Early Gains Fade Away
by Jerome "Mel" Hickerson
Market Recap:
Overseas markets were generally higher overnight in response to the Fed's announcement that rates are likely to stay low through 2014. Also, word that there may be a break in the Greek debt swap negotiations provided an added boost to European markets and U.S. futures. Initial Claims for Unemployment Insurance for the week ending 1/21 rose by 21,000 to 372K, which was slightly above the consensus estimate for 372K. Continuing Claims for the week ending 1/14 came in at 3.554M vs. consensus of 3.533M. The Commerce Department reported that Durable Goods orders were up +3.0% during the month, which was better than the consensus expectations for +2.2%. When you strip out the volatile orders for transportation, orders rose by +2.1%, which was above the consensus for +0.8%.
Thursday's session began with a small gap higher and continued upward for the first half hour. But housing data dampened the mood and sellers gently took the indices lower throughout the day to put the low of the day on the chart with a half hour of trading remaining. The final thirty minutes took the equities off the lows but this was still a day where the dip buyers did not successfully mount a significant comeback.
Checking our Market Leaders Board we find that all of our leaders closed modestly lower today with the Financials and Technology leading the way lower and the DOW showing relative strength.
SPX big winners were J.C. Penney Company Inc (JCP) 18.76%, Netflix Inc (NFLX) 18.41%, and LSI Corporation (LSI) 10.%. SPX big losers were E Trade Financial Corp (ETFC) -16.04%, Sandisk Corp (SNDK) -12.47%, and Range Resources Corp (RRC) -6.58%.
SPX five day big winners are J.C. Penney Company Inc (JCP) 14.61%, Textron Inc (TXT) 14.33%, and CA Inc (CA) 13.15%. SPX five day big losers are E Trade Financial Corp (ETFC) -16.94%, Corning Inc (GLW) -12.32%, and Sandisk Corp (SNDK) -11.94%.
New Ten Day Highs: MMM, ADBE, AMD, AES, AFL, A, AKS, AA, AGN, APC, ADI, APA, AIV, AMAT, ADM, AIZ, ADSK, AN, AVB, BLL, BAC, BCR, BAX, BBT, BDX, BMS, BBY, BIG, XL, HRB, BXP, BSX, BRCM, BF/B, BRK.B, CAM, CFN, CAT, CBG, CBS, CF, CHRW, XEL, CINF, CMS, COH, CTSH, CL, CMCSA, CSC, CAG, STZ, COST, CMI, DVA, DE, DNR, DVN, DO, DTV, DFS, DOV, DOW, DPS, DTE, DNB, DD, ROST, EMN, ECL, EIX, EMR, ESV, EOG, EFX, EQR, EXPD, ESRX, FIS, FE, FISV, FLS, FLR, FMC, FTI, F, BEN, FCX, GCI, GE, GILD, HAL, HOG, HAS, HCP, HCN, HON, HRL, DHI, HSP, HST, ITW, TEG, INTC, IBM, IFF, INTU, IVZ, JNS, JDSU, JNJ, JPM, CLF, KIM, KLAC, LH, LM, LUK, LTD, LLTC, LO, LSI, MRO, MAR, MAS, MAT, MJN, MHP, MHS, MDT, MON, MCO, MS, MUR, NDAQ, NOV, NTAP, NYT, GAS, NBL, NU, NVLS, NUE, NVDA, NYX, ODP, OI, PCAR, PLL, PAYX, JCP, PEP, PKI, PNW, PXD, PBI, PCL, RL, PPG, PLD, PSA, PHM, QLGC, RTN, RHT, RSG, RHI, RDC, R, SWY, CRM, SCG, CVG, SLB, SNI, SEE, SRE, SHW, SIAL, SPG, SLM, SNA, LUV, SE, STJ, SPLS, SBUX, SYK, SYMC, SYY, TROW, TGT, THC, TDC, TER, TSO, TWC, TWX, TJX, UNP, UPS, X, UTX, QLD, AEM, KBH, VTR, VNO, VMC, WAG, DIS, WM
New Ten Day Lows: ARG, ABC, T, COG, CTXS, CMA, GLW, RRD, ETFC, FTR, GME, HES, HUM, HBAN, IRM, K, KEY, LNC, M, MKC, MDP, MET, MWW, JWN, PBCT, PCP, SNDK, SCHW, STT, BK, VXX, SH, DYN, USB, VAR, VZ, WLP, WFC, GOOG
Volume & Breadth Indicators
For the SPX Index there were 147 components advancing and 322 components declining. On the NYSE 3,129 issues were traded with 1,493 advancing issues and 1,545 retreating issues, a ratio of 1.03 to one declining. There were 233 new highs and 6 new lows. The five day moving average of New Highs is 147 while the five day moving average of New Lows is 8 and the ten day moving average of Net Advancing is 594. The Net Advancing data indicates a bullish trend.
Declining volume was higher at a ratio of 1.94 to one. The closing TRIN was 1.89 and the final tick was -283. The five day average of TRIN is 1.16 and the ten day average of TRIN is 1.16. The NYSE Composite Index lost -0.39% today while the SPX lost -0.58%.
For the NYSE, relative to the previous 30 session average, volume was 8.26% above the average. Of the last 15 sessions 4 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 21 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 101.3% of the average daily volume for the last year. Volume was 108.3% of the last 10 day average and 103.7% of the previous day’s volume.
It’s interesting to notice that declining volume was almost twice the declining issues ratio. This is most often a bearish sign.
Total tick for the day was 116,000 and the average tick for the day was 75. There were 57 ticks greater than 600 and 24 ticks more extreme than -600. There were 6 ticks greater than 1000 and 1 ticks more extreme than -1000. The tick action suggests institutional accumulation.
The tick data today is surprisingly strong considering that most of the day trended downward. This would suggest that there was institutional buying taking place.
The intraday volume pattern clearly shows volume increasing during the late afternoon selling. The Nightly Breadth Indicators remain overbought.
Moving Average and Support/Resistance Indicators:
56.8% of the SPX are above their five day moving average, 70.4% are above their 10 day average, 79.4% are above their 20 day moving average, 84.6% are above their 50 day moving average, and 62.8% are above their 200 day moving average.
There were no significant moving average crossovers today. Our moving average Power Rating is 86 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Thursday:
- Basic Materials -- Outperformed the SPX by +49%.
- Industrials -- Outperformed the SPX by +49%.
- Consumer Staples -- Outperformed the SPX by +20%.
- Utilities -- Outperformed the SPX by +91%.
- Health Care -- Outperformed the SPX by +13%.
- Consumer Discretionary -- Outperformed the SPX by +40%.
Sectors weaker than the SPX for Thursday:
- Energy -- Underperformed the SPX by -89%.
- Financials -- Underperformed the SPX by -27%.
- Technology -- Underperformed the SPX by -9%.
In Late Trading:
165 SPX components moved upward and 145 components downward during the after hours with 253.3 million shares traded.
What We Learned from Thursday's Action:
Thursday was session 8 to close above the 5 DMA, session 25 to close above the 10 DMA, session 25 to close above the 20 DMA, and session 25 to close above the 50 DMA. This was also session 23 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 9.32 points above the 10 DMA.
The SPX 5 DMA is 1318.1, 10 DMA is 1309.13, 20 DMA is 1292, 50 DMA is 1253.89, 100 DMA is 1227.33, and 200 DMA is 1257.19.
On Thursday the SPX traded below the opening range but did not trade above the opening range. 30% of the SPX closed up from the previous close; 24.4% closed higher than the open. During Thursday's session the SPX lost -7.83 points from open to close.
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 -3. 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. Mel's 10 Day Oscillator is 69 (below 35 is oversold and above 65 is overbought.)
Some troubling data tonight for anyone in short positions. The ten-day average of ISEE data closed at a 52-week low today. Previous 52-week lows have often signaled a market bottom. Recent dates: 11/18/11, 09/29/11, 08/31/11, 06/17/11, 08/06/10. It is rather odd to have the ISEE 10-day average this low during a market uptrend.
Possibly related to the odd ISEE data is that after today's intraday decline, for the year the SPX has actually lost more points during the trading session than it has gained. All of the gains have come during the night while the hours the market has been open have seen the SPX trade for a net loss.
Looking at just today's action, it is somewhat unusual for the Fed day action to not follow through on the following day; this suggests that further weakness may be ahead. Today's decline of just more than 0.5% was the largest decline of the year.
Friday, January 27
Economics
08:30 GDP (Annualized QoQ) – consensus 3.0%
08:30 GDP Price Index – consensus 2.0%
08:30 Core PCE – consensus 1.0%
08:30 Personal Consumption – consensus 2.5%
09:55 University of Michigan Sentiment – consensus 74.2
11:00 Fed to sell $8b-$8.75b in 2 to 3-year notes
08:00 CHF KOF Swiss Leading Indicator
5:00 Italy to sell bills
Earnings
Before: AOS, AHGP, ARLP, MO, ACO, ABFS, CVX, CMCO, D, DHI, GHM, HON, IDXX, IMGN, LM, NWL, NEE, NS, OMN, PG, PFS, TROW, USAP
After: SCCO
Jobless claims were 377,000, more than the expected. Durable goods rose 3.0%, exceeding the consensus rise of 2.2%. New home sales were 307,000. The expectation was for 320,000. On Friday we will get GDP and consumer sentiment
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
Personal Note: A discouraging day spent at the hospital today. No chemo treatment as my blood/lab work prevented it. The rest of the day was spent in waiting rooms as I shuffled from doctor to doctor exploring options for further treatment.
-Mel
