Indices Implode to End the Week
by Jerome "Mel" Hickerson
Before Friday’s open, earnings from Bank of America, Citi, and GE all beat expectations on the bottom line numbers but the revenue numbers from all three were a little on the light side. The Consumer Price Index for June fell by -0.1%, which was in line the consensus for a drop of -0.1% and higher than May’s reading of -0.2%. When you strip out food and energy, the so-called Core CPI came in with a gain of +0.2%, which was above expectations for an increase of +0.1%. But futures were on the retreat as the open approached.
The session opened with a five point gap down and never looked back. The big move came at 10am when the Michigan Consumer Sentiment numbers missed expectations. After 11am the charts clearly show a succession of lower highs and lower lows intraday. The day belonged to the bears from start to finish although after the open the volume was not exciting. But this volume pattern has more to do with the options expiration than anything else; it happens every month.
But it was an odd day for such a down day. A prime characteristic of such days is a heavy tick pattern of extreme negative ticks; we had only four ticks more extreme than -1000. Most days that are down 30 points SPX we see 30 or more such extreme ticks. So this was an unusually quiet down day.
The extreme negative ticks are a distinguishing feature of panic selling by institutions. Experience strongly suggests that until this capitulation takes place there is no tradable bottom. Yes, we may see some sort of feeble bounce early next week but I wouldn’t expect much at all before we resume to the downside. Having said that, I did cover some of my short positions at the close Friday; I am not averse to taking profit and protecting myself incase something unforeseen happens over the weekend.
Looking back at the week, it was an interesting one. We only had the one down day but the week lost 13 points and 130 Advancers/360 Decliners; this was quite a negative week even though it all happened on one day.
Looking at the charts, we see the monthly chart with three consecutive lower highs and three lower lows; the stair-stepping pattern that was so dominant all last year is beginning to develop on the downside. The weekly chart is less unambiguous but this week was clearly a reversal bar and the down trend is obvious in spite of the choppy weekly patterns.
But the daily chart is where the downtrend channel becomes most obvious. We are plainly enmeshed in a downward spiral with the 1100 area the declining top and the 1000 area currently the floor.
Experience teaches that the middle of the channel often serves as an area to bounce or pullback so watching the 1040-1060 area next week makes good sense. A bounce from 1060 could send us back to 1080 while a move through 1040 suggests a quick downward move into the 1000 area.
Mel’s Missives from the Matrix:
- Total tick for the day was -147,000 and the average tick for the day was -96. There were 45 ticks greater than 600 and 142 ticks more extreme than -600. There were no ticks greater than 1000 and 4 ticks more extreme than -1000. The tick action suggests institutional distribution.
- The day's range was 30.53 points. The intraday trading range - 9:35 to the close - was 33.16. The 5 DMA of daily range is 19.72.
- Evidence of the intraday trend: At 10am volume was 190.53% of the 10 day average. By noon the volume was 134.23% of the 10 day average, and by 2pm volume was 130.18% of the 10 day average.
- The day's volume was 106.3% of the average daily volume for the last year. Volume was 125% of the last 10 day average and 123.1% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 1:30 and 1:45 when relative volume increased 47.6% while the SPX was dropping -0.02%. The largest drop in relative volume came between 10:00 and 10:15 when relative volume dropped -48.2% while the SPX was dropping -0.19%.
- 2% of the SPX stocks closed with two day RSI above 90. 3% closed with RSI above 80. 71% closed with RSI below 20 and 33% closed with RSI below 10.
- 5.6% of the SPX are above their five day moving average, 39.2% are above their 10 day average, 36.8% are above their 20 day moving average, 31% are above their 50 day moving average, 22.8% are above their 100 day moving average, and 31.2% are above their 150 day moving average.
- 2% of the SPX closed above their most recent previous high.
- 81% of the SPX stocks closed below their most recent previous lows.
- 10 SPX issues advanced and 482 issues declined, a net SPX advance/decline of -472.
- Evidence of the intraday trend: At 10am, 3.6% of the SPX components were in the top half of the range. By noon, 4.6% were in the top half of the range, and by 2pm, 4.8% were in the top half of the range.
- 2.6% of stocks closed in the top half of the day's range. (97.2% closed in bottom half.)
- 0.2% of stocks closed in the top 10% of the day's range. 0.4% of stocks closed in the top 20% of the day's range.
- 53.8% of stocks closed in the bottom 10% of the day's range. 83.8% of stocks closed in the bottom 20% of the day's range.
- 1.8% of stocks closed within 2% of their 52 week high. 11% of stocks closed within 5% of their 52 week high.
- 76.6% of stocks closed within 50% of their 52 week low. 48.8% of stocks closed within 25% of their 52 week low.
- 0.6% of stocks closed within ¼% of their high for the day.
- 38.4% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 2.8% of the SPX components were up since the open. By noon, 3.2% were up since the open, and by 2pm, 2.8% were up since the open.
- 2% of the SPX closed up from the previous close; 3% closed higher than the open.
- Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +9%.
- Energy -- Outperformed the SPX by +26%.
- Technology -- Outperformed the SPX by +5%.
- Consumer Staples -- Outperformed the SPX by +147%.
- Utilities -- Outperformed the SPX by +136%.
- Health Care -- Outperformed the SPX by +76%.
- Sectors weaker than the SPX for Friday:
- Financials -- Underperformed the SPX by -137%.
- Industrials -- Underperformed the SPX by -44%.
- Consumer Discretionary -- Underperformed the SPX by -63%.
- The $SOX index strength was weaker relative to the SPX Friday by -0.44%.
- The XLF underperformed the SPX by -1.37% Friday.
- The 2 Day RSI of the SPX is 9. The Dow RSI is 9, the NASDAQ is 11 and the Russell is 10.
- Over the last four sessions, the average session closed 59.22% of the range above the low. Friday closed at 4.8% of the daily range.
- Upside momentum decreased Friday, from Thursday’s 2.51 to today’s -1.5. The ratio of SPX components giving a crossover sell signal compared to buy signals moved upward to B 7.35 to 1.
- The ISEE Equity 10 day moving average Friday was 173.4. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 208 SPX components moved upward and 213 components downward during the after hours with 174 million shares traded.
Have a great weekend everyone!
-Mel
