Markets React to ECB Draghi with a Swan Dive
Market Recap:
Our Market Leaders Board shows all of our leaders closing in the red today with the NYSE Composite Index taking it the worst. It is often a bad sign when the broadest index of them all does the worst.
SPX big winners were First Solar Inc (FSLR) 18.41%, Tesoro Corp (TSO) 13.73%, and Gap Inc (GPS) 11.74%. SPX big losers were Sealed Air Corp (SEE) -18.65%, Abercrombie & Fitch Co (ANF) -16.98%, and Bristol-Myers Squibb Co (BMY) -9.22%.
SPX five day big winners are First Solar Inc (FSLR) 28.07%, Expedia Inc (EXPE) 24.26%, and Frontier Communications Corp (FTR) 21.82%. SPX five day big losers are Abercrombie & Fitch Co (ANF) -18.78%, Starbucks Corporation (SBUX) -17.63%, and Coach Inc (COH) -15.79%.
New Ten Day Highs: ABT, AMAT, BDX, CMCSA, STZ, FSLR, FTR, GPS, GILD, K, KLAC, KSS, LNC, WFR, MET, MON, PRU, PWR, SNI, SYMC, TDC, TSO, TWC, TWX, TIE, AEM
New Ten Day Lows: ANF, AMD, URBN, APC, AIV, APOL, ADM, AN, AZO, AVP, BLL, BCR, BBT, BBBY, BMS, HRB, BA, BMY, BF/B, CPB, CAH, CFN, CF, CME, CTXS, CMS, COH, CMA, DF, DELL, XRAY, DVN, EIX, EQT, EFX, EQR, EL, EXC, EXPD, FAST, FIS, FISV, FMC, F, GME, GCI, GD, GNW, HPQ, HRL, DHI, HBAN, IGT, ITT, LEN, LUK, L, LO, LOW, MAS, MCK, MWV, MWW, NWL, NKE, NU, NTRS, NYX, ODP, PDCO, PBI, RL, PPG, PPL, PCP, PG, PGR, PEG, STR, RTN, CRM, SEE, SHLD, SJM, SO, SE, SBUX, TROW, TXT, TIF, UNH, MBI, USB, VFC, VMC, WPO, WFC, ICE
Volume & Breadth Indicators
For the SPX Index there were 106 components advancing and 388 components declining. On the NYSE 3,150 issues were traded with 1,140 advancing issues and 1,891 retreating issues, a ratio of 1.66 to one declining. There were 105 new highs and 64 new lows. The five day moving average of New Highs is 187 while the five day moving average of New Lows is 35 and the ten day moving average of Net Advancing is -247. The Net Advancing data indicates a bearish trend.
Declining volume was higher at a ratio of 3.63 to one. The closing TRIN was 2.6 and the final tick was -296. The five day average of TRIN is 1.25 and the ten day average of TRIN is 1.18. The NYSE Composite Index lost -0.97% today while the SPX lost -0.76%.
For the NYSE, relative to the previous 30 session average, volume was 3.59% above the average. Of the last 15 sessions 7 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 11 sessions ended on a positive tick, 3 of last 10. For the SPX, the day's volume was 118.5% of the average daily volume for the last year. Volume was 109.8% of the last 10 day average and 99.6% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 16,000 and the average tick for the day was 10. There were 19 ticks greater than 600 and 8 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Moving Average and Support/Resistance Indicators:
19.8% of the SPX are above their five day moving average, 42.6% are above their 10 day average, 46.6% are above their 20 day moving average, 55.4% are above their 50 day moving average, and 47.4% are above their 200 day moving average.
There were no significant moving average crossovers today. Our moving average Power Rating is 61 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Thursday:
- Industrials -- Outperformed the SPX by +24%.
- Technology -- Outperformed the SPX by +20%.
- Utilities -- Outperformed the SPX by +24%.
- Consumer Discretionary -- Outperformed the SPX by +100%.
Sectors weaker than the SPX for Thursday:
- Basic Materials -- Underperformed the SPX by -44%.
- Energy -- Underperformed the SPX by -102%.
- Financials -- Underperformed the SPX by -1%.
- Consumer Staples -- Underperformed the SPX by -2%.
- Health Care -- Underperformed the SPX by -22%.
Checking the sectors of the SPX tonight: (The sector Buy and Sell signals come from a mechanical trend trading system; there will be some whipsaw but the signal will never be on the wrong side for long.)
The Basic Materials sector advancing issues (4) totaled 100,881 shares traded (25,220 average per stock) and declining issues (26) totaled 1,245,812 shares traded (47,916 average per stock.) 12 components are on an uptrend (no new uptrends today) and 18 components are on a downtrend (3 new downtrends today.) There were 1 New Highs and 1 New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .44% above the 20-Day average.
The Energy sector advancing issues (4) totaled 329,010 shares traded (82,253 average per stock) and declining issues (41) totaled 2,269,237 shares traded (55,347 average per stock.) 22 components are on an uptrend (no new uptrends today) and 23 components are on a downtrend (19 new downtrends today.) There were 1 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 3.05% above the 20-Day average.
The Financials sector advancing issues (17) totaled 568,614 shares traded (33,448 average per stock) and declining issues (62) totaled 5,136,769 shares traded (82,851 average per stock.) 29 components are on an uptrend (1 new uptrends today) and 52 components are on a downtrend (18 new downtrends today.) There were 1 New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed 1.% above the 20-Day average.
The Industrials sector advancing issues (16) totaled 474,894 shares traded (29,681 average per stock) and declining issues (43) totaled 1,443,326 shares traded (33,566 average per stock.) 42 components are on an uptrend (1 new uptrends today) and 18 components are on a downtrend (3 new downtrends today.) There were no New Highs and 1 New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.95% above the 20-Day average.
The four 'risk sectors' totaled 41 advancing issues and 172 declining issues today with 2 new uptrends and 43 new downtrends. 48.6% of Risk Sector components are uptrending.
The Technology sector advancing issues (16) totaled 1,187,321 shares traded (74,208 average per stock) and declining issues (61) totaled 5,607,788 shares traded (91,931 average per stock.) 52 components are on an uptrend (1 new uptrends today) and 27 components are on a downtrend (12 new downtrends today.) There were 1 New Highs and 3 New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.9% above the 20-Day average.
The Consumer Staples sector advancing issues (9) totaled 423,120 shares traded (47,013 average per stock) and declining issues (32) totaled 1,160,439 shares traded (36,264 average per stock.) 17 components are on an uptrend (2 new uptrends today) and 24 components are on a downtrend (6 new downtrends today.) There were 1 New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed 1.05% above the 20-Day average.
The Utilities sector advancing issues (3) totaled 114,878 shares traded (38,293 average per stock) and declining issues (28) totaled 684,162 shares traded (24,434 average per stock.) 12 components are on an uptrend (no new uptrends today) and 19 components are on a downtrend (11 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed 1.26% above the 20-Day average.
The Health Care sector advancing issues (7) totaled 524,299 shares traded (74,900 average per stock) and declining issues (45) totaled 2,067,036 shares traded (45,934 average per stock.) 19 components are on an uptrend (1 new uptrends today) and 33 components are on a downtrend (11 new downtrends today.) There were 2 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed 1.01% above the 20-Day average.
The Consumer Discretionary sector advancing issues (30) totaled 1,870,947 shares traded (62,365 average per stock) and declining issues (51) totaled 2,569,704 shares traded (50,386 average per stock.) 38 components are on an uptrend (6 new uptrends today) and 43 components are on a downtrend (5 new downtrends today.) There were 4 New Highs and 6 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed .68% above the 20-Day average.
Based on the SPX sector data, we are Neutral for the SPX and the Russell 2000.
What We Learned from Thursday's Action:
Thursday was session 2 to close below the 5 DMA, session 6 to close above the 10 DMA, session 6 to close above the 20 DMA, and session 15 to close above the 50 DMA. This was also session 4 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 .97 points above the 10 DMA.
The SPX 5 DMA is 1378.18, 10 DMA is 1364.03, 20 DMA is 1359.43, 50 DMA is 1340.49, 100 DMA is 1359.99, and 200 DMA is 1321.37.
On Thursday the SPX traded below the opening range but did not trade above the opening range. 20.4% of the SPX closed up from the previous close; 45.4% closed higher than the open. During Thursday's session the SPX lost -10.13 points from open to close. The SPX intraday trading range was 18.96 points. The 5-Day average intraday trading range is 14.31 points, the 10-Day average is 13.98 points, and the 20-Day average is 13.57 points. The trading range is expanding. The 5-Day SPX gain is 0.37%, the 10-Day gain is -0.84%, and the 15-Day gain is 2.27%.
Note: The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be in charge for the day. If we break out of that trading range, it's telling us that new buying or selling is impacting traders' assessments of value. Looking back at today’s breakouts also helps us grasp sentiment going forward because when a clear trend is established it often carries through for several sessions.
Looking Ahead:
The Market Environment for Friday is +4. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be lower. Mel's 5-Day Oscillator is 38 and Mel's 10-Day Oscillator is 27 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is bullish for Friday's session.
Comments from the ECB early today were not taken well by the markets. But after the opening moments, damage seemed to be limited the rest of the session. We still are looking for a market bounce but tomorrow is the Big Kahuna of economic data and the open will most likely be driven by the jobs data.
For now, we remain in "buy the dip" mode. To review, we are in TNA from 48.80 and 48.10 after exiting one layer for a $1 gain. A gap down tomorrow would allow us to add some more; we would prefer the gap to be downward because often the NFP Labor Report is a good fade opportunity; trading against the gap works more often than not.
The SPX has fallen on twelve of last fourteen NFP days going back to last June, falling more than 0.9% on each of last four. So looking for a gap lower doesn't seem too unreasonable but such streaks often end with a large move in the other direction. It pays to be nimble trading in this market.
Our Market Internals have moved into Neutral. But we will remain somewhat bullish until we see the risk sectors fall below their Pivots.
Friday, August 3
Economics
08:30 Change in Nonfarm Payrolls – consensus 100K, prior 80K
08:30 Change in Private Payrolls – consensus 110K, prior 84K
08:30 Change in Manufacturing Payrolls – consensus 10K, prior 11K
08:30 Unemployment Rate – consensus 8.2%, prior 8.2%
08:30 Average Weekly Hours – consensus 34.5, prior 34.5
08:30 Underemployment Rate – prior 14.9%
10:00 ISM Non-manufacturing Composite – consensus 52.3, prior 52.1
01:00 CNY Non-manufacturing PMI
08:00 EUR Eurozone PMI
08:30 GBP PMI
09:00 EUR Eurozone Retail Sales
11:10 UK to sell bills
Earnings
Before:
Viacom (VIA) EPS $1.00
Proctor & Gamble (PG) EPS 77c
Jobless claims were 365,000, fewer than the expected 370,000. Factory orders dropped 0.5%. The expectation was for a rise of 0.7%. On Friday we will get the non farm payroll and the ISM services.
Thank you for reading. Think on it, trade on it, and be well.
-Mel