Eurozone Euphoria!
Market Recap:
Thursday night and Friday morning were all about Europe as stock markets around the globe were ripping higher on the agreement out of the EU Summit to (a) create a single banking supervisor, (b) use existing bailout funds to buy bonds and recapitalize banks, and (c) set aside funds for growth initiatives. Personal Incomes rose by +0.2% in May, which was in line with the consensus expectations for an increase of +0.2%. Personal Spending for the month was unchanged, which was in line with the expectations for +0.0% but below April’s +0.3%.
Friday began with a huge upward gap. But buyers were relentless as the SPX continued to climb throughout the session, tacking on an additional twelve points after the gap to close at the highs. Worldwide markets were truly euphoric after the European summit.
Our Market Leaders Board shows just how strong Friday was; our weakest market leader was the Dow which was only up 277 points on the day. Leading the way upward were Technology and the Sox. This was a day that every one of our leaders netted more than 2%.
SPX big winners were Constellation Brands Inc (STZ) 20.35%, Abercrombie & Fitch Co (ANF) 8.13%, and Emc Corp (EMC) 7.86%. SPX big losers were Nike Inc Cl B (NKE) -10.37%, Mead Johnson Nutrition Company (MJN) -6.07%, and Ford Motor Co (F) -5.03%.
SPX five day big winners are Constellation Brands Inc (STZ) 39.7%, QEP Resources (QEP) 17.85%, and Lennar Corp Cl A (LEN) 17.22%. SPX five day big losers are O'reilly Automotive Inc (ORLY) -13.95%, Nike Inc Cl B (NKE) -11.69%, and Mead Johnson Nutrition Company (MJN) -9.17%.
New Ten Day Highs: MMM, ABT, ANF, AES, AKS, ATI, ALL, MO, AEE, AXP, AMT, AMP, ABC, APC, APA, APOL, AIZ, AVP, BHI, BCR, BAX, BBT, BIG, BIIB, XL, HRB, BA, BXP, BMY, BF/B, BRK.B, CA, CPB, CFN, CBS, CTL, CF, CVX, CB, CINF, CTAS, CTXS, KO, CCE, CL, CMCSA, CMA, CAG, CNX, STZ, COST, CMI, CVS, DVA, DE, DELL, DNR, DVN, DV, DTV, DFS, RRD, DPS, DNB, EMN, ECL, EIX, EMC, ESV, ETR, EQT, ESRX, XOM, FII, FIS, FITB, FHN, FISV, FLS, FLR, FMC, FRX, BEN, GCI, GD, GE, GNW, GILD, GR, GT, GWW, HAR, HIG, HCP, HCN, HSY, HRL, DHI, HSP, HUM, IPG, IGT, INTU, JEC, JDSU, JNJ, KEY, KMB, KIM, KSS, KR, LLL, LH, LM, LEG, LEN, LXK, LLY, LNC, LLTC, LMT, LO, MTB, MRO, MMC, MKC, MHP, MCK, MWV, MDT, MRK, MDP, PCS, MU, TAP, MON, MS, MUR, NBR, NDAQ, NSM, NTAP, NYT, NU, NTRS, NOC, NVDA, NYX, OXY, ORCL, PDCO, POM, PEP, PFE, PBI, PCL, PNC, PFG, PLD, PEG, PSA, PHM, PWR, DGX, STR, RTN, RSG, RAI, RDC, CVG, SCHW, SHLD, SIAL, SPG, SLM, LUV, SWN, SE, S, STJ, SWK, STT, STI, SVU, SYY, TROW, TSO, TXN, BK, TWC, TWX, TMK, UPS, X, KBH, MBI, USB, VLO, VTR, VZ, VNO, VMC, WMT, DIS, WM, WPI, WFC, WY, AMZN, ICE
New Ten Day Lows: AET, CVH, F, MJN, NKE, VXX, SH, VFC, WLP
Market Recap – Weekly Review:
The SPX gained 27.14 points during the week (2.03%). The range for the week was 52.9, 3.96%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 65. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was 722,000. On the NYSE, the advance/decline line increased during the week by 3,616 and the 10 day average of Net Advancing increased by 235. There were 591 New Highs and 247 New Lows. The week closed at 99.98% of the weekly range.
For the week, Russell 2000 advancing issues (1,439) totaled 32,059,934 shares traded (22,279 average per stock) and declining issues (459) totaled 11,183,367 shares traded (24,365 average per stock.) 1,068 components are on a weekly uptrend (251 new uptrends this week) and 847 components are on a weekly downtrend (47 new downtrends this week.) There were 167 New Highs and 77 New Lows.
For the week, SPX advancing issues (416) totaled 101,763,212 shares traded (244,623 average per stock) and declining issues (77) totaled 28,266,565 shares traded (367,098 average per stock.) 249 components are on a weekly uptrend (60 new uptrends this week) and 247 components are on a weekly downtrend (19 new downtrends this week.) There were 46 New Highs and 27 New Lows.
For the week, NASDAQ Composite Index advancing issues (2,174) totaled 45,024,988 shares traded (20,711 average per stock) and declining issues (376) totaled 38,803,952 shares traded (103,202 average per stock.) There were 144 New Highs and 28 New Lows.
Checking the sectors of the SPX for the week:
The Basic Materials sector advancing issues (24) totaled 4,783,975 shares traded (199,332 average per stock) and declining issues (6) totaled 1,225,705 shares traded (204,284 average per stock.) 15 components are on a weekly uptrend (6 new uptrends this week) and 15 components are on a weekly downtrend (1 new downtrends this week.) There were 1 New Highs and 2 New Lows.
The Energy sector advancing issues (41) totaled 11,847,216 shares traded (288,956 average per stock) and declining issues (3) totaled 1,558,110 shares traded (519,370 average per stock.) 10 components are on a weekly uptrend (6 new uptrends this week) and 33 components are on a weekly downtrend (no new downtrends this week.) There were no New Highs and 8 New Lows.
The Financials sector advancing issues (75) totaled 23,376,528 shares traded (311,687 average per stock) and declining issues (6) totaled 4,951,082 shares traded (825,180 average per stock.) 43 components are on a weekly uptrend (13 new uptrends this week) and 38 components are on a weekly downtrend (no new downtrends this week.) There were 7 New Highs and 2 New Lows.
The Industrials sector advancing issues (56) totaled 9,587,831 shares traded (171,211 average per stock) and declining issues (5) totaled 634,371 shares traded (126,874 average per stock.) 26 components are on a weekly uptrend (7 new uptrends this week) and 35 components are on a weekly downtrend (1 new downtrends this week.) There were 3 New Highs and 4 New Lows.
The four 'risk sectors' totaled 196 advancing issues and 20 declining issues this week with 32 new uptrends and 2 new downtrends.
Notice the disparity between volumes on the advancing issues and declining issues; traders were literally piling into the advancing stocks. There was very little “bottom feeding” this week as traders were willing to chase the rising stocks; this is a bullish phenomenon.
The Technology sector advancing issues (54) totaled 19,484,973 shares traded (360,833 average per stock) and declining issues (21) totaled 10,951,639 shares traded (521,507 average per stock.) 28 components are on a weekly uptrend (3 new uptrends this week) and 49 components are on a weekly downtrend (5 new downtrends this week.) There were 3 New Highs and 5 New Lows.
The Consumer Staples sector advancing issues (34) totaled 6,727,741 shares traded (197,875 average per stock) and declining issues (5) totaled 543,587 shares traded (108,717 average per stock.) 28 components are on a weekly uptrend (6 new uptrends this week) and 11 components are on a weekly downtrend (1 new downtrends this week.) There were 14 New Highs and 1 New Lows.
The Utilities sector advancing issues (30) totaled 3,016,545 shares traded (100,552 average per stock) and declining issues (2) totaled 258,892 shares traded (129,446 average per stock.) 31 components are on a weekly uptrend (6 new uptrends this week) and 1 components are on a weekly downtrend (no new downtrends this week.) There were 3 New Highs and 1 New Lows.
The Health Care sector advancing issues (44) totaled 8,213,436 shares traded (186,669 average per stock) and declining issues (8) totaled 2,387,071 shares traded (298,384 average per stock.) 35 components are on a weekly uptrend (6 new uptrends this week) and 17 components are on a weekly downtrend (3 new downtrends this week.) There were 10 New Highs and no New Lows.
The Consumer Discretionary sector advancing issues (58) totaled 14,724,967 shares traded (253,879 average per stock) and declining issues (21) totaled 5,756,108 shares traded (274,100 average per stock.) 33 components are on a weekly uptrend (7 new uptrends this week) and 48 components are on a weekly downtrend (8 new downtrends this week.) There were 5 New Highs and 4 New Lows.
Volume & Breadth Indicators
For the SPX Index there were 471 components advancing and 24 components declining. On the NYSE 3,165 issues were traded with 2,690 advancing issues and 404 retreating issues, a ratio of 6.66 to one advancing. There were 251 new highs and 12 new lows. The five day moving average of New Highs is 118 while the five day moving average of New Lows is 49 and the ten day moving average of Net Advancing is 545. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 7.77 to one. The closing TRIN was 1.06 and the final tick was -137. The five day average of TRIN is 1.3 and the ten day average of TRIN is 1.41. The NYSE Composite Index gained 2.69% today while the SPX gained 2.43%.
For the NYSE, relative to the previous 30 session average, volume was 21.94% 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, 17 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 110.7% of the average daily volume for the last year. Volume was 122.7% of the last 10 day average and 115.5% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 274,000 and the average tick for the day was 177. There were 108 ticks greater than 600 and 2 ticks more extreme than -600. There were 7 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Moving Average and Support/Resistance Indicators:
94.8% of the SPX are above their five day moving average, 84.5% are above their 10 day average, 81% are above their 20 day moving average, 55% are above their 50 day moving average, and 55.6% are above their 200 day moving average.
There were no significant moving average crossovers Friday. Our moving average Power Rating is 28 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +42%.
- Energy -- Outperformed the SPX by +52%.
- Financials -- Outperformed the SPX by +6%.
- Industrials -- Outperformed the SPX by +84%.
- Technology -- Outperformed the SPX by +34%.
Sectors weaker than the SPX for Friday:
- Consumer Staples -- Underperformed the SPX by -66%.
- Utilities -- Underperformed the SPX by -194%.
- Health Care -- Underperformed the SPX by -51%.
- Consumer Discretionary -- Underperformed the SPX by -52%.
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 (29) totaled 1,215,239 shares traded (41,905 average per stock) and declining issues (1) totaled 132,821 shares traded (132,821 average per stock.) 26 components are on an uptrend (12 new uptrends Friday) and 4 components are on a downtrend (no new downtrends Friday.) There were 1 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -.05% below the 20-Day average.
The Energy sector advancing issues (41) totaled 2,894,931 shares traded (70,608 average per stock) and declining issues (3) totaled 92,098 shares traded (30,699 average per stock.) 42 components are on an uptrend (16 new uptrends Friday) and 2 components are on a downtrend (no new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed -.62% below the 20-Day average.
The Financials sector advancing issues (80) totaled 6,834,778 shares traded (85,435 average per stock) and declining issues (1) totaled 560,637 shares traded (560,637 average per stock.) 77 components are on an uptrend (15 new uptrends Friday) and 4 components are on a downtrend (no new downtrends Friday.) There were 7 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .9% above the 20-Day average.
The Industrials sector advancing issues (59) totaled 2,371,719 shares traded (40,199 average per stock) and declining issues (2) totaled 75,063 shares traded (37,532 average per stock.) 55 components are on an uptrend (27 new uptrends Friday) and 6 components are on a downtrend (no new downtrends Friday.) There were 3 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -.21% below the 20-Day average.
The four 'risk sectors' totaled 209 advancing issues and 7 declining issues Friday with 70 new uptrends and 0 new downtrends. 92.6% of Risk Sector components are uptrending.
The Technology sector advancing issues (76) totaled 6,672,666 shares traded (87,798 average per stock.) 71 components are on an uptrend (47 new uptrends Friday) and 6 components are on a downtrend (no new downtrends Friday.) There were 3 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -.07% below the 20-Day average.
The Consumer Staples sector advancing issues (38) totaled 1,753,621 shares traded (46,148 average per stock) and declining issues (1) totaled 71,891 shares traded (71,891 average per stock.) 35 components are on an uptrend (8 new uptrends Friday) and 4 components are on a downtrend (1 new downtrends Friday.) There were 13 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .01% above the 20-Day average.
The Utilities sector advancing issues (26) totaled 616,134 shares traded (23,697 average per stock) and declining issues (5) totaled 262,059 shares traded (52,412 average per stock.) 31 components are on an uptrend (4 new uptrends Friday) and 1 components are on a downtrend (no new downtrends Friday.) There were 3 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed -.25% below the 20-Day average.
The Health Care sector advancing issues (45) totaled 1,990,900 shares traded (44,242 average per stock) and declining issues (7) totaled 596,266 shares traded (85,181 average per stock.) 47 components are on an uptrend (17 new uptrends Friday) and 5 components are on a downtrend (1 new downtrends Friday.) There were 9 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.19% above the 20-Day average.
The Consumer Discretionary sector advancing issues (77) totaled 3,809,566 shares traded (49,475 average per stock) and declining issues (4) totaled 1,645,491 shares traded (411,373 average per stock.) 59 components are on an uptrend (29 new uptrends Friday) and 22 components are on a downtrend (no new downtrends Friday.) There were 4 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed -.02% below the 20-Day average.
Based on the SPX sector data, we are on a Buy for the SPX and the Russell 2000.
What We Learned from Friday's Action:
Friday was session 3 to close above the 5 DMA, session 1 to close above the 10 DMA, session 4 to close above the 20 DMA, and session 1 to close above the 50 DMA. This was also session 14 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 24.59 points above the 10 DMA.
The SPX 5 DMA is 1331.35, 10 DMA is 1337.57, 20 DMA is 1325.76, 50 DMA is 1340.6, 100 DMA is 1359.76, and 200 DMA is 1299.68.
On Friday the SPX traded above the opening range but did not trade below the opening range. 88.4% of the SPX closed up from the previous close; 70.8% closed higher than the open. During Friday's session the SPX gained 32.04 points from open to close. The SPX intraday trading range was 12.09 points. The 5-Day average intraday trading range is 12.63 points, the 10-Day average is 14.63 points, and the 20-Day average is 15.89 points. The trading range is contracting. The 5-Day SPX gain is 2.03%, the 10-Day gain is 1.44%, and the 15-Day gain is 2.75%.
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 Monday is -3. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be higher. Mel's 10 Day Oscillator is 49 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bearish for Monday's session.
What a crazy market. News from Europe, even the hint of news, rocks the market around in all directions. We thought that the final hour Thursday was face-ripping; but Friday was market euphoria at its best. The SPX has gained more than 45 points since 3:00 pm Thursday. Any bears who have ridden this from that time are shaking their heads and trying to figure out what hit them. It must be painful to be a bear when such moves strike.
What is particularly scary for bears right now is that the internals are stronger than the indices; market breadth is outpacing the SPX. While we may see a pullback of some kind first, market breadth tells an experienced trader that odds favor seeing higher prices soon.
But there are also reasons to look for a brief pullback. Whether the market ignores those reasons and simply crawls higher into the midweek holiday remains to be seen. But when the McClellan Oscillator touches the upper Bollinger Band a market pullback is common.
Looking ahead to the holiday-shortened week ahead, equity markets close at 1 pm on Tuesday and remain closed for the Wednesday, July 4th U.S. holiday observation. On Thursday, the ECB and the Bank of England will both announce their monthly rate decision. Germany will have key manufacturing data that needs to show growth in order to not derail the rally. The economic data from Germany is particularly vital because they are the only hope to bailout the rest of Eurozone.
For our markets, the most important economic news comes on Friday morning with the Big Kahuna of economic reports: The monthly nonfarms payroll report.
While earnings report for the week will be light and of little significance, there should be plenty of other news to keep the markets roiled as we head into another earnings season the following week.
Looking at our Market Internals data, two things catch our attention. First, on the lower subgraph, notice that the green line dipped on Friday despite the large rally. This type of divergence often leads to weakness the following session. Second, notice that the SPX uptrending components is approaching 90%. This is a bit unusual; frequently a market reversal occurs when this percentage surpasses 85%. Only one other time this year have we seen more than 85% uptrending and that was at the close of June 19th and the SPX quickly shed 48 points. Previous to that, on December 5th the SPX closed with 87% uptrending before moving sideways a couple of sessions and then dropping 55 points in upcoming days.
So while things look bullish here, we may have come too far too fast; momentum on the upside often runs into its evil twin on the way down. A dip before higher seems most likely to us.
SPX levels to watch include 1331; a close above is bullish and a close below is bearish. For the Russell 2000, keep an eye on the 772 level.
Week of July 02 - July 06 Overview
Date/Time Release/Consensus
07/02/12 10:00 ISM Index/52.2
07/02/12 10:00 Construction Spending/0.002
07/03/12 10:00 Factory Orders/0.004
07/03/12 14:00 Auto Sales/NA
07/03/12 14:00 Truck Sales/NA
07/05/12 7:00 MBA Mortgage Index/NA
07/05/12 7:30 Challenger Job Cuts/NA
07/05/12 8:15 ADP Employment Change/105K
07/05/12 8:30 Initial Claims/385K
07/05/12 8:30 Continuing Claims/3283K
07/05/12 10:00 ISM Services/53
07/05/12 11:00 Crude Inventories/NA
07/06/12 8:30 Nonfarm Payrolls/100K
07/06/12 8:30 Nonfarm Private Payrolls/105K
07/06/12 8:30 Unemployment Rate/0.082
07/06/12 8:30 Hourly Earnings/0.002
07/06/12 8:30 Average Workweek/34.4
Monday, July 2
Economics
10:00 am: ISM Manufacturing Index, est 52.0, prior 53.5
10:00 am: ISM Prices Paid, est 46.0, prior 47.5
10:00 am: Construction Spending, est. 0.2, prior 0.3%
11:00 am: Fed to purchase $1.5b-$2b notes in 25 to 30-year range
11:30 am: U.S. to sell $30b 3-month bills, $27b 6-month bills
2:30 CNY HSBC Manufacturing PMI
7:15 CHF Retail Sales
8:30 GBP Purchasing Manager Index Manufacturing
9:00 EUR Euro-Zone Unemployment Rate
14:00 France to sell bills
Earnings
Before:
Acuity Brands (AYI) EPS 79c, revs 492.16M
After:
No major events.
Chicago PMI came in at 52.92, better than the expected 53.12. Personal income rose 0.2%. Consumer sentiment was 73.2, less than last month's 74.1.
Thank you for reading. Think on it, trade on it, and be well.
-Mel