Dow Triple-Digit Loss, Third Consecutive
Market Recap:
Our Market Leaders Board is noteworthy because of the huge loss for the Russell 2000 small caps versus the much smaller loss for the Financials. This is rather unusual.
SPX big winners were Avery Dennison Corp (AVY) 7.31%, Metropcs Communications Inc (PCS) 5.42%, and Ryder Systems Inc (R) 5.42%. SPX big losers were Devry Inc (DV) -34.42%, Lexmark International (LXK) -12.98%, and Peabody Energy (BTU) -11.45%.
SPX five day big winners are Sandisk Corp (SNDK) 18.93%, Amphenol Corp (APH) 12.34%, and Snap-On Inc (SNA) 11.69%. SPX five day big losers are Devry Inc (DV) -27.25%, Chipotle Mexican Grill (CMG) -26.22%, and Advanced Micro Devices (AMD) -16.63%.
New Ten Day Highs: AVY, COG, EQT, HAL, DHI, ITW, LMT, NTAP, PCAR, R, SNDK, SPG, VXX, SH, WU
New Ten Day Lows: ABT, ADBE, AMD, AES, AFL, A, APD, ARG, AKS, AA, ATI, AGN, ALL, AMT, AMP, ABC, APA, AIV, APOL, AIZ, T, ADP, AVP, BCR, BDX, HRB, BMC, BA, BXP, BSX, BF/B, CFN, CCL, CBG, CHK, CB, CSCO, KO, CTSH, CL, CMCSA, CMA, CSC, CPWR, CAG, CNX, GLW, CSX, CVS, DRI, DVA, DE, DELL, XRAY, DV, DTV, DFS, D, DPS, EMN, ECL, EIX, FII, FDX, FSLR, FISV, F, FRX, FCX, FTR, GME, GD, GIS, HOG, HAR, HSY, HPQ, HRL, HSP, HST, HCBK, HUM, IFF, IGT, INTU, IVZ, JEC, JNS, JNJ, JCI, CLF, K, KMB, KIM, KR, LLL, LH, LM, LXK, LLY, LTD, LNC, MAR, MMC, MA, MKC, MCD, MCK, MWV, MDT, WFR, MET, MU, MWW, MYL, NSM, NYT, NWL, NEM, NUE, OXY, ODP, OI, PLL, PDCO, BTU, PEP, PKI, PCG, PM, PBI, PCL, PX, PCP, PGR, PLD, PRU, QLGC, DGX, RSH, RTN, RAI, COL, SCG, CVG, SCHW, SNI, SHLD, SIAL, LUV, SRCL, SYK, STI, SVU, SYMC, SYY, TE, TLAB, THC, BK, TMO, TWX, TMK, TRV, TSN, UNP, UPS, X, UTX, DRYS, UNM, VAR, VZ, VNO, WPO, WPI, C
Volume & Breadth Indicators
For the SPX Index there were 66 components advancing and 429 components declining. On the NYSE 3,135 issues were traded with 787 advancing issues and 2,249 retreating issues, a ratio of 2.86 to one declining. There were 105 new highs and 99 new lows. The five day moving average of New Highs is 154 while the five day moving average of New Lows is 55 and the ten day moving average of Net Advancing is -100.
Declining volume was higher at a ratio of 3.78 to one. The closing TRIN was 1.32 and the final tick was -459. The five day average of TRIN is 1.16 and the ten day average of TRIN is 1.13. The NYSE Composite Index lost -1.04% today while the SPX lost -0.91%.
For the NYSE, relative to the previous 30 session average, volume was 1.60% above the average. Of the last 15 sessions 2 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 15 sessions ended on a positive tick, 4 of last 10. For the SPX, the day's volume was 107.7% of the average daily volume for the last year. Volume was 109.4% of the last 10 day average and 105.6% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was -146,000 and the average tick for the day was -94. There were 18 ticks greater than 600 and 56 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional distribution.
Moving Average and Support/Resistance Indicators:
9.8% of the SPX are above their five day moving average, 20.6% are above their 10 day average, 28.2% are above their 20 day moving average, 42.2% are above their 50 day moving average, and 43.8% are above their 200 day moving average.
There were several significant moving average crossovers today as the Russell 2000, Financials, and Emerging Markets all had their 5 DMA cross below the 20 DMA. Interestingly, the Russell 2000 also had 20 DMA cross above the 100 DMA. Our moving average Power Rating is 50 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Financials -- Outperformed the SPX by +56%.
- Consumer Staples -- Outperformed the SPX by +59%.
- Utilities -- Outperformed the SPX by +5%.
- Consumer Discretionary -- Outperformed the SPX by +23%.
Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -64%.
- Energy -- Underperformed the SPX by -64%.
- Industrials -- Underperformed the SPX by -21%.
- Technology -- Underperformed the SPX by -11%.
- Health Care -- Underperformed the SPX by -18%.
Checking the sectors of the SPX tonight: (The sector Buy and Sell signals come from a mechanical trend trading system; there will be some whipsaw but the signal will never be on the wrong side for long.)
The Basic Materials sector advancing issues (1) totaled 7,950 shares traded (7,950 average per stock) and declining issues (29) totaled 1,130,106 shares traded (38,969 average per stock.) 6 components are on an uptrend (no new uptrends today) and 24 components are on a downtrend (3 new downtrends today.) There were no New Highs and 2 New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .81% above the 20-Day average.
The Energy sector advancing issues (4) totaled 294,555 shares traded (73,639 average per stock) and declining issues (40) totaled 2,123,748 shares traded (53,094 average per stock.) 13 components are on an uptrend (1 new uptrends today) and 31 components are on a downtrend (20 new downtrends today.) There were no New Highs and 2 New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed 2.53% above the 20-Day average.
The Financials sector advancing issues (16) totaled 1,752,963 shares traded (109,560 average per stock) and declining issues (64) totaled 4,234,646 shares traded (66,166 average per stock.) 7 components are on an uptrend (2 new uptrends today) and 74 components are on a downtrend (4 new downtrends today.) There were 1 New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.14% below the 20-Day average.
The Industrials sector advancing issues (8) totaled 251,276 shares traded (31,410 average per stock) and declining issues (53) totaled 2,033,753 shares traded (38,373 average per stock.) 18 components are on an uptrend (2 new uptrends today) and 43 components are on a downtrend (7 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed .51% above the 20-Day average.
The four 'risk sectors' totaled 29 advancing issues and 186 declining issues today with 5 new uptrends and 34 new downtrends. 20.4% of Risk Sector components are uptrending.
The Technology sector advancing issues (9) totaled 1,135,753 shares traded (126,195 average per stock) and declining issues (70) totaled 6,540,530 shares traded (93,436 average per stock.) 13 components are on an uptrend (1 new uptrends today) and 66 components are on a downtrend (9 new downtrends today.) There were no New Highs and 7 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed .55% above the 20-Day average.
The Consumer Staples sector advancing issues (9) totaled 601,070 shares traded (66,786 average per stock) and declining issues (30) totaled 916,692 shares traded (30,556 average per stock.) 5 components are on an uptrend (no new uptrends today) and 36 components are on a downtrend (5 new downtrends today.) There were no New Highs and 3 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed .58% above the 20-Day average.
The Utilities sector advancing issues (2) totaled 24,038 shares traded (12,019 average per stock) and declining issues (29) totaled 782,300 shares traded (26,976 average per stock.) 12 components are on an uptrend (no new uptrends today) and 19 components are on a downtrend (10 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .97% above the 20-Day average.
The Health Care sector advancing issues (6) totaled 177,513 shares traded (29,586 average per stock) and declining issues (45) totaled 1,897,961 shares traded (42,177 average per stock.) 3 components are on an uptrend (1 new uptrends today) and 49 components are on a downtrend (6 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed .86% above the 20-Day average.
The Consumer Discretionary sector advancing issues (11) totaled 754,286 shares traded (68,571 average per stock) and declining issues (69) totaled 3,067,541 shares traded (44,457 average per stock.) 21 components are on an uptrend (no new uptrends today) and 60 components are on a downtrend (15 new downtrends today.) There were 1 New Highs and 6 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed .36% above the 20-Day average.
Based on the SPX sector data, we are on a Sell for the SPX and the Russell 2000.
What We Learned from Tuesday's Action:
Tuesday was session 3 to close below the 5 DMA, session 2 to close below the 10 DMA, session 2 to close below the 20 DMA, and session 17 to close above the 50 DMA. This was also session 6 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 16.8 points below the 10 DMA.
The SPX 5 DMA is 1360.16, 10 DMA is 1355.11, 20 DMA is 1352.49, 50 DMA is 1332.71, 100 DMA is 1359.21, and 200 DMA is 1315.2.
On Tuesday the SPX traded below the opening range but did not trade above the opening range. 13.2% of the SPX closed up from the previous close; 14.4% closed higher than the open. During Tuesday's session the SPX lost -12.21 points from open to close. The SPX intraday trading range was 20.54 points. The 5-Day average intraday trading range is 13.62 points, the 10-Day average is 15.15 points, and the 20-Day average is 13.06 points. The trading range is contracting. The 5-Day SPX gain is -1.86%, the 10-Day gain is -0.24%, and the 15-Day gain is -1.99%.
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 Wednesday is +4. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be lower. Mel's 5-Day Oscillator is 20 and Mel's 10-Day Oscillator is 34 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are bullish for Wednesday's session.
As ugly as the day was, the big news was actually after hours when AAPL made an unusual miss on earnings. The last time AAPL gapped down more than 5% after earnings was four years ago (7/08). But there have been eight times AAPL has gapped down 5% or more after earnings and the impact on the broader market has been exactly in line with random.
The last time the Dow declined 100 points or more for 3 straight days was in September, 2011. The Dow tends to bounce back after such streaks and the Dow gained 2.47% on day four last September. In fact, the last three times the Dow lost triple-digits three consecutive days all resulted in gains on the following session.
We have been trading counter-trend, taking a couple of $1 gains along the way, fortunately, because we are obviously a bit underwater here. But we have been judicious at our entry and exit points and are really not far underwater, but our trade's success is going to depend greatly on tomorrow's action.
Looking at the Market Internals, we can see just how much the trend has turned bearish. But once again, with only 12.7% of the Russell uptrending, we are in an extreme where the market is likely to bounce, possibly sharply. The powder is lying on the floor, ammo is ready to light. Only a spark of "good news" or "rumor" will be required.
Wednesday, July 25
Economics
07:00 MBA Mortgage Purchase Index
10:00 New Home Sales – consensus 372K, prior 369K
10:00 New Home Sales MoM – consensus 0.8%, prior 7.6%
11:00 Fed to purchase $4.5b to $5.5b notes in 8 to 10-year range
11:00 Treasury to sell $35b 5-yr notes
01:30 AUD CPI
08:00 EUR German IFO –Business Climate
08:30 GBP GDP
21:00 NZD Reserve Bank of New Zealand Rate Decision
12:00 Germany to sell 11-year inflation linked bonds
12:30 Germany to sell EU3b 30-yr bonds
Earnings
Before:
General Dynamics (GD) EPS $1.74
Corning (GLW) EPS 31c
Radioshack (RSH) EPS 5c
Wyndham (WYN) EPS 84c
Caterpillar (CAT) EPS $2.29
Boeing (BA) EPS $1.10
ConocoPhillips (COP) EPS $1.27
Pepsi (PEP) EPS $1.10
Ford (F) EPS 29c
After:
Zynga (ZNGA) EPS 6c
Las Vegas Sands (LVS) EPS 60c
Visa (V) EPS $1.45
Delta Airlines (DAL) EPS 68c
Whole Foods (WFM) EPS 61c
AOL (AOL) EPS 20c
The Richmond Fed came in at -17, much worse than the expected flat reading. On Wednesday we will get oil inventories and new home sales.
Thank you for reading. Think on it, trade on it, and be well.
-Mel