Dip Buyers Control the Tape
by Jerome "Mel" Hickerson
Market Recap:
Overnight, demand was considered strong at France's latest bond auction, but yields did rise. Greece's PM announced that the country could default in March if unions don't agree to pay cuts. In addition, there was more talk of downgrades in France, as well as big problems in Hungary. Chinese stocks continue to fall. ADP reported that the private sector job market expanded by 325K jobs during December, which was well above the consensus expectations for a gain of about 179K. Initial Claims for Unemployment Insurance for the week ending 12/31 fell by 15,000 to 372K,which was below the consensus estimate for 375K. Continuing Claims for the week ending 12/24 came in at 3.595M vs. consensus of 3.617M. U.S. stock futures were trying to rebound as the open approach despite the negative news overseas.
Thursday's session began with an insignificant gap lower but sellers began to pile in. But after a quick eleven point drop the low of the day was on the chart just after the first half hour of trading. Wave after wave of buyers bid the tape up almost eighteen points until mid afternoon. The last couple of hours excited some bears but the SPX closed just a few points off the intraday high.
Checking our Market Leaders Board we see a mixed board, led higher by the strength in the Financials, Technology, and the Russell 2000 small caps. The weakest leader was the NYSE Composite Index.
SPX big winners were Bank Of America Corp (BAC) 8.7%, Pulte Homes Inc (PHM) 7.69%, and LSI Corporation (LSI) 7.47%. SPX big losers were Metropcs Communications Inc (PCS) -9.33%, Tesoro Corp (TSO) -6.41%, and Marathon Petroleum Corp (MPC) -5.57%.
SPX five day big winners are Bank Of America Corp (BAC) 19.51%, Pulte Homes Inc (PHM) 18.32%, and Masco Corp (MAS) 16.92%. SPX five day big losers are Williams Companies Inc (WMB) -14.25%, Sears Holding Corp (SHLD) -9.63%, and Autonation Inc (AN) -7.17%.
New Ten Day Highs: AES, AFL, A, AXP, ABC, APC, APA, APOL, ADM, AZO, BAC, BBT, BIIB, COG, COF, CAT, CELG, CF, CHK, CTAS, CTXS, CMCSA, CMA, CSX, CMI, DE, DNR, DTV, DOW, ROST, ETFC, ETN, EOG, EQT, ESRX, FAST, FII, FIS, FITB, FHN, F, GME, GNW, GILD, GT, HOG, HAR, HD, DHI, HCBK, HUM, HBAN, ITW, INTC, IPG, IP, IRM, ITT, JBL, JDSU, JCI, JPM, KEY, LEN, LIFE, LSI, MTB, M, MRO, MAR, MAS, MHS, MRK, MET, MU, MSFT, MON, MCO, MS, NWL, NWSA, JWN, NSC, NVDA, PCAR, PAYX, PBCT, PXD, PNC, PRU, PHM, RF, R, SCHW, SRE, SPLS, HOT, SYK, STI, TER, BK, TWX, TJX, UNH, QLD, UNM, USB, DIS, WPI, WLP, WFC, WDC, AAPL, C
New Ten Day Lows: ANF, AN, AVB, XL, BMY, BF/B, CPB, CME, CL, ED, STZ, COST, DF, DFS, EK, ETR, EQR, EXC, FDO, FE, GPS, HRL, KSS, LLY, MA, PCS, TAP, NTAP, PLL, JCP, PPL, RRC, RAI, CVG, SHLD, SO, SRCL, SYY, TGT, TSO, TSN, VXX, VLO, VZ, ICE
Volume & Breadth Indicators
For the SPX Index there were 292 components advancing and 177 components declining. On the NYSE 3,124 issues were traded with 1,839 advancing issues and 1,199 retreating issues, a ratio of 1.53 to one advancing. There were 98 new highs and 14 new lows. The five day moving average of New Highs is 128 while the five day moving average of New Lows is 17 and the ten day moving average of Net Advancing is 554. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 1.37 to one. The closing TRIN was 0.94 and the final tick was 641. The five day average of TRIN is .78 and the ten day average of TRIN is 1.31. The NYSE Composite Index lost -0.16% today while the SPX gained 0.29%.
For the NYSE, relative to the previous 30 session average, volume was -2.38% below the average. Of the last 15 sessions 3 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 17 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 105.5% of the average daily volume for the last year. Volume was 153.7% of the last 10 day average and 120.5% of the previous day’s volume.
The only signal of weakness within the breadth data tonight is that the NYSE Composite Index showed weakness.
Total tick for the day was 301,000 and the average tick for the day was 194. There were 156 ticks greater than 600 and 40 ticks more extreme than -600. There were 10 ticks greater than 1000 and 6 ticks more extreme than -1000. The tick action suggests institutional accumulation.
The tick data today shows that buyers ruled most of the day and shows clear signs of institutional buying.
The intraday volume pattern Thursday shows the now familiar spike of volume in the morning but today we saw relative volume remain strong throughout the day. The Nightly Breadth Indicators suggest that we are overbought but not extremely.
Moving Average and Support/Resistance Indicators:
73.6% of the SPX are above their five day moving average, 75.6% are above their 10 day average, 79.2% are above their 20 day moving average, 64.6% are above their 50 day moving average, and 42.8% are above their 200 day moving average.
There were three significant moving average crossovers today as the NYSE Composite Index and the Financials both had the 20 DMA cross above the 50 DMA while China's 5 DMA crossed above the 20 DMA. Our moving average Power Rating is 64 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Thursday:
- Financials -- Outperformed the SPX by +107%.
- Technology -- Outperformed the SPX by +2%.
- Health Care -- Outperformed the SPX by +11%.
- Consumer Discretionary -- Outperformed the SPX by +42%.
Sectors weaker than the SPX for Thursday:
- Basic Materials -- Underperformed the SPX by -6%.
- Energy -- Underperformed the SPX by -100%.
- Industrials -- Underperformed the SPX by -26%.
- Consumer Staples -- Underperformed the SPX by -39%.
- Utilities -- Underperformed the SPX by -9%.
In Late Trading:
153 SPX components moved upward and 157 components downward during the after hours with 139.8 million shares traded.
What We Learned from Thursday's Action:
Thursday was session 3 to close above the 5 DMA, session 11 to close above the 10 DMA, session 11 to close above the 20 DMA, and session 11 to close above the 50 DMA. This was also session 9 for the 5 DMA to close above the 20 DMA. One early sign of a sustainable rally or pullback is often a close above or below the 10 DMA. The SPX closed 17.64 points above the 10 DMA.
The SPX 5 DMA is 1271.21, 10 DMA is 1263.42, 20 DMA is 1247.05, 50 DMA is 1239.89, 100 DMA is 1210, and 200 DMA is 1258.64.
On Thursday the SPX traded above the opening range but did not trade below the opening range. 59% of the SPX closed up from the previous close; 77% closed higher than the open. During Thursday's session the SPX gained 3.76 points from open to close. The daily bar painted an Outside day.
Note: The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be in charge for the day. If we break out of that trading range, it's telling us that new buying or selling is impacting traders' assessments of value. Looking back at today’s breakouts also helps us grasp sentiment going forward because when a clear trend is established it often carries through for several sessions.
Looking Ahead:
The Market Environment for Friday is -2. Greater than three is bullish and less than negative three is bearish. Based solely on the technicals, our bias is slightly bearish for Friday's session.
An early morning low with an afternoon high is a characteristic of a bullish trend. But this market is short-term overbought and facing the largest economic tape mover before Friday's open. It seems to us entirely reasonable to think that a gap higher is sold but that a gap lower is also sold.
An ideal trade would be set up with a SPX touch near or above 1290. This is a level of significant resistance that would probably a good place for the bears to pound. If we get to that level, we won't hesitate to unload any long positions and trade short.
Friday, January 6
Economics
8:30 Nonfarm Payrolls, est. 150k from 120k
8:30 Private Payrolls, 165k from 140k
8:30 Unemployment Rate, 8.7% from 8.6%
11:00 Fed to buy $4.25b-$5b in 7-8 year notes
08:15 CHF CPI
10:00 EUR Euro-Zone Consumer Confidence
10:00 EUR Euro-Zone Retail Sales
10:00 EUR Euro-Zone Unemployment Rate
12:00 CAD Unemployment Rate
Earnings
Before: AZZ, CMC, GBX, IHS, RBN
The ADP employment report showed a gain of 325,000, more than expected. Initial claims came in at 372,000, less than the expected 375,000. The ISM non manufacturing survey was 52.6, less than the consensus 53.4.
Personal Note: I received another round of chemo today; I can't say I am feeling well this evening. But I met a new doctor today, a guy that impressed me with his ideas and his willingness to explore new ideas for treatment. I am more optimistic tonight despite the nausea; it seems that I am the "perfect" candidate for a clinical trial that currently is looking for its first patient. This new drug made quite a splash in the news during the summer as it showed promising results but has since ran into a problem with interacting with other cancer drugs and this new clinical trial is wrapped around testing those interactions; the drug has already shown effectiveness (extending life several months) on my type of melanoma (BRAF positive nodular melanoma.)
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel
