Fast Out of the Gate but Slow to the Finish Line
by Jerome "Mel" Hickerson
The bulls charged out of the gate chased by the futures like demons. The stampede quickly exhausted itself and painted the high for the day just ten minutes into the session. The low for the day was not set until 3:28 but for all practical purposes, the trading range was set during the first hour with the low at 10:20. The difference between the 10:20 low and the 3:28 low was only 0.16 points.
So in reality, the entire session’s action was compressed into the opening hour. The second hour’s open and the session’s close differ by just a little more than 1 point. There was choppy trade in that last 5 ½ hours but mostly sideways action. It is quite difficult to trade such days.
Broadening our view to the daily chart, the chart pattern is more bullish than bearish. Today closed right in the middle of the range so we can’t draw much conclusion from that but the bar is a nice upward bar with no portion of the bar overlapping with the previous bar. This is a pure gap and such bars frequently are followed by bars that move in the direction of the gap. Had the gap been filled today the chart pattern would have been a bit more ambiguous.
So we have a somewhat bullish chart pattern, but let’s examine today’s internals because they were very unusual. So unusual in fact that I have nothing like today in my database. The internal indicators today turned negative before 10:00 and never turned positive the entire day. These numbers are typical of a session in which the SPX gives up eight or ten points, not a day in which the index gains six points and is up even more than that much of the session.
The sectors that were positive relative to the SPX today comprise such a small part my model that the negative sectors just overwhelmed the indicators. Energy was the only significant sector in my model that was pulling upward today and even that pull was weak. Basic materials, the financials, even the SOXX index were all negative today. Even the almighty dollar, which was pretty neutral today, could not successfully pull down the SPX.
This was yet another close within our trading range of 1085-1111; the 23rd consecutive close within that range. Eventually we will break out of this range but anyone claiming to know for certain which way this goes is mistaken in that claim. I would not be surprised to see one more stab higher but I believe we are continuing to watch a topping pattern form.
Today, I think we were watching a rally running on fumes; surviving more on hope of economic recovery than on realism. But such a phenomenon can continue for a few days. My hunch is that we see a rally that can be successfully faded in the coming days. Getting on the short-side was tempting today but I think we see a better opportunity soon.
Our model has once again generated a +1 for tomorrow; not much use to us. I would not be surprised to see Friday close green but with possibly more volatility than we saw today.
Friday, December 11
Economics
08:30 Export Price ex-ag
08:30 Import Prices ex-oil
08:30 Retail Sales 0.5% cons.
08:30 Retail Sales ex-auto 0.5% cons.
09:55 Michigan Sentiment 68.5 cons.
10:00 Business Inventories -0.2 cons.
The November retail sales report from the Commerce Department is due in the morning. Sales are expected to have risen 0.5% after rising 1.4% in the previous month. Sales excluding autos are expected to have risen 0.5% in November after rising 0.2% in the previous month. The University of Michigan's preliminary consumer sentiment index for December is due just after the start of trading. Sentiment is expected to have improved to 68.5 from 67.4 in late November. Reports on October business inventories and November import and export prices are also due.
Mel’s Random Hits:
• Total tick for today was more than 110,000. Breadth was positive most of the day with short periods negative just before 1:30 and the hour from 2:45 through 3:45. The tick was just about the only thing that was consistently positive today other than the indices themselves.
• Today's range was 7.56 points. And the real trading range was just six points; these are not easy days to day trade.
• Today's volume was 70.4% of the average 2009 daily volume. Volume was 97% of the 10 day average.
• 11% of the SPX stocks closed with two day RSI above 90. 25% closed with RSI above 80. 17% closed with RSI below 20 and 8% closed with RSI below 10. RSI still would seem to suggest more upside coming.
• 59% of the SPX are above their 10 day moving average and 54% are above their 20 day moving average.
• 11% of the SPX stocks closed below their most recent previous lows.
• 42% of the SPX closed above their most recent previous high.
• 45.2% of stocks closed in the top half of today's range. (54.8% closed in bottom half.)
• 22.4% of stocks closed in the bottom 20% of today's range.
• 4.2% of stocks closed in the top 10% of today's range.
• 18.4% of stocks closed within 2% of their 52 week high.
• 25.6% of stocks closed within 50% of their 52 week low.
• 8.0% of stocks closed within ¼% of their high for today.
• 13.2% of stocks closed within ¼% of their low for today.
• 67.6% of the SPX closed up for today.
• Sectors weaker than the SPX today: Basic materials, Financials, Industrials, Technology, and Consumer Staples
• Sectors stronger than the SPX today: Energy, Utilities, Health Care and Consumer Discretionary
• Today broke the seven session streak that the $SOX had out performed the SPX.
• Our two day swing long signal was once again successful. This suggests that the market is stronger than it was a few days ago.
• The 2 Day RSI of the SPX is 72. The Dow RSI is 77, NASDAQ is 74 and Russell 22. The broader Russell number looks odd to me but I double checked it. The weakness in the broader index may be telling.
• SPX components moved upward during the after hours. This has been a steady pattern recently.
Have a great Friday!
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"Mel"
Today we closed out of:
UltraPro Short S&P500 ProShares (SPXU) +0.11%
