If Santa Should Fail to Call, Bears Will Come to Broad and Wall
by Jerome "Mel" Hickerson
Once again, today’s session opened with a mild pop upward inspired by pressure from the futures. And also as has been the recent pattern, the small gap was quickly filled. After 10:30, the index began a gentle decline, reaching the low of the day at 12:21. From there began a slow – extremely slow – melt upward into the close… or at least that seemed the game plan until 3:30 or so. The last half hour saw some selling into the close as the SPX dropped 2½ points to close at the session low. End of the winning streak just like that.
Today’s high of 1130.38 was exactly the same as yesterday’s high. Today’s chart bar is an extremely narrow range inside day – it’s pretty difficult to be an inside day when the bar follows a 6.87 point bar, but today managed by being the smallest bar of the year.
Range contraction such as we’ve seen often expands with several large range days; I’d be surprised if this happens before year end, but I’d also be surprised if this came as a result of an upward move.
Bears are excited by ending the SPX winning streak. And that is an accomplishment, especially the way it was done right at the close today. But in this overbought market, a 1½ point drop in the index just doesn’t seem all that much. We might also keep in mind that the last two sessions of the year, indeed, the last session of any month, trend bullish. The second to the last session of the year closes positively 69% of the time (since 1950) and the last session closes up 62% of the time.
But as I review data tonight, I see evidence that should trouble bulls. I also see evidence that should stop the bears in mid dance. The conflict in the signals is such as I’ve rarely seen.
For Wednesday, I resolve the conflicting signals in this fashion: Thursday closes higher than Wednesday’s open after which the bears dance to begin the new year.
Wednesday, December 30
Economics
09:45 Chicago PMI 55.1 cons.
10:30 Crude Inventories
Auctions
01:00 7-Yr Note Auction
The Institute for Supply Management is scheduled to report data on Chicago-area manufacturing for December. The weekly crude oil inventories report is due at 10:30 a.m. ET.
Mel’s Random Hits:
• Total tick for the day was +23,000. There was a negative stretch beginning about 10:30 and ending about 12:30; the last half hour was negative as well.
• The day's range was 4.3 points. Range has not exceeded 6.87 points in five sessions. No session has exceeded 22 points since October 30th. This period of range contraction is one of the longest ever. Periods such as this often end explosively. Note: The last session with a smaller range than today was 11/21/2006. It’s been three years and I hope it is at least that long again.
• The day's volume was 44% of the average 2009 daily volume. The volume was 51% of the last 10 day (shrinking) average. The last four days equal one large day earlier this spring.
• 14% of the SPX stocks closed with two day RSI above 90. 22% closed with RSI above 80. 18% closed with RSI below 20 and 3% closed with RSI below 10. Overbought conditions are relieved somewhat by the sideways movement.
• 49% of the SPX are above their five day moving average, 76% are above their 10 day average, and 82% are above their 20 day moving average.
• 32% of the SPX stocks closed below their most recent previous lows.
• 10% of the SPX closed above their most recent previous high.
• 33.6% of stocks closed in the top half of the day's range. (66.4% closed in bottom half.)
• 34.6% of stocks closed in the bottom 20% of the day's range.
• 3.2% of stocks closed in the top 10% of the day's range.
• 26.2% of stocks closed within 2% of their 52 week high.
• 23.4% of stocks closed within 50% of their 52 week low.
• 9.2% of stocks closed within ¼% of their high for the day.
• 33.6% of stocks closed within ¼% of their low for the day.
• 40.4% of the SPX closed up from the previous close; 33.0% closed higher than the open.
• Sectors weaker than the SPX for the day: Energy, Financials, and Health Care
• Sectors stronger than the SPX for the day: Utilities, Technology, Consumer Staples, Basic Materials, Industrials, and Consumer Discretionary
• The $SOX index strength was weaker than the SPX today.
• The 2 Day RSI of the SPX is 70. The Dow RSI is 97, NASDAQ is 86 and Russell 67. Compare these numbers to last night to see how a day such as today relieves some of the overbought conditions.
• With the Dollar being up today, the market being down isn’t a surprise; the surprise might be that it was down so little.
• SPX components moved upward slightly during the after hours.
Have a great Wednesday!
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"Mel"
ETF’s we trade:
Ultra S&P500 ProShares (NYSE: SSO)
Ultra Dow30 ProShares (NYSE: DDM)
Ultra QQQ ProShares (NYSE: QLD)
PS UTLRSHRT QQQ (NYSE: QID)
UltraShort S&P500 ProShares (NYSE: SDS)
UltraShort Dow30 ProShares (NYSE: DXD)
PowerShares QQQ Trust (NASDAQ: QQQQ)
Direxion Daily Small Cp Bear 3X (NYSE:TZA)
Direxion Daily Small Cp Bull 3X (NYSE:TNA)
