Inching Above the Trading Range
by Jerome "Mel" Hickerson
Today was a typical pre-holiday trading session in many ways; but was odd in other ways. The market opened with a mild pop, setting the high for the day after just nine minutes. But housing data released at 10:00 shook the market momentarily and the low of the session was put on the chart at 10:25. The rest of the day was upward drift until 2:15 when the index began sliding mildly downward into the close, triggering a mini snapback in the last 30 minutes.
The index closed near the highs for today; but you could also say it closed near the lows since it closed only four points off the low. But today, all moves were slow and small. It was almost excruciating to watch. Even the DOW had a range under 28 points! Geesh.
It was another high for the year and another closing high. We keep inching above the trading range.
So briefly, let’s look ahead.
My outlook for the trading sessions going into year end: One thing to keep in mind is that for large players, selling after the first of the year changes the tax year. Big traders always keep an eye on their tax situation, especially at year end. Most years, people have losses to move into the current year in order to reduce this year’s taxes. Retail investors are unlikely sellers at year end this year because of taxable gains.
Retail investors are also less likely to exercise short positions and won’t likely be a factor on the short side either. The larger players may be buying to cover losing short positions that have taxable losses. That reeks of continued rally to me, in spite of any weak internals. I think we may see dips continue to be bought, at least some short covering until the first of the year. This may mask any market weakness for several days, especially in low volume sessions.
Some may scoff at my thesis; and certainly the above does not apply to all large investors because some funds won’t care about taxes. But if my thesis applies to even 10% of potential sellers, it has merit to be considered because it could serve to dampen any pullback.
This does not mean I don’t think we pullback soon; I am just trying to show the flipside of the coin and a reason to be cautious and not expect any pullback to be extreme. I trade by time-tested rules; if I get a short signal I won’t over think it and overrule it because of my logic; I will follow my rule set.
For the abbreviated pre-holiday Thursday session, my model is throwing out a -10 indicator. This is a rather harsh way for the model to suggest that the market is overdue for a breather. It is not – yet – a signal to go short.
Thursday, December 24
Economics
08:30 Initial Claims
08:30 Continuing Claims
10:00 Durable Goods 0.4% cons.
10:00 Durable Goods ex. Auto 1.0% cons.
Events
Markets Close Early for Christmas Eve
A report on durable goods orders comes out before the start of trading. Economists believe new orders for long-lasting manufactured goods rose 0.4% in November after a decline of 0.6% the month before. Excluding transportation, durable goods orders are expected to rise 1.0%.
Mel’s Random Hits:
• Total tick for the day was an incredible +348,000. This on a day that the SPX closed up a mere 2.57. Many market internals looked like a +10 or more day. There were no negative 20 minute stretches the entire day. This was low volume levitation at its finest.
• The day's range was 5.58 points.
• The day's volume was 56.15% of the average 2009 daily volume. The volume was 64% of the last 10 day average. The volume was the third lowest of the year, lower than yesterday by almost a half billion shares.
• 45% of the SPX stocks closed with two day RSI above 90. 60% closed with RSI above 80. 4% closed with RSI below 20 and 2% closed with RSI below 10. Take notice of these numbers.
• 85% of the SPX are above their five day moving average, 80% are above their 10 day average, and 81% are above their 20 day moving average.
• 10% of the SPX stocks closed below their most recent previous lows.
• 50% of the SPX closed above their most recent previous high.
• 63.0% of stocks closed in the top half of the day's range. (37.0% closed in bottom half.)
• 14.4% of stocks closed in the bottom 20% of the day's range.
• 18.6% of stocks closed in the top 10% of the day's range.
• 32.6% of stocks closed within 2% of their 52 week high.
• 25.0% of stocks closed within 50% of their 52 week low.
• 26.6% of stocks closed within ¼% of their high for the day.
• 11.0% of stocks closed within ¼% of their low for the day.
• 65.2% of the SPX closed up from the previous close; 59.4% closed higher than the open.
• Sectors weaker than the SPX for the day: Industrials, Utilities, Technology, Financials, and Health Care
• Sectors stronger than the SPX for the day: Basic materials, Energy, Consumer Discretionary, and Consumer Staples
• The $SOX index strength was basically equal to the SPX today.
• An oddity comes to light as I scan the SPX components. The average component stock increased 0.53% today while the index increased 0.23%. This would suggest to me that the smaller components were increasing faster than the more heavily weighted components.
• 9 of last 11 sessions have closed green.
• The 2 Day RSI of the SPX is 91. The Dow RSI is 86, NASDAQ is 95 and Russell 96. These numbers are overbought and a pullback soon seems likely. I am itching to get short but will continue to be patient.
• SPX components moved downward slightly during the after hours.
Have a great Thursday and Merry Christmas everyone; have the greatest of holiday seasons. Take time to enjoy with those who share your life with you. There is no greater gift you can give or be given.
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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)
