Dow Can't Hold 10K
by Jerome "Mel" Hickerson
The Labor Department reported that initial claims for unemployment insurance for the week ending August 14 fell by 31,000 to 473K. The week’s total was 14K below the Reuters consensus for a reading of 487K. Continuing Claims for unemployment for the week ending August 7 were below consensus at 4.456M vs. expectations for 4.505M and last week’s 4.518M. Pre-market futures were up a bit as a result.
The session began with a quick move upward of almost four points, gave it all back before 10am, then quickly moved even higher to put an intraday double top on the chart at 10:13 and 10:44. There was a sudden flurry of selling for 20 minutes before the index stabilized and consolidated for three hours. But from 2pm through 3pm the index was blasted lower before a seven point rally began that was sharply rejected in the last 15 minutes.
This was not an easy session to understand. At 10:45am, the Russell small caps were outperforming the SPX by 34%. The XLF was ahead of the SPX by 53%. The leading sectors of the index were outperforming the index by 42%. These are all factors that usually lend to an up day yet suddenly a downdraft struck the markets and most of the rest of the session was carnage. It was certainly a change of the intraday trend that was difficult to foresee with our methodology.
Looking ahead, based on internals and historical data going back to 1950, the data says we have almost an 80% likelihood of an oversold bounce. The question that is unanswered is whether this time really matches the hundreds of times within the data that the internal conditions were similar; in other words, do the externals match as well as the internals? Quantifying all the externals into mathematical data is beyond my pay grade so I can't answer that. But the internals are clearly suggesting that a bounce is likely. Monday's close should be higher than Friday's open.
Looking beyond the next couple of days, this market seems to be on a mission to test 1010. The Dow closed below 10,000 today for the first time since early July. The real question now is where does a tradable bottom form? I like the chances for a significant bounce on the first touch of the SPX 1010 area.
Our Nine Sectors Report tonight shows two negative changes but not enough to be a trend change; therefore we will hold the Buy signal for another day.
We were caught long SSO when the surprising (to us, at least) sudden down move struck just before 11am.
Friday, August 27
Economics
08:30 GDP Second Estimate 1.4% cons.
08:30 GDP Deflator 1.8% cons.
09:55 University of Michigan Consumer Sentiment 70 cons.
German Consumer Price Index
Britain GDP
Swiss Leading Indicator
Earnings
Before: FRO, TIF
The government's revised reading on gross domestic product is due on Friday. GDP is the broadest measure of the nation's economic activity. Economists surveyed are expecting the government to revise the number to 1.4%, showing a significant slowdown from its previous reading of 2.4%.
Mel’s Missives from the Matrix:
- Total tick for the day was -77,000 and the average tick for the day was -50. There were 93 ticks greater than 600 and 160 ticks more extreme than -600. There were 3 ticks greater than 1000 and 14 ticks more extreme than -1000. The tick action suggests institutional distribution.
- The day's range was 16.05 points. The intraday trading range - 9:35 to the close - was 15.97. The 5 DMA of daily range is 16.66.
- Evidence of the intraday trend: At 10am volume was 77.58% of the 10 day average. By noon the volume was 87.96% of the 10 day average, and by 2pm volume was 88.31% of the 10 day average.
- The day's volume was 75.5% of the average daily volume for the last year. Volume was 94.5% of the last 10 day average and 86% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 11:45 and 12:00 when relative volume increased 48.0% while the SPX was rising 0.04%. The largest drop in relative volume came between 12:00 and 12:15 when relative volume dropped -51.6% while the SPX was dropping -0.09%.
- 2% of the SPX stocks closed with two day RSI above 90. 6% closed with RSI above 80. 39% closed with RSI below 20 and 25% closed with RSI below 10.
- 18% of the SPX are above their five day moving average, 13% are above their 10 day average, 11.4% are above their 20 day moving average, 25.8% are above their 50 day moving average, 23.4% are above their 100 day moving average, and 28.4% are above their 150 day moving average.
- 15% of the SPX closed above their most recent previous high.
- 10% of the SPX stocks closed below their most recent previous lows.
- 111 SPX issues advanced and 378 issues declined, a net SPX advance/decline of -267.
- Evidence of the intraday trend: At 10am, 51.8% of the SPX components were in the top half of the range. By noon, 31.6% were in the top half of the range, and by 2pm, 16% were in the top half of the range.
- 8.2% of stocks closed in the top half of the day's range. (91.6% closed in bottom half.)
- 0.6% of stocks closed in the top 10% of the day's range. 1.8% of stocks closed in the top 20% of the day's range.
- 28.4% of stocks closed in the bottom 10% of the day's range. 58% of stocks closed in the bottom 20% of the day's range.
- 4.2% of stocks closed within 2% of their 52 week high. 11.2% of stocks closed within 5% of their 52 week high.
- 88.4% of stocks closed within 50% of their 52 week low. 66.6% of stocks closed within 25% of their 52 week low.
- 1.6% of stocks closed within ¼% of their high for the day.
- 31.2% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 71.2% of the SPX components were up since the open. By noon, 53% were up since the open, and by 2pm, 38.2% were up since the open.
- 22% of the SPX closed up from the previous close; 12.6% closed higher than the open.
- Sectors stronger than the SPX for Thursday:
- Basic Materials -- Outperformed the SPX by +80%.
- Industrials -- Outperformed the SPX by +67%.
- Utilities -- Outperformed the SPX by +28%.
- Consumer Discretionary -- Outperformed the SPX by +5%.
- Sectors weaker than the SPX for Thursday:
- Energy -- Underperformed the SPX by -23%.
- Financials -- Underperformed the SPX by -15%.
- Technology -- Underperformed the SPX by -16%.
- Consumer Staples -- Underperformed the SPX by -1%.
- Health Care -- Underperformed the SPX by -17%.
- The $SOX index strength was weaker relative to the SPX Thursday by -1.2%.
- The XLF underperformed the SPX by -0.15% Thursday.
- The 2 Day RSI of the SPX is 12. The Dow RSI is 8, the NASDAQ is 20 and the Russell is 36.
- Over the last four sessions, the average session closed 30.99% of the range above the low. Thursday closed at 13% of the daily range.
- Upside momentum improved slightly Thursday, from Wednesday’s -3.53 to today’s -2.53. The ratio of SPX components giving a crossover sell signal compared to buy signals also improved slightly to S 10.42 to 1.
- The ISEE Equity 10 day moving average Thursday was 176.5. 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.
- 100 SPX components moved upward and 287 components downward during the after hours with 124 million shares traded.
Trade 'em well on Friday everyone!
-Mel
