European Fears Return to the Market
by Jerome "Mel" Hickerson
Market Recap:
Asia closed mixed overnight while Europe was down moderately. U.S. futures were choppy in overnight trading, coming significantly off their highs.
The holiday shortened week began under immediate pressure from the futures and gapped down about five points before continuing down a few more points. A brief four point bounce gave way to a seven point drop just before 10 am. Most of the day it appeared as though this low might hold up as low of the day as the four hours midday were tight range sideways trade with a slight upward bias. But about 2:30 the index quickly gave up seven points. The final hour tried to rally but the last 15 minutes were heavy selling as the index closed just above the lows of the day.
Looking at our Market Leaders board, all indices were down sharply, across the board. Weakness in the SOX, XLF, and Russell small caps led the pullback as European concerns once again pummeled the market. But from a technical viewpoint, very little damage was done with today's pullback.
Market Trend: Nine Sectors Report
Looking at tonight's Nine Sectors Report, there were no changes. This is somewhat surprising on a day that the Dow dropped triple digits. The internal data tonight is some of the oddest within recent memory. There are many data elements pointing in opposite directions.
But we will stick with the prognosis from the Nine Sectors Report and stay with the Long signal for now. Thursday's close should be higher than Wednesday's open. Let’s repeat that: Long at tomorrow’s open and sell Thursday; excellent risk/reward potential. Of course, there’s that troubling little thing of breaking news….
Volume & Breadth Indicators
For the SPX Index there were 50 Advancers/436 Decliners. On the NYSE 3,142 issues were traded with 794 advancing issues and 2,244 retreating issues, a ratio of 2.83 to 1 declining. There were 166 new highs and 16 new lows. The 5 day moving average of New Highs is 152 while the 5 day moving average of New Lows is 28 and the 10 day moving average of Net Advancing is 288. The Net Advancing data indicates a bullish trend.
Declining volume was higher at a ratio of 5.56 to 1. The closing TRIN was 1.97 and the final tick was -357. The NYSE Composite Index lost -1.35% today.
For the NYSE, relative to the previous 30 session average, volume was -18.2% below the average. Of the last 15 sessions 8 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 20 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 65.8% of the average daily volume for the last year. Volume was 80.5% of the last 10 day average and 88.2% of the previous day’s volume.
As would be expected on a day when the Dow was down triple digits, breadth today was not pretty. But the final tick does not suggest panic selling at the close and New Highs far exceeded New Lows. So we really need to see what the bears can do for follow-through tomorrow. Nightly indicators remain bullish looking.
Further, total tick for the day was -72,000 and the average tick for the day was -47. There were 55 ticks greater than 600 and 118 ticks more extreme than -600. There were no ticks greater than 1000 and 10 ticks more extreme than -1000. The tick action suggests institutional distribution.
The tick data also looks pretty bearish. But it comes during short-term overbought conditions. The key for now will be whether Wednesday provides relief for the bulls or whether the bears carry through.
Moving Average Indicators:
31.60% of the SPX components are giving a crossover Buy signal; 5.20% of the SPX components are giving a Sell signal. This is a 6.1 to 1 ratio of Buy signals over Sell signals.
77.6% of the SPX are above their five day moving average, 91% are above their 10 day average, 73.8% are above their 20 day moving average, 57.6% are above their 50 day moving average, 43% are above their 100 day moving average, and 43.4% are above their 150 day moving average.
Now comes the most surprising part of tonight’s data: The moving average crossovers. We expected to see many of the short-term averages begin to cross above the longer-term averages, as mentioned on Saturday.
No fewer than six indices had their 5 DMA cross above their 20 DMA today (SPX, NYA, Dow, XLF, Germany, and China.) It has been a long time since so many crossed on the same day; but that’s really not the surprising part of the data. What makes the data really unusual this evening is that three indices had their 20 DMA cross below their 50 DMA at the same time as the 5 DMA was crossing above the 20 DMA (NYA, Dow, and China.)
So the moving average crossovers were busy today. Once again, the action the next couple of days is going to have a lot to say about the future of this market.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +26%.
- Industrials -- Outperformed the SPX by +12%.
- Technology -- Outperformed the SPX by +32%.
- Consumer Staples -- Outperformed the SPX by +71%.
- Utilities -- Outperformed the SPX by +64%.
- Health Care -- Outperformed the SPX by +57%.
Sectors weaker than the SPX for Tuesday:
- Energy -- Underperformed the SPX by -35%.
- Financials -- Underperformed the SPX by -114%.
- Consumer Discretionary -- Underperformed the SPX by -47%.
Stocks on the Move:
Today's SPX component winners and losers:
- Largest one day loser is GT with -6.02%
- Largest three day loser is ANF with -5.41%
- Largest five day loser is HRB with -6.43%
- Largest ten day loser is SNDK with -10.09%
- Largest one day winner is ORCL with 5.85%
- Largest three day winner is X with 8.26%
- Largest five day winner is X with 14.83%
- Largest ten day winner is LNC with 17.14%
In Late Trading:
207 SPX components moved upward and 142 components downward during the after hours with 179 million shares traded.
Wednesday, September 8
Economics
10:30 Crude Inventories
02:00 Fed’s Beige Book
03:00 Consumer Credit
Great Britain NIESR GDP 0.9%cons.
Australia New Home Loans 1.0% cons.
Japan Bankruptcies -23.1% cos.
German Trade Balance 12.0B
Great Britain Industrial Production 1.3% cons.
German Industrial Production 10.9% cons.
Canada Interest Rate Decision
Earnings
Before: CIEN, HITK, JTX, SFD, TLB, TITN, UNFI
After: AVAV, CHP, MW, GAME, SHFL
Auction
11:00 10 Yr Note
The Federal Reserve's Beige Book, a snapshot of economic activity across the nation, is due at 2 p.m. ET. The central bank is also slated to release data on consumer credit. The government's weekly oil inventory report, which is usually released on Wednesday, comes out in the morning. Home builder Hovnanian reports quarterly results after the market closes.
Have a great Wednesday!
-Mel
