FED Day Volatility
by Jerome "Mel" Hickerson
It was another quiet morning for economic news before the bell today but we did get a report on New Home Sales for May at 10:00am ET. The focal point of the session was the Fed statement issued at 2:15 pm. In the pre-market, it appeared that traders were preparing for a bounce at the open. Overseas markets were mixed while U.S. futures were choppy since a 2am move upward.
The session opened without a gap, moved upward slightly, retreated and recovered before 10am, all in a very tight range. But at 10am the New Homes Sales data rocked the market with disappointment and the SPX gave up a quick five points to set the low of the session at 10:07. The rest of the morning and early afternoon consisted mostly of gently upward drift into the FOMC announcement. From 2pm until 2:15 traders were taking refuge on the sideline resulting in a minor market retreat. Then came the announcement and the index moved down, then sharply higher, followed by the typical strong retreat. A little after 3pmthe final post-announcement move began and took the market higher before a final minute pullback.
While the day had the intraday volatility that is expected with the FOMC announcement, when it was all over the indices really hadn’t traveled far from where they began the day and the range was only 14 points.
Looking ahead, while I look for a snapper rally attempt, I see little reason to not anticipate further work to the downside in the next several days. The daily advance/decline lines are currently retreating and that looks likely to continue for several days. But before we get too bearish, we should also take note of the fact that the New Homes Sales data was abysmal and the FOMC downgraded their assessment of the economy yet the SPX closed down a mere three points. While I don’t intend to spin the numbers bullishly, I think it is also wise to recognize that last month this kind of news would have resulted in a very ugly red candle on the chart.
Speaking of the charts… I am watching the 1070 area closely. Any break below that area suggests 1040ish to me. A successful test of 1070 should bring a bounce back above 1100.
One other technical event I am watching closely is a potential crossover of the 50 DMA and the 200 DMA. These averages are converging and if the 50 DMA crosses below a falling 200 DMA I’ll have to become much more bearish. Right now the 200 DMA has leveled off while the 50 DMA is falling. These averages were 40 points apart two weeks ago. They remain about 20 points apart but the chart makes it look likely that they will converge sometime in July.
Day Trade Systems Update: (Signals today)
* SDS at: 11:01
* SSO at: 11:58
* GDX Short at: 1:00
* SDS at: 1:17
* SDS at: 2:35
We remained focused on ProShares Ultra S&P500 ETF (SSO), ProShares Ultrashort S&P500 ETF (SDS), and Market Vectors Gold Miners (GDX) today. Our systems were quieter today than recent days. We were struggling for traction during the pre-announcement part of the day as trading a very tight range is not easy to produce results. But we quickly jumped in on the short side soon after the announcement and managed a very enjoyable ride on SDS.
SPX Summary for Wednesday, June 23, 2010
207 Advancers/283 Decliners
Today's SPX component winners and losers:
- Largest one day loser is ADBE with -7.12%
- Largest three day loser is COG with -9.74%
- Largest five day loser is COG with -13.76%
- Largest ten day loser is DHR with -48.04%
- Largest one day winner is JBL with 10.60%
- Largest three day winner is JBL with 7.66%
- Largest five day winner is MTB with 11.00%
- Largest ten day winner is SUN with 21.58%
*** SPX Technical Summary ***
The lowest 14 day RSI component is DHR; the highest 14 day RSI component is BDK. The average 14 day RSI of all 500 components is 48.
The greatest positive five day momentum component is MTB; the greatest negative five day momentum component is COG. The average five day momentum of all 500 components is -2.57.
58.00% of the SPX components are giving a crossover Buy signal; 12.40% of the SPX components are giving a Sell signal. This is a 4.7 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
- From Sell to Neutral: 7 components.
- From Buy to Neutral: 82 components.
- From Neutral to Sell: 23 components.
- From Neutral to Buy: 16 components.
Movement is now from the Buy side to the Sell side.
The moving averages:
Close 1092.04
9 EMA 1091.94 Falling
5 DMA 1106.82 Falling
10 DMA 1103.19 Rising
20 DMA 1089.87 Rising
50 DMA 1133.39 Falling
100 DMA 1133.73 Rising
200 DMA 1111.59 Rising
10 Wk MA 1119.70 Falling
NYSE Summary
On the NYSE 3192 issues were traded with 1464 advancing issues and 1616 retreating issues, a ratio of 1.10 to 1 declining. There were 25 new highs and 32 new lows.
Declining volume was higher at a ratio of 1.26 to 1. The closing TRIN was 1.14 and the final tick was 79.
New Lows are greater than New Highs today, for the first time since June 9th.
Evidence of trend:
Relative to the previous 30 session average, volume was -22.13% below 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, 9 of last 10.
The 5 day moving average of New Highs is 54 while the 5 day moving average of new lows is 17 and the 10 day moving average of Net Advancing is 399. The Net Advancing data indicates a bullish trend.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line decreased from 203667 to 203515. This -0.07% decrease came while the SPX was losing -0.3%. The 10 day moving ratio of positive volume is 1.23 and the 10 day moving Advance/Decline ratio is 1.3. The 10 day moving ratio of positive volume has trended -0.41 over the last three days and the 10 day moving Advance/Decline ratio has trended -0.25 over the last three days.
The NYSE Composite Index lost -0.13% today.
NYSE Statistics:
Absolute Breadth Index: 47.45 down from previous day of 48.50
Cumulative Volume Index: 44,123.21 down from previous day of 45,065.50
High Low Logic Index: 0.42 up from previous day of 0.40
McClellan Oscillator: (12.31) down from previous day of 2.28
McClellan 10 DMA: 134.01 up from previous day of 127.08
McClellan Summation Index: (850.48) down from previous day of (838.17)
% Stocks Above 200 DMA: 52.53 down from previous day of 53.70
% Stocks Above 40 DMA: 39.02 up from previous day of 38.62
New High / New Low Ratio: 38.00 down from previous day of 56.52
26wk New High/Low Ratio: 29.60 down from previous day of 45.58
13wk New High/Low Ratio: 25.00 down from previous day of 35.23
4wk New High/Low Ratio: 46.39 down from previous day of 66.19
Cumulative 4-Week New Hi-Low: 439,413 down from previous day of 439,439
Nasdaq Adv/Decline: 1,407 down from previous day of 1,414
Russell 1000 Advance/ Decline Line: 2,319 down from previous day of 2,332
Russell 2000 Advance/ Decline Line: (1,937) down from previous day of (1,928)
Notes:
Absolute Breadth Index: Low numbers suggest a topping process and high numbers suggest a bottoming process.
Cumulative Volume Index: If this begins to trend down while the averages are trending up, it is a bearish sign. If this begins to trend up while the averages are trending down, it is a bullish sign.
High Low Logic Index: High readings are bearish; low readings are bullish.
McClellan Oscillator: -100 is oversold and +100 is overbought. Also watch for crosses above and below zero.
McClellan Summation Index: Interpreted as bullish or bearish when it crosses over the zero line.
Cumulative 4-Week New Hi-Low: The difference between the number of issues reaching new highs (during a 4-week period) and the number of issues reaching new lows (during the same 4-week period).
Thursday, June 24
Economics
08:30 Initial Claims
08:30 Continuing Claims
08:30 Durable Orders -1.4% cons.
08:30 Durable Orders ex trans 0.9% cons.
01:00 Italy Unemployment Rate
02:45 France Manufactured Goods
04:00 Italy Retail Sales
07:30 Japan CPI
Earnings
Before: CAG, DFS, LEN, MKC, RBN
After: ACN, AVAV, FLOW, FINL, FSII, HRB, ORBL, PALM, RIMM, SMSC, TIBX
Auction
01:00 7-yr Note Auction
The Commerce Department releases the durable goods orders report for May in the morning. Orders are expected to have fallen 1.4% after rising 2.8% in April. Orders excluding transportation are expected to have risen 1.25% after falling 1.1% last month. The number of Americans filing new claims for unemployment is expected to have fallen to 458,000 last week from 472,000 the previous week. Continuing claims are expected to have risen to 4,580,000, from 4,571,000 last week. Oracle reports quarterly results Thursday evening. The software maker is expected to report earnings of 54 cents per share, up 17% from a year ago, and revenue of $9.5 billion, up 38% from a year ago.
Mel’s Missives from the Matrix:
- Total tick for the day was 26,000 and the average tick for the day was 17. There were 89 ticks greater than 600 and 98 ticks more extreme than -600. There were 2 ticks greater than 1000 and 16 ticks more extreme than -1000.
- The day's range was 14.33 points. The intraday trading range - 9:35to the close - was 13.46. The 5 DMA of daily range is 17.18.
- Evidence of the intraday trend: At 10am volume was 84.47% of the 10 day average. By noon the volume was 92.08% of the 10 day average, and by 2pm volume was 90.17% of the 10 day average.
- The day's volume was 90.8% of the average daily volume for the last year. Volume was 100% of the last 10 day average and 105.5% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 10:00 and 10:15 when relative volume increased 81.5% while the SPX was dropping -0.68%. The largest drop in relative volume came between 2:45 and 3:00 when relative volume dropped -60.0% while the SPX was dropping -0.20%.
- 1% of the SPX stocks closed with two day RSI above 90. 2% closed with RSI above 80. 55% closed with RSI below 20 and 39% closed with RSI below 10.
- 10.4% of the SPX are above their five day moving average, 21% are above their 10 day average, 50.4% are above their 20 day moving average, 22.4% are above their 50 day moving average, 33.8% are above their 100 day moving average, and 41% are above their 150 day moving average.
- 2% of the SPX closed above their most recent previous high.
- 45% of the SPX stocks closed below their most recent previous lows.
- 207 SPX issues advanced and 283 issues declined, a net SPX advance/decline of -76.
- Evidence of the intraday trend: At 10am, 48.2% of the SPX components were in the top half of the range. By noon, 29.4% were in the top half of the range, and by 2pm, 61.8% were in the top half of the range.
- 57% of stocks closed in the top half of the day's range. (42.8% closed in bottom half.)
- 1.8% of stocks closed in the top 10% of the day's range. 8% of stocks closed in the top 20% of the day's range.
- 2.4% of stocks closed in the bottom 10% of the day's range. 8.6% of stocks closed in the bottom 20% of the day's range.
- 1.6% of stocks closed within 2% of their 52 week high. 10.2% of stocks closed within 5% of their 52 week high.
- 63.4% of stocks closed within 50% of their 52 week low. 33% of stocks closed within 25% of their 52 week low.
- 1.6% of stocks closed within ¼% of their high for the day.
- 2.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 43.2% of the SPX components were up since the open. By noon, 20.6% were up since the open, and by 2pm, 44.6% were up since the open.
- 41.8% of the SPX closed up from the previous close; 40.2% closed higher than the open.
- Sectors stronger than the SPX for Wednesday:
- Basic Materials -- Outperformed the SPX by +65%.
- Technology -- Outperformed the SPX by +11%.
- Consumer Staples -- Outperformed the SPX by +94%.
- Consumer Discretionary -- Outperformed the SPX by +23%.
- Sectors weaker than the SPX for Wednesday:
- Energy -- Underperformed the SPX by -47%.
- Financials -- Underperformed the SPX by -15%.
- Industrials -- Underperformed the SPX by -9%.
- Utilities -- Underperformed the SPX by -60%.
- Health Care -- Underperformed the SPX by -12%.
- The $SOX index strength was stronger relative to the SPX Wednesday by 0.7%.
- The XLF underperformed the SPX by -0.15% Wednesday.
- The 2 Day RSI of the SPX is 5. The Dow RSI is 14, the NASDAQ is 5 and the Russell is 4.
- Over the last four sessions, the average session closed 30.94% of the range above the low. Wednesday closed at 48.4% of the daily range.
- Upside momentum moved downward slightly Wednesday, from Tuesday’s -2.66 to today’s -2.57. The ratio of SPX components giving a crossover sell signal compared to buy signals also moved downward to B 4.68 to 1.
- The ISEE Equity 10 day moving average Wednesday was 146.7. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10 and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 193 SPX components moved upward and 174 components downward during the after hours with 130 million shares traded.
Trade 'em well on Thursday everyone!
-Mel
