1040 Holds... For Now
by Jerome "Mel" Hickerson
S&P's downgrade of Ireland kept a lid on any optimism early today as foreign markets were red across the board. With bond yields hitting new cycle lows and gold rising, the fear trade was continuing. The Commerce Department reported that Durable Goods orders increased +0.3% in July, which was well below the consensus expectations for an increase of +2.8%. June’s reading was revised higher to -0.1 from -1.2%. When you strip out the volatile orders for transportation, orders fell by -3.8%, which was below the consensus for +0.5 Futures were pointing to another weak open.
The SPX gapped down a few points at the open, then continued down another quick eight points to tag the support line of 1040 and put the low of the day on the chart at 10am. The rest of the session was really small incremental steps off the floor as the index closed out the day near the highs.
Economic news today was pretty abysmal but the market found a floor and spent most of the session rallying. This was certainly a text book example of the market bouncing off a well known support area. The real question now is whether the equities can gain any momentum or whether the indices turn back down again to retest and likely fall through support. Data I follow lends itself to believing that we have a couple days for a bounce before resuming to the downside.
Looking at the Nine Sectors Report tonight, we have several changes and several sectors were almost a positive change. So we believe we see a trend change. Therefore, the signal tonight changes to Buy. But we have to be aware of the unemployment claims data that will be released Thursday morning. The Ultimate Indicator (Price) suggests that bad news is already absorbed into the markets. So it is possible that only good news would rock the equities; but a trader makes a living by being cautious not by taking chances. Nevertheless, our signal changes to Buy as of tonight's close. It could easily return to Neutral or Sell quickly.
When you've been in a multi-day trading funk it is good to know why but even better to know you've corrected what was wrong. I still messed up once today by being impatient and anticipating a signal, entering a position, then watched as the signal never came. Being impatient costs more traders more money than any other correctable error. Even experienced traders have to repeatedly relearn this lesson. But we are back on track and upcoming results will show it.
Thursday, August 26
Economics
08:30 Initial Claims
08:30 Continuing Claims
Swiss Employment Level
Japan Jobless Rate
Japan National Consumer Price Index
Earnings
Before: APWR, BRLI, CHOP, CONN, DHT, FRED, GRB, LB, MPR, PDCO, RGS, SFL
After: ARUN, BEBE, DAC, DLLR, IFR, JCG, MCRS, NZ, NOVL, OVTI, SLH, RBI
Auction
1:00 7-Yr Note
Mel’s Missives from the Matrix:
- Total tick for the day was 145,000 and the average tick for the day was 94. There were 201 ticks greater than 600 and 88 ticks more extreme than -600. There were 31 ticks greater than 1000 and 7 ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 19.55 points. The intraday trading range - 9:35 to the close - was 18.23. The 5 DMA of daily range is 15.57.
- Evidence of the intraday trend: At 10am volume was 95.66% of the 10 day average. By noon the volume was 111.51% of the 10 day average, and by 2pm volume was 106.52% of the 10 day average.
- The day's volume was 90.1% of the average daily volume for the last year. Volume was 109.3% of the last 10 day average and 95.1% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 14:30 and 14:45 when relative volume increased 48.5% while the SPX was rising 0.37%. The largest drop in relative volume came between 15:00 and 15:15 when relative volume dropped -40.7% while the SPX was dropping -0.03%.
- 2% of the SPX stocks closed with two day RSI above 90. 9% closed with RSI above 80. 32% closed with RSI below 20 and 22% closed with RSI below 10.
- 26.4% of the SPX are above their five day moving average, 18% are above their 10 day average, 14% are above their 20 day moving average, 28.2% are above their 50 day moving average, 24% are above their 100 day moving average, and 30.2% are above their 150 day moving average.
- 27% of the SPX closed above their most recent previous high.
- 12% of the SPX stocks closed below their most recent previous lows.
- 313 SPX issues advanced and 173 issues declined, a net SPX advance/decline of 140.
- Evidence of the intraday trend: At 10am, 18.2% of the SPX components were in the top half of the range. By noon, 67.4% were in the top half of the range, and by 2pm, 71.6% were in the top half of the range.
- 91.6% of stocks closed in the top half of the day's range. (8.2% closed in bottom half.)
- 10.6% of stocks closed in the top 10% of the day's range. 54% of stocks closed in the top 20% of the day's range.
- 0.4% of stocks closed in the bottom 10% of the day's range. 1.4% of stocks closed in the bottom 20% of the day's range.
- 4.4% of stocks closed within 2% of their 52 week high. 12.6% of stocks closed within 5% of their 52 week high.
- 88.4% of stocks closed within 50% of their 52 week low. 64.8% of stocks closed within 25% of their 52 week low.
- 10.6% of stocks closed within ¼% of their high for the day.
- 1.4% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 9.6% of the SPX components were up since the open. By noon, 33.8% were up since the open, and by 2pm, 37.4% were up since the open.
- 62.8% of the SPX closed up from the previous close; 84% closed higher than the open.
- Sectors stronger than the SPX for Wednesday:
- Technology -- Outperformed the SPX by +29%.
- Health Care -- Outperformed the SPX by +66%.
- Consumer Discretionary -- Outperformed the SPX by +70%.
- Sectors weaker than the SPX for Wednesday:
- Basic Materials -- Underperformed the SPX by -4%.
- Energy -- Underperformed the SPX by -85%.
- Financials -- Underperformed the SPX by -12%.
- Industrials -- Underperformed the SPX by -52%.
- Consumer Staples -- Underperformed the SPX by -12%.
- Utilities -- Underperformed the SPX by -41%.
- The $SOX index strength was stronger relative to the SPX Wednesday by 0.64%.
- The XLF underperformed the SPX by -0.12% Wednesday.
- The 2 Day RSI of the SPX is 26. The Dow RSI is 18, the NASDAQ is 42 and the Russell is 58.
- Over the last four sessions, the average session closed 44.75% of the range above the low. Wednesday closed at 78.4% of the daily range.
- Upside momentum moved a little bullishly Wednesday, from Tuesday’s -3.77 to today’s -3.53. The ratio of SPX components giving a crossover sell signal compared to buy signals moved bearishly to S 10.66 to 1.
- The ISEE Equity 10 day moving average Wednesday was 177.8. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10 and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 184 SPX components moved upward and 177 components downward during the after hours with 223 million shares traded.
Trade 'em well on Thursday everyone!
-Mel
