Friday, Bears Resume Their Work
Market Recap:
One of Thursday's rumors proved untrue as China's GDP came in under expectations at +8.1% (the weakest rate in nearly 3 years) as opposed to the rumors of 9% or better. In addition, concerns about borrowing levels in Spain and Italy were pushing Europe lower. JPMorgan Chase's results beat expectations but some of the internal numbers gave traders concern. The Consumer Price Index for March was up +0.3%, which was in line with the consensus estimates for an increase of +0.3%. When you strip out food and energy, the Core CPI came in with a gain of +0.2%, which was also in line with the expectations for an increase of +0.2% but above February’s +0.1%. Futures were pointing to a weak open.
Friday's session began with a gap lower and traders continued to sell throughout the opening hour. Then the SPX stabilized and went into a five hour period of trading within a four point range. But the final half hour of the week wasn't pretty as the SPX quickly sold off seven additional points to close at the intraday lows.
Our Market Leaders Board has all of our leaders getting pounded with the Financials getting the worst of it and the Dow getting off relatively light.
SPX big winners were Yum! Brands Inc (YUM) 2.81%, Safeway Inc (SWY) 2.53%, and Verisign Inc (VRSN) 2.48%. SPX big losers were E Trade Financial Corp (ETFC) -5.65%, Edwards Life Sciences (EW) -5.63%, and Bank Of America Corp (BAC) -5.4%.
SPX five day big winners are Supervalu Inc (SVU) 24.95%, Alpha Natural Resources (ANR) 10.28%, and Safeway Inc (SWY) 7.45%. SPX five day big losers are F5 Networks Inc (FFIV) -10.16%, Chesapeake Energy Corp (CHK) -9.93%, and Federated Investors B (FII) -9.12%.
New Ten Day Highs: MO, AVP, BIG, CF, CLX, HD, IRM, LO, LOW, MA, ORLY, SWY, CRM, SHW, SBUX, MBI, VRSN, WPO
New Ten Day Lows: ABT, AES, AMP, ABC, AMGN, BDX, XL, BSX, BMY, CAH, CHK, CTSH, SAI, COST, CVS, DELL, ETFC, EXC, FII, HRL, HSP, HCBK, JNJ, KEY, LLY, MRK, MWW, NTAP, NYT, OXY, PFE, PNC, PPL, PG, DGX, R, SNDK, SHLD, SLM, SWN, STI, TSO, TSN, WFC, GOOG
Market Recap – Weekly Review:
The SPX lost -27.82 points during the week (-1.99%). The range for the week was 40.07, 2.87%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 36. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was 109,000. On the NYSE, the advance/decline line decreased during the week by -1,806 and the 10 day average of Net Advancing decreased by -277. There were 164 New Highs and 203 New Lows. The week closed at 32.14% of the weekly range.
For the week, Russell 2000 advancing issues (325) totaled 8,865,240 shares traded (27,278 average per stock) and declining issues (1,597) totaled 33,225,806 shares traded (20,805 average per stock.) 916 components are on a weekly uptrend (25 new uptrends this week) and 1,017 components are on a weekly downtrend (342 new downtrends this week.) There were 44 New Highs and 83 New Lows.
For the week, SPX advancing issues (80) totaled 21,677,768 shares traded (270,972 average per stock) and declining issues (416) totaled 111,024,028 shares traded (266,885 average per stock.) 297 components are on a weekly uptrend (3 new uptrends this week) and 198 components are on a weekly downtrend (95 new downtrends this week.) There were 22 New Highs and 17 New Lows.
For the week, NASDAQ Composite Index advancing issues (550) totaled 30,075,538 shares traded (54,683 average per stock) and declining issues (1,930) totaled 47,752,928 shares traded (24,742 average per stock.) There were 58 New Highs and 40 New Lows.
Checking the sectors of the SPX for the week:
The Basic Materials sector advancing issues (10) totaled 3,856,806 shares traded (385,681 average per stock) and declining issues (20) totaled 3,502,192 shares traded (175,110 average per stock.) 22 components are on a weekly uptrend (no new uptrends this week) and 8 components are on a weekly downtrend (1 new downtrends this week.) There were 1 New Highs and 1 New Lows.
The Energy sector advancing issues (5) totaled 2,221,167 shares traded (444,233 average per stock) and declining issues (38) totaled 8,979,868 shares traded (236,312 average per stock.) 9 components are on a weekly uptrend (no new uptrends this week) and 34 components are on a weekly downtrend (6 new downtrends this week.) There were 1 New Highs and 6 New Lows.
The Financials sector advancing issues (6) totaled 763,426 shares traded (127,238 average per stock) and declining issues (74) totaled 33,755,823 shares traded (456,160 average per stock.) 59 components are on a weekly uptrend (no new uptrends this week) and 21 components are on a weekly downtrend (16 new downtrends this week.) There were no New Highs and no New Lows.
The Industrials sector advancing issues (12) totaled 1,170,059 shares traded (97,505 average per stock) and declining issues (49) totaled 7,925,962 shares traded (161,754 average per stock.) 34 components are on a weekly uptrend (no new uptrends this week) and 27 components are on a weekly downtrend (17 new downtrends this week.) There were no New Highs and 1 New Lows.
The four 'risk sectors' totaled 33 advancing issues and 181 declining issues this week with 4 new uptrends and 14 new downtrends.
The Technology sector advancing issues (15) totaled 5,122,793 shares traded (341,520 average per stock) and declining issues (61) totaled 24,568,167 shares traded (402,757 average per stock.) 48 components are on a weekly uptrend (1 new uptrends this week) and 28 components are on a weekly downtrend (12 new downtrends this week.) There were 6 New Highs and 2 New Lows.
The Consumer Staples sector advancing issues (10) totaled 3,061,956 shares traded (306,196 average per stock) and declining issues (32) totaled 5,697,780 shares traded (178,056 average per stock.) 26 components are on a weekly uptrend (1 new uptrends this week) and 15 components are on a weekly downtrend (8 new downtrends this week.) There were 2 New Highs and 1 New Lows.
The Utilities sector advancing issues (no) totaled no shares traded (no average per stock) and declining issues (32) totaled 4,864,720 shares traded (152,023 average per stock.) 6 components are on a weekly uptrend (no new uptrends this week) and 26 components are on a weekly downtrend (9 new downtrends this week.) There were 1 New Highs and 3 New Lows.
The Health Care sector advancing issues (4) totaled 799,922 shares traded (199,981 average per stock) and declining issues (47) totaled 8,988,585 shares traded (191,246 average per stock.) 33 components are on a weekly uptrend (no new uptrends this week) and 18 components are on a weekly downtrend (16 new downtrends this week.) There were 2 New Highs and no New Lows.
The Consumer Discretionary sector advancing issues (18) totaled 4,681,639 shares traded (260,091 average per stock) and declining issues (63) totaled 12,740,931 shares traded (202,237 average per stock.) 60 components are on a weekly uptrend (1 new uptrends this week) and 21 components are on a weekly downtrend (10 new downtrends this week.) There were 9 New Highs and 3 New Lows.
Volume & Breadth Indicators
For the SPX Index there were 75 components advancing and 423 components declining. On the NYSE 3,138 issues were traded with 710 advancing issues and 2,324 retreating issues, a ratio of 3.27 to one declining. There were 38 new highs and 32 new lows. The five day moving average of New Highs is 33 while the five day moving average of New Lows is 41 and the ten day moving average of Net Advancing is -298. The Net Advancing data indicates a bearish trend.
Declining volume was higher at a ratio of 6.04 to one. The closing TRIN was 1.96 and the final tick was -390. The five day average of TRIN is 1.56 and the ten day average of TRIN is 1.35. The NYSE Composite Index lost -1.35% Friday while the SPX lost -1.26%.
For the NYSE, relative to the previous 30 session average, volume was -4.37% below the average. Of the last 15 sessions 6 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 16 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 87.4% of the average daily volume for the last year. Volume was 96.6% of the last 10 day average and 105.5% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was -52,000 and the average tick for the day was -34. There were 32 ticks greater than 600 and 60 ticks more extreme than -600. There were no ticks greater than 1000 and 6 ticks more extreme than -1000. The tick action suggests institutional distribution.
Looking at the one-minute tick data, there were 48 ticks greater than 500 and 83 ticks more extreme than -500. 44.7% one-minute ticks were positive. There were 6 ticks greater than 900 and 16 ticks more extreme than -900. The tick action suggests institutional distribution.
The tick data Friday suggests that after the opening hour buyers had a modest advantage. This may have been true until the final half hour of the day.
The intraday volume pattern shows a modest volume spike during the early morning sell off but the typical Friday pattern of diminishing volume is seen after that. The Nightly Breadth Indicators remain mixed, suggesting choppy trade, while the McClellan Oscillator is oversold and suggesting a bounce.
Moving Average and Support/Resistance Indicators:
53.4% of the SPX are above their five day moving average, 23.8% are above their 10 day average, 22.4% are above their 20 day moving average, 37.6% are above their 50 day moving average, and 72.2% are above their 200 day moving average.
There were no significant moving average crossovers Friday. Our moving average Power Rating is 58 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +5%.
- Industrials -- Outperformed the SPX by +1%.
- Consumer Staples -- Outperformed the SPX by +123%.
- Utilities -- Outperformed the SPX by +91%.
- Health Care -- Outperformed the SPX by +24%.
- Consumer Discretionary -- Outperformed the SPX by +97%.
Sectors weaker than the SPX for Friday:
- Energy -- Underperformed the SPX by -36%.
- Financials -- Underperformed the SPX by -102%.
- Technology -- Underperformed the SPX by -37%.
Checking the sectors of the SPX for Friday: (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 (3) totaled 169,684 shares traded (56,561 average per stock) and declining issues (27) totaled 1,031,858 shares traded (38,217 average per stock.) 13 components are on an uptrend (no new uptrends Friday) and 17 components are on a downtrend (5 new downtrends Friday.) There were 1 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.31% below the 20-Day average.
The Energy sector advancing issues (1) totaled 86,790 shares traded (86,790 average per stock) and declining issues (42) totaled 2,069,679 shares traded (49,278 average per stock.) 4 components are on an uptrend (no new uptrends Friday) and 39 components are on a downtrend (7 new downtrends Friday.) There were 1 New Highs and 2 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -3.67% below the 20-Day average.
The Financials sector advancing issues (3) totaled 72,125 shares traded (24,042 average per stock) and declining issues (78) totaled 7,677,418 shares traded (98,428 average per stock.) 11 components are on an uptrend (1 new uptrends Friday) and 70 components are on a downtrend (23 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.6% below the 20-Day average.
The Industrials sector advancing issues (6) totaled 135,775 shares traded (22,629 average per stock) and declining issues (55) totaled 1,576,074 shares traded (28,656 average per stock.) 16 components are on an uptrend (no new uptrends Friday) and 45 components are on a downtrend (10 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.49% below the 20-Day average.
The four 'risk sectors' totaled 13 advancing issues and 202 declining issues Friday with 1 new uptrends and 45 new downtrends.
The Technology sector advancing issues (11) totaled 354,942 shares traded (32,267 average per stock) and declining issues (67) totaled 6,265,895 shares traded (93,521 average per stock.) 16 components are on an uptrend (2 new uptrends Friday) and 63 components are on a downtrend (20 new downtrends Friday.) There were 4 New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.96% below the 20-Day average.
The Consumer Staples sector advancing issues (19) totaled 881,746 shares traded (46,408 average per stock) and declining issues (22) totaled 1,204,053 shares traded (54,730 average per stock.) 17 components are on an uptrend (1 new uptrends Friday) and 25 components are on a downtrend (1 new downtrends Friday.) There were 2 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.47% below the 20-Day average.
The Utilities sector advancing issues (6) totaled 416,913 shares traded (69,486 average per stock) and declining issues (26) totaled 712,777 shares traded (27,415 average per stock.) 3 components are on an uptrend (no new uptrends Friday) and 29 components are on a downtrend (2 new downtrends Friday.) There were no New Highs and 2 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.77% below the 20-Day average.
The Health Care sector advancing issues (3) totaled 41,022 shares traded (13,674 average per stock) and declining issues (48) totaled 2,007,364 shares traded (41,820 average per stock.) 14 components are on an uptrend (1 new uptrends Friday) and 37 components are on a downtrend (8 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.53% below the 20-Day average.
The Consumer Discretionary sector advancing issues (23) totaled 861,474 shares traded (37,455 average per stock) and declining issues (58) totaled 2,468,830 shares traded (42,566 average per stock.) 28 components are on an uptrend (4 new uptrends Friday) and 53 components are on a downtrend (16 new downtrends Friday.) There were 8 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -1.% below the 20-Day average.
Based on the SPX sector data, we are on a Sell for the SPX and the Russell 2000.
What We Learned from Friday's Action:
Friday was session 1 to close below the 5 DMA, session 7 to close below the 10 DMA, session 7 to close below the 20 DMA, and session 1 to close below the 50 DMA. This was also session 4 for the 5 DMA to close below 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 20.24 points below the 10 DMA.
The SPX 5 DMA is 1373.47, 10 DMA is 1390.5, 20 DMA is 1397.76, 50 DMA is 1375.71, 100 DMA is 1317.83, and 200 DMA is 1271.91.
On Friday the SPX traded below the opening range but did not trade above the opening range. 14.6% of the SPX closed up from the previous close; 18.6% closed higher than the open. During Friday's session the SPX lost -17.35 points from open to close. The SPX intraday trading range was 13.26 points. The 5-Day average intraday trading range is 14.52 points, the 10-Day average is 13.21 points, and the 20-Day average is 11.36 points. The trading range is expanding. The daily bar painted an Inside day. The 5-Day SPX gain is -1.99%, the 10-Day gain is -2.35%, and the 15-Day gain is -1.62%.
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.
Our Technical Summary shows that declining volume is at levels that often produce bounces. The Sox and the Dow Transportation Index have their 4-day average advance/decline line pointed upward. But all of our leaders closed below their Pivots and remain bearish until they close above.
Looking Ahead:
The Market Environment for Monday is +5. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be lower. Mel's 10 Day Oscillator is 23 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are bullish for Monday's session.
Monday promises to be an interesting day. Conditions are ripe for a violent bounce. Conditions are also ripe for a vicious sell off. Which one we get is difficult to know but we are leaning towards the sell off.
The SPX closed below the 50 DMA again as it has oscillated above and below this important moving average several times during the week, The last time we saw the SPX oscillating on the 50 DMA like this was the middle of July last summer. While that visit to the 50 DMA provided several bounces, the SPX eventually shed almost 200 points during the following weeks.
This was also the first time the SPX had four 1%+ (up or down) moves in a week since mid-November. The SPX quickly dropped more than 100 points following that.
Last hour sell-offs such as seen several times the last week are a lot different than the buy-the-close market we saw during the first quarter. This is also a characteristic of a declining market.
The broadest index, the NYSE Composite Index, never reached new highs in early April like several indices did. The Composite is currently more than 8% off the 52-week highs. This sort of non-confirmation is often a sign of weakening breadth.
So there are many reasons to be looking for lower prices, but by many measures the market is short-term oversold; the chances for a strong bounce should not be overlooked.
In US economic news, we'll get quite a bit of data, including retail sales on Monday, housing starts on Tuesday, and existing home sales on Thursday. The week will be one filled with key earnings reports like Apple, Priceline.com, and MasterCard. If traders reject these reports and sell, the momentum to the downside could build rapidly.
Week of April 16 - April 20 Overview
Date/Time Release/Consensus
04/16/12 8:30 Retail Sales/0.003
04/16/12 8:30 Retail Sales ex-auto/0.006
04/16/12 8:30 Empire Manufacturing/17.5
04/16/12 9:00 Net Long-Term TIC Flows/NA
04/16/12 10:00 Business Inventories/0.005
04/16/12 10:00 NAHB Housing Market Index/29
04/17/12 8:30 Housing Starts/700K
04/17/12 8:30 Building Permits/710K
04/17/12 9:15 Industrial Production/0.002
04/17/12 9:15 Capacity Utilization/0.785
04/18/12 7:00 MBA Mortgage Index/NA
04/18/12 10:30 Crude Inventories/NA
04/19/12 8:30 Initial Claims/375K
04/19/12 8:30 Continuing Claims/3275K
04/19/12 10:00 Existing Home Sales/4.62M
04/19/12 10:00 Philadelphia Fed/10.3
04/19/12 10:00 Leading Indicators/0.002
Monday, April 16
Economics
08:30 Empire Manufacturing – consensus 18
08:30 Advance Retail Sales – consensus 0.3%
08:30 Retail Sales Ex Autos – consensus 0.6%
08:30 Retail Sales Ex Auto & Gas – consensus 0.5%
09:00 Total Net TIC Flows – consensus $40.0B
09:00 Net Long-term TIC Flows – consensus $40.0B
10:00 Business Inventories – consensus 0.6%
10:00 NAHB Housing Market Index – consensus 28
11:00 Fed selling 02/15/2013-06/30/2013 $8b-$8.75b notes
11:30 Treasury selling $30b 3-month notes, $28b 6-month note
Earnings
Before: SCHW, C, GCI, MTB, MAT
After: BRO, ELS, ICUI, LNCR, PNFP, STLD
The CPI rose 0.3% in line with expectations. Consumer sentiment came in at 75.7, lower than last month's 76.2. On Monday we will get retail sales, Empire State mfg. and the home price index.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel