Equities Wobble as Rumors Fly
Market Recap:
With the situation in Greece appearing to be well on its way to being resolved, the markets were focused on Italy this morning. Sunday evening stock futures opened with a pop higher but soon gave it back and worked significantly lower. But European stock markets and U.S. futures moved higher overnight on rumors that Prime Minister Silvio Berlusconi would be resigning in the near future. However, Berlusconi said that rumors of his resignation were unfounded.
The Monday session began with a small gap lower but continued the pre-session trend higher for the first half hour. But sellers took the SPX down almost consistently for the next two and half hours shedding almost nineteen points by 12:30 pm. But then the SPX began slowly mount a comeback. But just before 2:00 pm the rumor mill went to work for the bulls and the index jumped higher five points within a few minutes and followed through another seven points over the next thirty minutes. The final hour was choppy but the SPX managed to gain a few more points to close near the highs of the day.
Checking our Market Leaders Board we can see some red today as indices closed mixed. The Russell 2000 and the SOX both closed down today while the DOW was the leader on the upside. The small caps and the SOX both showing weakness today is not a bullish sign.
SPX big winners were Amgen Inc (AMGN) 5.64%, Pulte Homes Inc (PHM) 4.78%, and Zions Bancorporation (ZION) 4.46%. SPX big losers were Memc Electronic Material (WFR) -4.07%, Quanta Services Inc (PWR) -4.07%, and First Solar Inc (FSLR) -3.74%.
SPX five day big winners are Estee Lauder Companies Inc (EL) 19.53%, Zions Bancorporation (ZION) 17.58%, and Alpha Natural Resources (ANR) 15.39%. SPX five day big losers are Abercrombie & Fitch Co (ANF) -21.63%, Memc Electronic Material (WFR) -16.86%, and Hudson City Bancorp Inc (HCBK) -7.68%.
New Ten Day Highs: AKS, AMT, BIG, HRB, COG, CPB, CAG, CVS, DVA, DNR, D, ECL, EFX, EXC, ESRX, FAST, FLS, GPS, HUM, ITW, KSS, LEN, LXK, M, MCD, MHS, NBR, NTAP, NEM, OXY, PFE, PHM, QCOM, RTN, SHW, SPG, S, SBUX, TE, TSO, TMK, AEM, GOOG
New Ten Day Lows: AIG, AN, BAC, CHK, CMCSA, FRX, MTB, WFR, RSG, SIAL, SRCL, TXT, UNH, DYN, MBI, VZ, WPI
Volume & Breadth Indicators
For the SPX Index there were 316 components advancing and 153 components declining. On the NYSE 3,105 issues were traded with 1,642 advancing issues and 1,353 retreating issues, a ratio of 1.21 to one advancing. There were 55 new highs and 16 new lows. The five day moving average of New Highs is 36 while the five day moving average of New Lows is 19 and the ten day moving average of Net Advancing is 150.
Advancing volume was higher at a ratio of 1.69 to one. The closing TRIN was 0.79 and the final tick was 523. The five day average of TRIN is 1.12 and the ten day average of TRIN is 1.31. The NYSE Composite Index gained 0.51% today while the SPX gained 0.63%.
For the NYSE, relative to the previous 30 session average, volume was -27.64% 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, 22 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 83.9% of the average daily volume for the last year. Volume was 76.4% of the last 10 day average and 94.4% of the previous day’s volume.
Breadth was not particularly impressive today and notice that the ten day average of Net Advancing has fallen below 200. Volume was light and today was impressive not in its strength but in that it recovered significantly off the morning lows. We will need to see Tuesday’s follow through to feel any comfort level with Monday’s afternoon rally.
Total tick for the day was 40,000 and the average tick for the day was 26. There were 130 ticks greater than 600 and 137 ticks more extreme than -600. There were 19 ticks greater than 1000 and 20 ticks more extreme than -1000.
The tick data this evening clearly shows how things changed after the opening hour as buyers came into the market.
Volume was lower than Friday's volume and tapered off throughout the session as the market rallied.
Moving Average and Support/Resistance Indicators:
82.2% of the SPX are above their five day moving average, 67.6% are above their 10 day average, 81.4% are above their 20 day moving average, 83.8% are above their 50 day moving average, and 37.8% are above their 200 day moving average.
There were no significant moving average crossovers today. Our moving average Power Rating is 66 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Monday:
- Basic Materials -- Outperformed the SPX by +24%.
- Technology -- Outperformed the SPX by +7%.
- Consumer Staples -- Outperformed the SPX by +12%.
- Health Care -- Outperformed the SPX by +61%.
Sectors weaker than the SPX for Monday:
- Energy -- Underperformed the SPX by -0%.
- Financials -- Underperformed the SPX by -13%.
- Industrials -- Underperformed the SPX by -35%.
- Utilities -- Underperformed the SPX by -8%.
- Consumer Discretionary -- Underperformed the SPX by -6%.
In Late Trading:
198 SPX components moved upward and 98 components downward during the after hours with 253.2 million shares traded.
What We Learned from Monday's Action:
Monday was session 3 to close above the 5 DMA, session 3 to close above the 10 DMA, session 21 to close above the 20 DMA, and session 21 to close above the 50 DMA. This was also session 20 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 8.55 points above the 10 DMA.
The SPX 5 DMA is 1246.34, 10 DMA is 1252.57, 20 DMA is 1235.04, 50 DMA is 1197.53, 100 DMA is 1228.9, and 200 DMA is 1273.05.
Looking Ahead:
Today did very little to change the technicals. We continue to look for lower before higher in the weeks to come. But news and rumors control the intraday moves as the fixation has now moved from Greece to Italy.
Market breadth was weak today but things can change quickly in this Europe obsessed market. We scaled out of our shorts today (TZA exits at 30.40 and 31.20) and reloaded later in the session (TZA entries at 30.20 and 29.50.) So we are playing the short side as we have been for several days. Profit must be taken quickly as the next rumor is rarely more than minutes away.
It is worth noting that the frequency of inside days in increasing. The last time we had a rash of inside days close together was mid March. Frequently such a pattern reflects a weary and indecisive market, often resulting in a down trend. (Note that today was technically not an inside day as the SPX spurted a fraction of a point outside of yesterday's range right at the close today.)
The real telling thing to us is the action in the small caps. Another red close for the Russell 2000 today despite many other indices closing in the green. Small caps often lead and they are suggesting lower prices ahead.
Tuesday, November 8
Economics
07:30 NFIB Small Business Optimism – consensus 90.0
10:00 IBD/TIPP Economic Optimism – consensus 41.1
10:00 JOLTs Job Openings
11:00 Fed to purchase $4.25b-$5b notes/bonds in 8 to 10-year range
11:30 U.S. to sell 4-week bills
1:00 U.S. to sell $32b 3-year notes
00:30 AUD NAB Business Confidence
08:30 GBP Industrial Production
13:15 CAD Housing Starts
23:50 JPY Trade Balance
5:00 Greece to sell Eu1b 182-day bills
Earnings
Before: AAON, AER, AYR, AMRI, APU, ARGN, ARCC, BIOS, CRZO, CAAS, CORE, DEP, EBIX, EMCI, ES, SSP, XIDE, FOSL, GEL, GEOI, HL, HFC, IFF, JASO, JRCC, LRN, KNOL, LMIA, MMYT, MPW, MDSO, MITI, TNDM, NGPC, NOG, RJET, RNO, ROK, ROSE, SATC, SMG, LEDS, HEAT, SJI, SUG, SF, TICC, TMS, TNP, UGI, WRES, ZBRA
After: ARAY, ATVI, ALSK, AIQ, DOX, AOB, ANDE, AERL, NILE, BEAT, CBOU, CLNE, CODI, DIOD, ENV, ESE, EVEP, EXAM, EZPW, FALC, GOK, GCA, GCOM, GSS, HRBN, HIMX, HRZN, IGT, IL, KID, LKD, MSSR, MDR, MRX, MIDD, MYRG, NNI, ONTY, ORCC, PAAS, MALL, PNSN, RMW, PULS, RAH, MKTG, ROVI, RBCN, SLXP, BOX, SGI, SVM, SINA, STEC, STRL, TTWO, PANL, URS, PRTS, USU, VLNC, WTW, HOGS
Thank you for reading. Think on it, trade on it, and be well.
-Mel