Late Day Rally Yet Again Frustrates Bears
by Jerome "Mel" Hickerson
Today’s session opened after a volatile night of futures action, but the market had little or no guidance from the futures which were flat at the open. So like a lost little boy, Mr. Market wandered around aimlessly at the open, popping upward slightly before quickly turning downward and threatening to get ugly, setting the low for the day just 17 minutes into the session. From there, the market bounced back, retested the lows at 10:30, and then ramped upward strongly until just before 11:00. The middle three hours of the day were trending downward, once again testing lows just before 2:00. This time buyers carried the index higher into the close with a very bullish feeling rally.
I am suspicious of this rally so I took advantage and exited my long position shortly before the close. I will continue to buy dips and sell rallies; trusting neither for very long. The market closed yet again – the 22nd consecutive time – within the narrow range of 1084.90 and 1110.31. We may close tomorrow near the top of that range; if we move that way, I’ll look to day trade long tomorrow. But holding long overnight tonight didn’t appeal much to me in spite of having a two-day swing signal that started today. We had profit and it seemed wiser to take it. I know they say to let your winners run, but in this choppy tape I believe you don’t go broke from taking profits early; you go broke from letting profit turn into a loss. Today’s late surge felt like a gift and I didn’t want to return it.
Since I am the new analyst at MarketsPath, I want to take a little of your time tonight to describe what I do and what subscribers see throughout the day. Since all subscribers are new, some of this may even be new information for the subscribers as they learn my methods and how to use the data that is provided to them throughout the day.
Most of what I provide intraday is aimed at identifying the intraday trend and determining if it is likely to last long enough to profitably ride along. Narrow range days are the most difficult but we will be identifying those days early in the day and changing tactics on those days to trade the range rather than the trend. Today traded almost entirely within the trading range established during the first 75 minutes of the session and we posted as early as 10:07 this morning that it was likely to be a range day with a small range for intraday trading.
At 11:55 this morning, while the index was creeping downward, we alerted users that internal indicators, while negative, were rising in spite of the declining index and that “This is usually a positive for the intraday session.”
At 3:02, we posted: “Signals now suggest a pump into the final hour. I wouldn't want to try to day trade long here because other data suggests we are range bound today (and near the top of today's range.) But signals are increasingly strong.”
We then exited our SSO nine cents short of the high of the day due to a signal given by the software.
Users frequently see the following display updated throughout the session. (If you are reading this on one of the mail lists that doesn’t provide the images, please go over to http://www.advicetrade.com/ to read the nightly report there with the graphics – no membership is required, just click the Nightly Report tab near the center top of your screen.)
The amount of data shown may at first seem intimidating. But the most important data is in the top row with blue backgrounds. In the most basic terms, three arrows up is a Long signal and three arrows down is a Short signal. There are many other ways a signal can be generated by the software.
The four charts track signals and can visually provide evidence of the intraday trends. The bars on the right provide a lot of data but just a glance at the colors gives a clue that we closed green today after struggling upward through 2:45. It is not my intention to give a full seminar on the signals here and now, many more details are available at the website, but I wanted readers to have a taste of what is available. If you are reading this, you are likely interested in anything that can provide you with a winning edge in today’s difficult market conditions.
For Thursday, our model has generated a +1 indicator; a null signal telling us little. My experience with our two-day swing signal tells me that the second day of the signal is often low volume listless levitation upward. I would not be surprised to see tomorrow bring us a sluggish green close.
Thursday, December 10
Economics
08:30 Initial Claims
08:30 Continuing Claims
08:30 Trade Balance -$37.1b cons.
Earnings
Before: CIEN, COST, DG, GIL, MEI, SFD, TITN, UNFI
After: CRI, CPII ESL, LTRE, NSM
Auction
01:00 30-Yr Bond Auction
Speeches
12:45 Elizabeth Duke
The October trade balance from the Commerce Department is due before the markets open. The trade gap is expected to have widened to $37.1 billion from $36.5 billion in September. The flow of funds report from the Federal Reserve is due around noon. The report is likely to show that household net worth continued to fall in the second quarter, along with home values. The Labor Department's weekly jobless claims report is due out in the morning. The Treasury budget is due in the afternoon. Treasury Secretary Timothy Geithner testifies before the Congressional Oversight Committee. Federal Reserve Governor Elizabeth A. Duke speaks in Chicago on Mortgage Foreclosure policy.
Mel’s Random Hits:
• Total tick for today was more than 95,000. Breadth was negative the first 75 minutes, turned upward for 90 minutes, negative for two hours, before closing with a final surge for the last two hours. The final hour was powerful.
• Today's range was 11.15 points. These small range days are often difficult to day trade but today was easier than most because the moves were more clearly defined, occurring near the bottom and tops of the daily trading range.
• Today's volume was 72.5% of the average 2009 daily volume. Volume was 99% of the 10 day average.
• 8% of the SPX stocks closed with two day RSI above 90. 13% closed with RSI above 80. 25% closed with RSI below 20 and 9% closed with RSI below 10. Still more oversold than overbought. RSI would seem to suggest more upside coming.
• 49% of the SPX are above their 10 day moving average and 48% are above their 20 day moving average.
• 16% of the SPX stocks closed below their most recent previous lows.
• 19% of the SPX closed above their most recent previous high.
• 71% of stocks closed in the top half of today's range. (29% closed in bottom half.)
• 5.6% of stocks closed in the bottom 20% of today's range.
• 17.8% of stocks closed in the top 10% of today's range.
• 11.8% of stocks closed within 2% of their 52 week high. This number dropped in spite of the green close today.
• 26.8% of stocks closed within 50% of their 52 week low.
• 26.8% of stocks closed within ¼% of their high for today.
• 1.8% of stocks closed within ¼% of their low for today.
• 54% of the SPX closed up for today. This strikes me as a poor showing for a green close.
• Sectors weaker than the SPX today: Financials, Energy, Consumer Staples , and Consumer Discretionary
• Sectors stronger than the SPX today: Basic materials, Industrials, Technology, Utilities, and Health Care
• Today was the seventh consecutive session that the $SOX out performed the SPX.
• The 2 Day RSI of the SPX is 39. The Dow RSI is 47, NASDAQ is 57 and Russell 41. The broader Russell index did not budge today.
• SPX components moved upward during the after hours.
Have a great Thursday!
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"Mel"
Today we closed out of:
Ultra S&P 500 ProShares (SSO) +0.96%
