In FED Traders Trust
by Jerome "Mel" Hickerson
There were no economic news releases today. However, the combination of strong sentiment numbers in Europe and some talk about the Fed resuming its purchase of Treasuries or possible additional stimulus to the economy pushed stock futures higher.
The first session of the week began with a little pop and drop move, jumping four points quickly at the open before moving into negative territory to put the low of the day on the chart at 9:57am. The time in negative territory was brief; if you blinked, you missed it. The rest of the session was like a sleep walker, slowly inching higher as if traders were mesmerized and expressing their faith in tomorrow’s FOMC statement.
Mornings of recent FED meeting announcements have tended to be sluggish with a positive bias and Tuesday may be no different. Of course, we are then likely to get the usual gyrations along with the announcement. But it’s the move that comes last, the move that sticks, that matters most. And I believe we are setup for a “sell the news” reaction. We have drifted higher on very low and unconvincing volume. We are short-term overbought and right at a significant resistance layer. This would appear to be a good setup for a strong rejection fueled by the FED announcement tomorrow. It makes sense to be prepared for anything with a FED meeting, but this seems most likely to me.
Our Nine Sectors Report tonight once again fails to show a good reason to move away from our Sell signal. It is possible that tomorrow’s FED announcement will completely blow us out of the water but we are going to hold the Sell signal another day.
One important note about today: Volume was extraordinarily low. It is uncommon for non-holiday volume to be only 65% of the previous year’s average.
Our trade systems were quiet in today’s sluggish environment; we produced one small profitable signal for ten cents in SDS and simply watched the rest of the inaction.
Tuesday, August 10
Economics
08:30 Productivity
08:30 Unit Labor Costs
10:00 Wholesale Inventories
02:15 FOMC Rate Decision
German Consumer Price Index
Britain DCLG UK House Prices
Britain Visible Trade Balance
Canada Housing Starts
Earnings
Before: ACMR, AYR, ALLT, CVG, DPTR, FOSL, JASO, NXG, SEED, SMG, TECH, YTEC, HOGS
After: AONE, AXAS, AOSL, ARI, BOBE, CFN, HMIN, JAZZ, LDK, MYGN, PEGA, SPRWA, SYMM, URS, DIS
Auction
01:00 3-Yr Note
The Federal Reserve will issue a policy statement in the afternoon. The central bank is widely expected to leave its benchmark federal funds rate in a range of 0 to 0.25%, where it has been since December 2008. A report on wholesale inventories is due shortly after the market opens. After the closing bell, Walt Disney is among the companies slated to report quarterly results.
Mel’s Missives from the Matrix:
- Total tick for the day was 253,000 and the average tick for the day was 164. There were 129 ticks greater than 600 and 10 ticks more extreme than -600. There were 2 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 8.33 points. The intraday trading range - 9:35 to the close - was 8.29. The 5 DMA of daily range is 10.31.
- Evidence of the intraday trend: At 10am volume was 91.41% of the 10 day average. By noon the volume was 75.11% of the 10 day average, and by 2pm volume was 77.96% of the 10 day average.
- The day's volume was 65.1% of the average daily volume for the last year. Volume was 79.3% of the last 10 day average and 83.5% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 2:30 and 2:45 when relative volume increased 43.4% while the SPX was rising 0.20%. The largest drop in relative volume came between 2:45 and 3:00 when relative volume dropped -39.4% while the SPX was rising 0.06%.
- 16% of the SPX stocks closed with two day RSI above 90. 31% closed with RSI above 80. 8% closed with RSI below 20 and 4% closed with RSI below 10.
- 65.2% of the SPX are above their five day moving average, 72% are above their 10 day average, 74% are above their 20 day moving average, 71.2% are above their 50 day moving average, 53.8% are above their 100 day moving average, and 58% are above their 150 day moving average.
- 51% of the SPX closed above their most recent previous high.
- 2% of the SPX stocks closed below their most recent previous lows.
- 389 SPX issues advanced and 98 issues declined, a net SPX advance/decline of 291.
- Evidence of the intraday trend: At 10am, 25.4% of the SPX components were in the top half of the range. By noon, 60.2% were in the top half of the range, and by 2pm, 54% were in the top half of the range.
- 66.4% of stocks closed in the top half of the day's range. (33.4% closed in bottom half.)
- 12.4% of stocks closed in the top 10% of the day's range. 29.2% of stocks closed in the top 20% of the day's range.
- 4.8% of stocks closed in the bottom 10% of the day's range. 9.8% of stocks closed in the bottom 20% of the day's range.
- 11.2% of stocks closed within 2% of their 52 week high. 24% of stocks closed within 5% of their 52 week high.
- 80.8% of stocks closed within 50% of their 52 week low. 45% of stocks closed within 25% of their 52 week low.
- 23.2% of stocks closed within ¼% of their high for the day.
- 8.6% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 61.6% of the SPX components were up since the open. By noon, 73.2% were up since the open, and by 2pm, 71.8% were up since the open.
- 76% of the SPX closed up from the previous close; 56% closed higher than the open.
- Sectors stronger than the SPX for Monday:
- Basic Materials -- Outperformed the SPX by +7%.
- Financials -- Outperformed the SPX by +0%.
- Technology -- Outperformed the SPX by +36%.
- Consumer Discretionary -- Outperformed the SPX by +42%.
- Sectors weaker than the SPX for Monday:
- Energy -- Underperformed the SPX by -13%.
- Industrials -- Underperformed the SPX by -12%.
- Consumer Staples -- Underperformed the SPX by -2%.
- Utilities -- Underperformed the SPX by -18%.
- Health Care -- Underperformed the SPX by -3%.
- The $SOX index strength was stronger relative to the SPX Monday by 0.1%.
- The XLF outperformed the SPX by 0% Monday.
- The 2 Day RSI of the SPX is 73. The Dow RSI is 79, the NASDAQ is 78 and the Russell is 68.
- Over the last four sessions, the average session closed 86.93% of the range above the low. Monday closed at 81.1% of the daily range.
- Upside momentum decreased Monday, from Friday’s 1.34 to today’s 0.06. The ratio of SPX components giving a crossover sell signal compared to buy signals also decreased slightly to B 4.07 to 1.
- The ISEE Equity 10 day moving average Monday was 166.9. 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.
- 208 SPX components moved upward and 134 components downward during the after hours with 116 million shares traded.
Trade 'em well on Tuesday everyone!
-Mel
