 80. 74% closed with RSI below 20 and 58% closed with RSI below 10.
- 5.8% of the SPX are above their five day moving average, 8.2% are above their 10 day average, 23% are above their 20 day moving average, 44.8% are above their 50 day moving average, 29.6% are above their 100 day moving average, and 38.6% are above their 150 day moving average.
- 7% of the SPX closed above their most recent previous high.
- 47% of the SPX stocks closed below their most recent previous lows.
- 152 SPX issues advanced and 333 issues declined, a net SPX advance/decline of -181.
- Evidence of the intraday trend: At 10am, 72.8% of the SPX components were in the top half of the range. By noon, 78.4% were in the top half of the range, and by 2pm, 61% were in the top half of the range.
- 71% of stocks closed in the top half of the day's range. (28.8% closed in bottom half.)
- 7.4% of stocks closed in the top 10% of the day's range. 25% of stocks closed in the top 20% of the day's range.
- 2.6% of stocks closed in the bottom 10% of the day's range. 7.4% of stocks closed in the bottom 20% of the day's range.
- 3% of stocks closed within 2% of their 52 week high. 11.8% of stocks closed within 5% of their 52 week high.
- 86% of stocks closed within 50% of their 52 week low. 57.2% of stocks closed within 25% of their 52 week low.
- 8.8% of stocks closed within ¼% of their high for the day.
- 3.4% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 11.6% of the SPX components were up since the open. By noon, 26.8% were up since the open, and by 2pm, 23% were up since the open.
- 31.2% of the SPX closed up from the previous close; 80.4% closed higher than the open.
- Sectors stronger than the SPX for Thursday:
- Basic Materials -- Outperformed the SPX by +100%.
- Consumer Staples -- Outperformed the SPX by +43%.
- Utilities -- Outperformed the SPX by +35%.
- Health Care -- Outperformed the SPX by +96%.
- Consumer Discretionary -- Outperformed the SPX by +9%.
- Sectors weaker than the SPX for Thursday:
- Energy -- Underperformed the SPX by -6%.
- Financials -- Underperformed the SPX by -45%.
- Industrials -- Underperformed the SPX by -17%.
- Technology -- Underperformed the SPX by -87%.
- The $SOX index strength was weaker relative to the SPX Thursday by -0.79%.
- The XLF underperformed the SPX by -0.45% Thursday.
- The 2 Day RSI of the SPX is 3. The Dow RSI is 3, the NASDAQ is 4 and the Russell is 5.
- Over the last four sessions, the average session closed 53.92% of the range above the low. Thursday closed at 67.6% of the daily range.
- Upside momentum decreased Thursday, from Wednesday’s -3.76 to today’s -4.14. The ratio of SPX components giving a crossover sell signal compared to buy signals decreased to B 1.1 to 1.
- The ISEE Equity 10 day moving average Thursday was 169.4. 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.
- 215 SPX components moved upward and 136 components downward during the after hours with 111 million shares traded.
Trade 'em well on Friday everyone!
-Mel
