Greek Debt Worries Bring Morning Dip
The focus was back on Europe this morning as EU leaders met. There was still no deal on the Greek debt swap, and yields/CDS were rising in Portugal. After being closed last week for New Year celebration, China's Shanghai index dropped -1.5% overnight. As such, futures were under pressure as the week began. Personal Incomes rose by +0.5% in December, which was above the consensus expectations for an increase of +0.4% and November's +0.1%. Personal Spending for the month was unchanged which was below the expectations for +0.1% and below the November reading of +0.1%. The Core PCE came in with a gain of just +0.1% which was in line with expectation for +0.1%. On a year-over-year basis, the PCE was up +2.4%, which was a tenth higher than expectations for a reading of +2.3%
The Monday session opened with a gap lower and traded lower for the first forty-five minutes. But the SPX 1300 area was successfully tested and the market bounced. While the SPX rested for a couple of hours between 11:00 and 1:00, the index was busy climbing before and after that rest, although the final ninety minutes did see some selling. But we once again saw an early morning low followed by buying the dip and a late afternoon high. This is a characteristic of a bullish market.
Our Market Leaders Board shows a mixed finish as Technology closed positive while all the other leaders closed in negative territory. Leading the way lower were the chip makers (SOX) and the Financials. Also notice that the NYSE Composite Index was weaker than the SPX, often a bearish sign.
SPX big winners were Nabors Industries Inc (NBR) 3.56%, Interpublic Gr Of Cos (IPG) 2.47%, and Monsanto Co (MON) 2.21%. SPX big losers were Gannett Co Inc (GCI) -7.08%, Staples Inc (SPLS) -5.05%, and CBRE Group, Inc. (CBG) -4.33%.
SPX five day big winners are Netflix Inc (NFLX) 33.49%, J.C. Penney Company Inc (JCP) 19.56%, and Textron Inc (TXT) 16.92%. SPX five day big losers are E Trade Financial Corp (ETFC) -14.03%, Frontier Communications Corp (FTR) -12.78%, and Corning Inc (GLW) -12.25%.
New Ten Day Highs: BMC, CFN, DELL, EP, FSLR, BEN, GR, HSY, LLL, MON, NBR, NKE, NUE, JCP, RSG, TXT, UPS, VRSN, VMC
New Ten Day Lows: ABT, ATI, MO, AEP, APOL, T, AVY, BIIB, CPB, COF, CELG, CNP, CVX, CB, CTAS, CMA, CAG, COP, SAI, CVH, CVS, D, RRD, ROST, EP, FII, FTI, GCI, GD, GIS, HSY, HES, HRL, HBAN, IPG, IP, IRM, K, KEY, KMB, KSS, LEG, LLY, L, LO, MKC, MCD, MWV, MDP, TAP, NYT, JWN, NSC, NOC, OMC, PLL, PBCT, POM, PFE, PNC, PG, STR, RTN, RAI, ROK, SLE, SCHW, SJM, STT, SRCL, TROW, BK, TWX, TIE, TRV, TSN, DYN, USB, VAR, VZ, VFC
Volume & Breadth Indicators
For the SPX Index there were 147 components advancing and 322 components declining. On the NYSE 3,135 issues were traded with 1,112 advancing issues and 1,904 retreating issues, a ratio of 1.71 to one declining. There were 157 new highs and 10 new lows. The five day moving average of New Highs is 159 while the five day moving average of New Lows is 9 and the ten day moving average of Net Advancing is 626. The Net Advancing data indicates a bullish trend.
Declining volume was higher at a ratio of 2.46 to one. The closing TRIN was 1.4 and the final tick was -122. The five day average of TRIN is 1.38 and the ten day average of TRIN is 1.18. The NYSE Composite Index lost -0.54% today while the SPX lost -0.25%.
For the NYSE, relative to the previous 30 session average, volume was -6.10% below the average. Of the last 15 sessions 5 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 22 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 87.3% of the average daily volume for the last year. Volume was 91.2% of the last 10 day average and 96.1% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 136,000 and the average tick for the day was 88. There were 48 ticks greater than 600 and 21 ticks more extreme than -600. There were no ticks greater than 1000 and 3 ticks more extreme than -1000. The tick action suggests institutional accumulation.
Looking at the one-minute tick data, there were 75 ticks greater than 500 and 39 ticks more extreme than -500. 61.9% one-minute ticks were positive. There were no ticks greater than 900 and no ticks more extreme than -900. The tick action suggests institutional accumulation.
The tick data today shows that the largest ticks were bearish but buyers were in control most of the day after the early morning lows. Note: We will eventually be forced to change our data collection from the 15-second tick to the 1-minute tick. So until that is forced upon us, we will display both collection methods so that traders can observe how the methods compare.
The intraday volume pattern shows that the volume spikes came while the SPX was on the rise. Our Nightly Breadth Indicators remain overbought but days such as the last few days serve very well to "burn off" the overbought conditions while not really taking much off the indices.
Moving Average and Support/Resistance Indicators:
42% of the SPX are above their five day moving average, 59.2% are above their 10 day average, 74.2% are above their 20 day moving average, 83.6% are above their 50 day moving average, and 62.2% 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 Monday:
- Basic Materials -- Outperformed the SPX by +9%.
- Technology -- Outperformed the SPX by +56%.
- Health Care -- Outperformed the SPX by +11%.
- Consumer Discretionary -- Outperformed the SPX by +4%.
Sectors weaker than the SPX for Monday:
- Energy -- Underperformed the SPX by -18%.
- Financials -- Underperformed the SPX by -82%.
- Industrials -- Underperformed the SPX by -13%.
- Consumer Staples -- Underperformed the SPX by -34%.
- Utilities -- Underperformed the SPX by -35%.
In Late Trading:
151 SPX components moved upward and 218 components downward during the after hours with 211 million shares traded.
What We Learned from Monday's Action:
Monday was session 2 to close below the 5 DMA, session 1 to close below the 10 DMA, session 27 to close above the 20 DMA, and session 27 to close above the 50 DMA. This was also session 25 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 .59 points below the 10 DMA. This is the first close below the 10 DMA since 12/19/11.
The SPX 5 DMA is 1317.7, 10 DMA is 1313.61, 20 DMA is 1297.84, 50 DMA is 1256.28, 100 DMA is 1230.23, and 200 DMA is 1257.2.
On Monday the SPX traded above the opening range but did not trade below the opening range. 31% of the SPX closed up from the previous close; 64% closed higher than the open. During Monday's session the SPX lost -3.14 points from open to close. The SPX intraday trading range was 13.51 points. The 5-Day average intraday trading range is 14.22 points, the 10-Day average is 12.56 points, and the 20-Day average is 11.16 points. The trading range is expanding.
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.
The Market Environment for Tuesday is -4. 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 65 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are bearish for Tuesday's session.
Market breadth finally took a hit today after showing strength late last week even while the SPX was moving slightly lower. But for Tuesday's end-of-month session, a slight move higher for the SPX won't be surprising as the internal data has turned very neutral after just three down days in which the index lost a total of only thirteen points.
Notice the intraday bounce off the SPX 1300 level today. This will bear watching if we see a retest soon. It probably makes sense to take some of any short-side positions off if the SPX approaches the 1300 level again. We also think that the market showed that breaking back above the 1315 level might be difficult. For now, the 1300 and 1315 levels seem worthwhile to watch as we ping-pong between.
Tuesday, January 31
08:30 Employment Cost Index – consensus 0.4%
09:00 S&P/CaseShiller Home Price Index
09:00 S&P/CS 20 City SA – consensus -0.45%
09:00 S&P/CS Composite 20 – consensus -3.22%
09:45 Chicago Fed PMI – consensus 63
10:00 Consumer Confidence – consensus 68
10:00 NAPM-Milwaukee – consensus 57.3
11:00 Fed to purchase $2.25b-$2.75b in 25 to 30-year notes
11:30 U.S. to sell 4-week bills
EUR German CPI
EUR German Retail Sales
00:30 AUD NAB Business Confidence
05:00 JPY Housing Starts
07:00 CHF UBS Consumption Indicator
08:55 German Unemployment Change
09:30 GBP Net Consumer Credit
10:00 EUR Euro-Zone Unemployment Change
13:30 CAD GDP
Before: AMG, AXE, ADM, ARMH, AVY, BIIB, CE, CEVA, CIT, CNH, DHR, LLY, ETR, XOM, GKSR, GNTX, HRS, HHS, HW, HP, ITW, NRGY, KLIC, LLL, LXK, MPC, HZO, MAT, MHP, MTH, OSK, PCAR, PNR, PFE, PCH, PROV, RTIX, SAIA, STL, TECH, TLAB, TNB, TYC, X, UPS, VLO, WDR
After: ACE, ACXM, AFL, AFOP, AMZN, AMCC, AJG, AZPN, BBOX, BXP, EPAY, BRCM, CHRW, BCR, CYT, DLB, FTNT, HLIT, HA, ILMN, IVAC, IXYS, JKHY, JDAS, JLL, KEYN, MANH, MTW, MPW, MWA, MYGN, NATI, PSEM, PLT, QGEN, RSYS, STX, SLGN, STYL, SU, TCRD, UBNT, UIS, VRTU, WRB, WBSN, WPRT
The Dallas Fed reported a reading of 15.3, much better than the expected 1.0. Personal income rose 0.5%, better than the consensus 0.4%. On Tuesday will we get the Case-Shiller home price index, Chicago PMI and consumer confidence.
Thank you for reading. Think on it, trade on it, and be well.