FOMC Statement Inspires Market Rally
by Jerome "Mel" Hickerson
Market Recap:
Apple's quarterly earnings report boosted returns in Japan and Australia and were helping the NASDAQ this morning. However, declines in European markets were keeping pressure on U.S. futures.
The Fed day session began with a small gap lower, unusual for a Fed day. But after a quick burst of selling pressure we then received the normal upward move into the FOMC announcement. After the announcement, the market cheered, expanded the intraday range to the upside and forced shorts to cover. Mid afternoon saw a brief pullback but the final hour belonged to the bulls.
Checking our Market Leaders Board shows that all of our leaders had a strong session. Leading the way was Technology while the Financials were lagging.
SPX big winners were Textron Inc (TXT) 13.14%, CA Inc (CA) 8.5%, and Bemis Co Inc (BMS) 5.93%. SPX big losers were Corning Inc (GLW) -11.63%, Xerox Corp (XRX) -9.92%, and Motorola Solutions Inc (MSI) -6.1%.
SPX five day big winners are Waters Corp (WAT) 15.23%, Textron Inc (TXT) 14.63%, and Sears Holding Corp (SHLD) 13.62%. SPX five day big losers are Johnson Controls Inc (JCI) -10.29%, First Solar Inc (FSLR) -10.19%, and Google (GOOG) -10.02%.
New Ten Day Highs: MMM, ADBE, AES, A, AKS, AA, AGN, AMT, AIV, ADM, ADSK, AN, AVB, BCR, BAX, BBT, BDX, BMS, BBY, XL, HRB, BMC, BA, BXP, BSX, BRCM, BF/B, BRK.B, CA, CFN, CAT, CBG, CF, CME, CINF, CMS, COH, CCE, CTSH, CMA, STZ, COST, CMI, DHR, DVA, DE, DNR, XRAY, DO, DOV, DOW, DPS, DNB, DD, ROST, EMN, EMC, EMR, ESV, EQR, ESRX, FDO, FII, FIS, FHN, FISV, FLS, FMC, FTI, F, BEN, FCX, GCI, GILD, HOG, HAS, HCN, HRL, DHI, HSP, HST, HCBK, ITW, IFF, INTU, JBL, JEC, JDSU, CLF, KIM, KFT, LH, LUK, LIFE, LTD, LSI, MRO, MAR, MAT, MDT, MCO, NDAQ, NOV, NKE, NTRS, NVLS, NUE, OXY, ODP, PCAR, PDCO, PAYX, PEP, PKI, PNW, PXD, PCL, RL, PLD, QLGC, QCOM, DGX, RRC, RHT, RF, RSG, RHI, RDC, SWY, CRM, SCG, CVG, SLB, SNI, SEE, SRE, SIAL, SPG, SJM, SNA, LUV, STJ, SPLS, HOT, SRCL, SYK, STI, SYMC, SYY, TROW, TGT, THC, TDC, TSO, TXT, TMO, TIF, TWX, TJX, TSS, UPS, X, UTX, QLD, VLO, VTR, VRSN, VNO, VMC, WAG, WM, WAT, WU, AAPL
New Ten Day Lows: ABT, AET, APD, ARG, ATI, AEE, AEP, T, BA, COF, CLX, COP, ED, CEG, GLW, D, DTE, DUK, ETR, EXC, FE, FTR, GIS, HUM, TEG, K, L, M, MJN, MCD, MOLX, TAP, MYL, NEM, NSC, PBCT, POM, PFE, PCG, PNW, PPL, PX, PGN, RAI, SO, S, TE, TRV, TSN, UNH, VXX, SH, AEM, WLP, GOOG
Volume & Breadth Indicators
For the SPX Index there were 375 components advancing and 93 components declining. On the NYSE 3,143 issues were traded with 2,325 advancing issues and 721 retreating issues, a ratio of 3.22 to one advancing. There were 145 new highs and 9 new lows. The five day moving average of New Highs is 136 while the five day moving average of New Lows is 11 and the ten day moving average of Net Advancing is 633. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 3.64 to one. The closing TRIN was 0.92 and the final tick was 740. The five day average of TRIN is .95 and the ten day average of TRIN is 1.03. The NYSE Composite Index gained 0.94% today while the SPX gained 0.86%.
For the NYSE, relative to the previous 30 session average, volume was 4.12% above 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, 21 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 97.7% of the average daily volume for the last year. Volume was 104.3% of the last 10 day average and 119.6% of the previous day’s volume.
Total tick for the day was 164,000 and the average tick for the day was 106. There were 62 ticks greater than 600 and 28 ticks more extreme than -600. There were 4 ticks greater than 1000 and 1 ticks more extreme than -1000. The tick action suggests institutional accumulation.
The tick data today shows that buyers ruled this session from start to finish.
The intraday volume pattern shows a spike in volume mid morning as well as the customary FOMC spike in volume just after the announcement. The Nightly Breadth Indicators continue to be overbought.
Moving Average and Support/Resistance Indicators:
77.2% of the SPX are above their five day moving average, 81.8% are above their 10 day average, 85.8% are above their 20 day moving average, 86.8% are above their 50 day moving average, and 64.6% 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 Wednesday:
- Basic Materials -- Outperformed the SPX by +79%.
- Energy -- Outperformed the SPX by +34%.
- Industrials -- Outperformed the SPX by +33%.
- Consumer Staples -- Outperformed the SPX by +26%.
- Utilities -- Outperformed the SPX by +79%.
Sectors weaker than the SPX for Wednesday:
- Financials -- Underperformed the SPX by -72%.
- Technology -- Underperformed the SPX by -9%.
- Health Care -- Underperformed the SPX by -16%.
- Consumer Discretionary -- Underperformed the SPX by -13%.
In Late Trading:
199 SPX components moved upward and 124 components downward during the after hours with 111 million shares traded.
What We Learned from Wednesday's Action:
Wednesday was session 7 to close above the 5 DMA, session 24 to close above the 10 DMA, session 24 to close above the 20 DMA, and session 24 to close above the 50 DMA. This was also session 22 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 19.53 points above the 10 DMA.
The SPX 5 DMA is 1317.31, 10 DMA is 1306.53, 20 DMA is 1289.35, 50 DMA is 1252.8, 100 DMA is 1226.19, and 200 DMA is 1257.22.
On Wednesday the SPX traded above the opening range but did not trade below the opening range. 75.4% of the SPX closed up from the previous close; 81.2% closed higher than the open. During Wednesday's session the SPX gained 11.66 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 Thursday is -4. Greater than three is bullish and less than negative three is bearish. Based solely on the technicals, we are bearish for Thursday's session. Mel's 10 Day Oscillator is 72 (below 35 is oversold and above 65 is overbought.)
The market has been tough to trade this month. During the first two weeks of the year, the advances seen in the market indices have all occurred in the opening moments of just a couple of sessions. You were either in from the day before or you had no opportunity to get in. If you were short, there was no opportunity to escape before the damage was done. Most days the trading range after the opening moments has been five-to-seven points making day trading all but impossible.
With the Fed announcement today we expect the market to change. Volatility should soon return. But the real question is whether the Fed announcement was enough to continue to fuel this rally beyond resistance and the overbought conditions. History as well as market breadth suggest that it might just be enough.
Thursday, January 26
Economics
08:30 Chicago Fed – consensus -0.1
08:30 Durable Goods – consensus 2.0%
08:30 Durable Goods ex Transports – consensus 0.9%
08:30 Initial Jobless Claims – consensus 365K
08:30 Continuing Claims – consensus 3525K
10:00 Leading Indicators – consensus 0.7%
10:00 New Home Sales – consensus 320K
11:00 Kansas City Fed
11:00 Fed to purchase $2.25b-$2.75b 25-30 year notes
1:00 U.S. to sell $29b 7-yr notes
07:00 EUR German Gfk Consumer Confidence Survey
21:45 NZD Trade Balance
23:30 JPY National CPI
23:50 JPY Retail Trade
5:00 Italy to sell I/L bonds, zero coupon notes
Earnings
Before: FLWS, MMM, ARG, ALK, ABC, AME, ARCO, ART, T, AN, AVT, BLL, BAX, BGG, BMY, BC, CCMP, CP, CRR, CRS, CSH, CAT, CELG, CL, CLP, CNX, COV, CY, DLX, DEST, EK, ETN, EQT, FNFG, HBI, HSC, HUB.B, ISCA, IVZ, ESI, IXYS, JNS, JBLU, KMT, LANC, LMT, LYTS, MKC, MJN, MEG, MPW, MWW, NPBC, NMM, NEI, NOK, NUE, NVR, ORI, POT, PCP, PSSI, QSII, RTN, RGS, SASR, SHW, OKSB, STEL, STL, TDY, TWC, UTEK, UA, UCBI, UAL, USAK, VLY, WCC, ZMH
After: ABAX, AMGN, AMLN, ARBA, EPAY, CLS, CPHD, CHEF, CB, CRUS, CRBC, COZ, CPSI, CPWR, DV, DLLR, EMN, ESIO, ELX, FII, FFIN, FSL, GCAP, GDOT, GSIT, HBHC, HUBG, INFA, JNPR, KLAC, LSCC, MATW, MXIM, MBFI, MCRL, MCRS, MSCC, MMI, OCLR, OMCL, PACB, QLGC, RMBS, RMD, RVBD, RHI, RRR, RYL, SCSC, SBCF, SBUX, SXL, SIVB, SYNA, NAV, TSRA, THOR, TKR, VRSN, VPRT, WERN, WAIR, WMS
Pending home sales dropped 3.5%, more than the expected drop of 1.0%. The FHFA home price index rose 1.0%. Expectations were for a drop of 1.0%. Oil inventories were higher by 3.6 million barrels. Last week they dropped by 3.4 million. On Thursday we will get durable goods, initial claims and new home sales.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel
