Futures Lower After European Elections but U.S. Markets Rebound
Market Recap:
U.S. stock index futures pared losses but were still lower Monday following elections in France and Greece over the weekend. Greece's vote, combined with victory for Hollande over incumbent Nicolas Sarkozy, will raise pressure on Europe's paymaster Germany to pursue a more growth-oriented approach to the crisis. U.S. futures rebounded nicely this morning off the overnight lows.
Monday began with a small gap lower and the first hour of trading was all over the place. But soon after the first hour ended, traders began taking the indices gradually higher. The SPX high of the day was on the chart just before 2:00 pm and the last couple of hours traded in a narrow range with a modest downward bias.
Our Market Leaders Board is mixed after today's action with the Financials showing the greatest strength and Technology weakest.
SPX big winners were First Solar Inc (FSLR) 4.32%, Tyson Foods Inc (TSN) 3.33%, and Fifth Third Bancorp (FITB) 2.86%. SPX big losers were Cognizant Tech Sol Cp A (CTSH) -21.9%, Frontier Communications Corp (FTR) -7.24%, and Accenture Ltd (ACN) -3.84%.
SPX five day big winners are Masco Corp (MAS) 10.39%, TripAdvisor (TRIP) 9.22%, and Whole Foods Market Inc (WFM) 8.11%. SPX five day big losers are Cognizant Tech Sol Cp A (CTSH) -23.22%, Prudential Financial Inc (PRU) -13.79%, and Cablevision Systems Cl A (CVC) -12.28%.
New Ten Day Highs: BSX, BRK.B, CPB, CFN, CB, DF, ECL, EQR, FDX, HNZ, IRM, LLY, MAS, MKC, NWL, PGR, VNO
New Ten Day Lows: AET, AKS, AKAM, AA, ALTR, AIG, ABC, APH, APC, APA, APOL, AMAT, AIZ, ADSK, ADP, BLL, BAC, BBBY, BMS, BBY, BMC, CA, CAT, CBG, CELG, CME, CI, CSCO, CTSH, CPWR, COP, STZ, SAI, COST, CMI, DVA, DELL, XRAY, DVN, DO, DOV, DOW, DNB, ETFC, EMN, ETN, EBAY, EMR, ESV, ETR, EXPD, ESRX, XOM, FAST, FSLR, FISV, FLIR, FLR, FTI, F, BEN, FCX, FTR, GME, GCI, GIS, GNW, GILD, GT, HAL, HAR, HRS, HIG, HES, HPQ, HST, HUM, JBL, JEC, JDSU, JPM, JNPR, CLF, KLAC, KR, LM, LEG, LIFE, LLTC, LMT, LOW, MRO, MWV, WFR, MDP, PCS, MCHP, MSFT, MOLX, MON, MWW, MCO, MS, MYL, NBR, NOV, NUE, ODP, ORCL, OI, PCAR, PAYX, BTU, PBCT, PFE, PCL, PFG, PRU, QCOM, DGX, COL, RDC, R, SWY, SLB, SCHW, SEE, SIAL, SLM, SWK, SPLS, SBUX, SRCL, SVU, SYMC, SYY, TROW, TSO, TXT, TIF, TWC, TWX, X, UTX, UNH, DRYS, QLD, MBI, VLO, VMC, WAG, WPO, WM, WLP, WU, C, GS
Volume & Breadth Indicators
For the SPX Index there were 241 components advancing and 251 components declining. On the NYSE 3,157 issues were traded with 1,651 advancing issues and 1,380 retreating issues, a ratio of 1.2 to one advancing. There were 59 new highs and 52 new lows. The five day moving average of New Highs is 113 while the five day moving average of New Lows is 35 and the ten day moving average of Net Advancing is 217. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 1.16 to one. The closing TRIN was 1.03 and the final tick was 320. The five day average of TRIN is 1.43 and the ten day average of TRIN is 1.28. The NYSE Composite Index gained 0.2% today while the SPX gained 0.04%.
For the NYSE, relative to the previous 30 session average, volume was -5.45% 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, 18 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 92.6% of the average daily volume for the last year. Volume was 100.7% of the last 10 day average and 96.6% of the previous day’s volume.
The SPX is a mere 60 points off the 52-week highs while 260 points above the 52-week lows, yet NYSE New Lows almost equal New Highs. This suggests that breadth is not keeping up with the indices.
Looking at the NYSE 15-second tick data, the total tick for the day was 2,000 and the average tick for the day was 2. There were 39 ticks greater than 600 and 30 ticks more extreme than -600. There were no ticks greater than 1000 and 1 ticks more extreme than -1000.
Moving Average and Support/Resistance Indicators:
15.4% of the SPX are above their five day moving average, 23.2% are above their 10 day average, 36.8% are above their 20 day moving average, 36.4% are above their 50 day moving average, and 66.6% are above their 200 day moving average.
There were two significant moving average crossovers today as both Emerging Markets and Germany had their 5 DMA cross below their 20 DMA. Our moving average Power Rating is 58 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Monday:
- Basic Materials -- Outperformed the SPX by +4%.
- Financials -- Outperformed the SPX by +49%.
- Consumer Staples -- Outperformed the SPX by +10%.
- Health Care -- Outperformed the SPX by +18%.
Sectors weaker than the SPX for Monday:
- Energy -- Underperformed the SPX by -34%.
- Industrials -- Underperformed the SPX by -29%.
- Technology -- Underperformed the SPX by -32%.
- Utilities -- Underperformed the SPX by -27%.
- Consumer Discretionary -- Underperformed the SPX by -4%.
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 (13) totaled 190,175 shares traded (14,629 average per stock) and declining issues (15) totaled 591,605 shares traded (39,440 average per stock.) 5 components are on an uptrend (no new uptrends today) and 25 components are on a downtrend (1 new downtrends today.) 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 -.12% below the 20-Day average.
The Energy sector advancing issues (15) totaled 709,784 shares traded (47,319 average per stock) and declining issues (29) totaled 1,570,518 shares traded (54,156 average per stock.) 9 components are on an uptrend (3 new uptrends today) and 35 components are on a downtrend (no new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .64% above the 20-Day average.
The Financials sector advancing issues (58) totaled 4,734,254 shares traded (81,625 average per stock) and declining issues (21) totaled 2,070,763 shares traded (98,608 average per stock.) 34 components are on an uptrend (9 new uptrends today) and 47 components are on a downtrend (1 new downtrends today.) 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 .16% above the 20-Day average.
The Industrials sector advancing issues (29) totaled 663,954 shares traded (22,895 average per stock) and declining issues (32) totaled 1,000,215 shares traded (31,257 average per stock.) 15 components are on an uptrend (2 new uptrends today) and 46 components are on a downtrend (3 new downtrends today.) 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 .13% above the 20-Day average.
The four 'risk sectors' totaled 115 advancing issues and 97 declining issues today with 14 new uptrends and 5 new downtrends. 29.2% of Risk Sector components are uptrending.
The Technology sector advancing issues (27) totaled 2,351,665 shares traded (87,099 average per stock) and declining issues (50) totaled 4,242,914 shares traded (84,858 average per stock.) 12 components are on an uptrend (3 new uptrends today) and 67 components are on a downtrend (no new downtrends today.) There were no New Highs and 4 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.19% below the 20-Day average.
The Consumer Staples sector advancing issues (23) totaled 910,269 shares traded (39,577 average per stock) and declining issues (18) totaled 726,119 shares traded (40,340 average per stock.) 21 components are on an uptrend (2 new uptrends today) and 20 components are on a downtrend (1 new downtrends today.) 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 .68% above the 20-Day average.
The Utilities sector advancing issues (7) totaled 195,418 shares traded (27,917 average per stock) and declining issues (25) totaled 502,321 shares traded (20,093 average per stock.) 22 components are on an uptrend (no new uptrends today) and 10 components are on a downtrend (4 new downtrends today.) 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 1.71% above the 20-Day average.
The Health Care sector advancing issues (37) totaled 1,429,375 shares traded (38,632 average per stock) and declining issues (13) totaled 422,687 shares traded (32,514 average per stock.) 16 components are on an uptrend (no new uptrends today) and 35 components are on a downtrend (1 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .43% above the 20-Day average.
The Consumer Discretionary sector advancing issues (32) totaled 1,217,652 shares traded (38,052 average per stock) and declining issues (48) totaled 1,843,259 shares traded (38,401 average per stock.) 27 components are on an uptrend (1 new uptrends today) and 54 components are on a downtrend (7 new downtrends today.) 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 1.54% above 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 Monday's Action:
Monday was session 3 to close below the 5 DMA, session 2 to close below the 10 DMA, session 2 to close below the 20 DMA, and session 2 to close below the 50 DMA. This was also session 6 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 20.64 points below the 10 DMA.
The SPX 5 DMA is 1387.68, 10 DMA is 1390.23, 20 DMA is 1382.77, 50 DMA is 1386.71, 100 DMA is 1344.1, and 200 DMA is 1276.67.
On Monday the SPX traded above the opening range but did not trade below the opening range. 44.4% of the SPX closed up from the previous close; 63.2% closed higher than the open. During Monday's session the SPX gained .8 points from open to close. The SPX intraday trading range was 9.97 points. The 5-Day average intraday trading range is 13.93 points, the 10-Day average is 11.37 points, and the 20-Day average is 12.38 points. The trading range is expanding. The 5-Day SPX gain is -2.03%, the 10-Day gain is 0.19%, and the 15-Day gain is 0.00%.
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 Tuesday is -1. 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 36 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bearish for Tuesday's session.
We were disappointed today that the dip lower and then bounce that we were looking for mostly came in the futures in overnight trading. If you are an ETF trader you share my disappointment. The market did exactly what was expected but doing it while the cash markets were closed was frustrating.
If you simply look at the intraday action, today seemed very much like bearish consolidation of Friday's losses. But that sustained buying of the futures overnight gives cause to wonder if we continue to bounce higher.
The market remains oversold with only 2% of the SPX components with an RSI(2) above 90 and 38% of the components with an RSI(2) below 10. But a quick review of our Market Internals data shows that the long side might still be a struggle here as our leading indices continue to close not only below their Pivots but below their lower trend lines.
The data suggests that this is just an oversold bounce - the SPX gained less than a half point today. But this is a level of support with a convergence of moving average resistance levels above. A bounce to around 1380 would not be surprising.
SPX levels to watch include 1386; a close above is bullish and a close below is bearish. For the Russell 2000, keep an eye on the 807 level.
Tuesday, May 8
Economics
07:30 NFIB Small Business Optimism – consensus 92.9
10:00 IBD/TIPP Economic Optimism – consensus 48.0
11:30 Treasury selling 4-week bills
1:00 US selling $32b 3-year notes
01:30 AUD Trade Balance
10:00 EUR German Industrial Production
12:15 CAD Housing Starts
22:45 NZD NZ Card Spending
11:00 EFSF to sell EU2b in 91-day bills
Earnings
Before:
DirecTV (DTV) EPS $1.05, revs $7.04B
Discovery (DISCA) EPS 59c, revs $1.05B
Molson Coors (TAP) EPS 43c, revs $703.46M
OfficeMax (OMX) EPS 16c, revs $1.87B
After:
Walt Disney (DIS) EPS 55c, revs $9.55B
There were no important economic releases on Monday and there will be none on Tuesday.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel