Italian Sovereign Debt Spooks the Markets; Equities Plunge
U.S. stock index futures pointed to a lower open on Wall Street Wednesday as investors still watched Europe with caution after Italian Prime Minister Silvio Berlusconi announced he would step down once a series of austerity measures had been put in place. SPX futures (ES) traded within a thirty-seven point range overnight and the regular session opened with the futures trading at 16% of that range.
The midweek session opened with a huge gap lower and continued to work modestly lower for the opening hour. Late morning saw the equities attempt to rally but this failed, rolled over, and the afternoon was brutal for bulls as sellers came wave after wave after wave without a significant letup until the final bell mercifully rang.
Checking our Market Leaders Board we see massive blood letting. Getting off the easiest was the DOW, losing a mere 389 points. Leading the way lower were the Financials. This was an old-fashioned butt-kicking by the bears as the bulls never put up any significant resistance.
SPX big winners were Zions Bancorporation (ZION) 4.46%, Best Buy Co Inc (BBY) 1.43%, and Zimmer Holdings (ZMH) 0.%. SPX big losers were Computer Sciences Corp (CSC) -17.3%, Leucadia National Corp (LUK) -12.67%, and Alpha Natural Resources (ANR) -10.22%.
SPX five day big winners are Zions Bancorporation (ZION) 17.58%, Estee Lauder Companies Inc (EL) 13.98%, and priceline.com Inc (PCLN) 8.69%. SPX five day big losers are Abercrombie & Fitch Co (ANF) -23.96%, Memc Electronic Material (WFR) -19.9%, and Quanta Services Inc (PWR) -11.33%.
New Ten Day Highs: BBY, HRB, BSX, CEG, EXC, IGT, LOW, NEM, ORLY, TSO, VXX, AEM
New Ten Day Lows: ABT, ADBE, URBN, ALTR, AEP, AIG, ABC, APH, ADI, AIV, AN, AVB, BAC, XL, BMY, BRK.B, CFN, CCL, CBG, CNP, CHK, CTSH, CMCSA, CSC, DELL, DPS, ETFC, FDO, FII, FSLR, FLR, F, FRX, GE, GILD, HAR, HIG, HAS, HCP, HCN, TEG, IFF, IRM, JNJ, JCI, K, KIM, LH, LO, MTB, MAR, MJN, WFR, MDP, MYL, NWSA, NKE, NTRS, OMC, ORCL, PDCO, RL, PFG, PSA, PWR, RSG, SHLD, SIAL, LUV, STJ, SRCL, TXT, TWC, TIE, JASO, MBI, VTR, VFC, VMC, WAG, WM, WY, GS
Volume & Breadth Indicators
For the SPX Index there were 1 components advancing and 499 components declining. On the NYSE 3,121 issues were traded with 305 advancing issues and 2,778 retreating issues, a ratio of 9.11 to one declining. There were 29 new highs and 39 new lows. The five day moving average of New Highs is 49 while the five day moving average of New Lows is 20 and the ten day moving average of Net Advancing is 59.
Declining volume was higher at a ratio of 65.77 to one. The closing TRIN was 6.73 and the final tick was -408. The five day average of TRIN is 2. and the ten day average of TRIN is 1.74. The NYSE Composite Index lost -4.15% today while the SPX lost -3.81%.
For the NYSE, relative to the previous 30 session average, volume was 3.81% above the average. Of the last 15 sessions 4 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 21 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 103.5% of the average daily volume for the last year. Volume was 97.2% of the last 10 day average and 114% of the previous day’s volume.
It is almost surprising that any stocks were able to post gains today. But the closing TRIN is interesting. There have only been eight occurrences since 1950 with a TRIN over six. Seven of the eight closed higher the following day (average of 2%) and all eight occurrences closed higher one month later (average of 6%).
Total tick for the day was -156,000 and the average tick for the day was -101. There were 82 ticks greater than 600 and 190 ticks more extreme than -600. There were 13 ticks greater than 1000 and 22 ticks more extreme than -1000. The tick action suggests institutional distribution.
The tick data today shows the ugliness but it is quite interesting that the bulls held their own on the greater than 1000 ticks after the opening hour.
Volume today was not as extreme as might have been expected on such a session. The intraday volume pattern shows two surges, both as the market moved quickly lower. The ten day average of the McClellan Oscillator remains overbought. (Yes, that is not a typo.)
Moving Average and Support/Resistance Indicators:
3.4% of the SPX are above their five day moving average, 14.4% are above their 10 day average, 43.8% are above their 20 day moving average, 70.4% are above their 50 day moving average, and 29.2% are above their 200 day moving average.
There were no significant moving average crossovers today but we are seeing many of the short term averages falling. Our moving average Power Rating is 66 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Wednesday:
- Technology -- Outperformed the SPX by +39%.
- Consumer Staples -- Outperformed the SPX by +129%.
- Utilities -- Outperformed the SPX by +146%.
- Health Care -- Outperformed the SPX by +91%.
- Consumer Discretionary -- Outperformed the SPX by +2%.
Sectors weaker than the SPX for Wednesday:
- Basic Materials -- Underperformed the SPX by -135%.
- Energy -- Underperformed the SPX by -98%.
- Financials -- Underperformed the SPX by -186%.
- Industrials -- Underperformed the SPX by -33%.
In Late Trading:
208 SPX components moved upward and 164 components downward during the after hours with 143.4 million shares traded.
What We Learned from Wednesday's Action:
Wednesday was session 1 to close below the 5 DMA, session 1 to close below the 10 DMA, session 1 to close below the 20 DMA, and session 23 to close above the 50 DMA. This was also session 22 for the 5 DMA to close above the 20 DMA. One early sign of a sustainable rally or pullback is often a close above or below the 10 DMA. The SPX closed 26.87 points below the 10 DMA.
The SPX 5 DMA is 1256.11, 10 DMA is 1255.97, 20 DMA is 1240.15, 50 DMA is 1199.17, 100 DMA is 1228.45, and 200 DMA is 1272.63.
Well, we got a large move lower as we have been looking to see. While news was the catalyst to get things rolling, the technicals were a vital part of today's action.
Historically, large red daily bars have come in pairs. But the recent trend has been an almost immediate snap back. While we sliced through the 20 DMA, the lower end of our current trading range, we are still betting on the quick snapper rally.
This market has shown resilience and buoyancy. I would rather be underwater on the long side than underwater on the short side. Eight of the last ten years the Russell 2000 has seen gains over the last two months of the year (and one of the two losses was 2008 when everything lost) so odds would seem to favor a bullish run sometime soon. The real question is whether this is a do-over of 2008.
Despite today's rather significant plunge, the SPX weekly chart is still painting an inside week. A break of last week's lows of 1215 might stir up more selling. Until we see a break several points lower than 1215 we are looking for something of a significant bounce.
Be certain to read the note about the TRIN posted above in the Volume and Breadth section.
September 29th, 2008, June 29th, 2010, and August 8th, 2010 are the only days with 499 net decliners among SPX stocks. The SPX closed +5%, -1%, and +5% the following day.
Past experience suggests a three-to-one chance that Friday's close is higher than Thursday's open.
Thursday, November 10
08:30 Import Price Index – consensus 12.3%
08:30 Trade Balance – consensus -$46.0B
08:30 Initial Jobless Claims – consensus 400k
08:30 Continuing Claims – consensus 3680k
2:00 Monthly Treasury Budget Statement -$105.0B
11:00 Fed to purchase $1.5b-$2b notes/bonds in 10 to 20-year range
1:00 U.S. to sell $16b 30-yr bonds
CNY Trade Balance
00:30 AUD Unemployment Rate
05:00 JPY Consumer Confidence
07:30 German CPI
09:00 EUR ECB Publishes November Monthly Report
11:00 GBP BOE Asset Purchase Target
12:00 GBP BOE Rate Decision
05:00 Italy to sell bills
Before: ADES, ACM, BUD, ARQL, AUG, CAE, GIB, DDS, DUSA, EJ, ENG, FLO, FXCM, GNMK, KSS, KLIC, MMS, MPEL, VIVO, NAFC, NEI, NXG, PBH, SPH, ELOS, TK, THI, VIA.B, YTEC
After: SSRX, ACTV, AL, AIRM, ANAC, BODY, BRKS, BORN, COGO, DAR, DLB, HOKU, HMIN, KIOR, MATW, MSCC, MCP, JWN, NVDA, RENN, SREV, TPCG, VSEA, VISN, DIX, WX
Thank you for reading. Think on it, trade on it, and be well.