Markets are in Indecision Patterns as They Await News from Greece
Market Recap:
As world markets adjusted to the idea that the Greece situation is likely to be resolved late Friday, all eyes were focused on the Jobs report in the U.S. The labor department reported that nonfarm payrolls increased by 80K in October, which was below the consensus for +93K. However, the unemployment rate dipped to 9.0% from 9.1%. In addition, revisions to the job totals from August and September saw a total increase of 102K jobs.
The final session of the week began with a small gap lower and traded sideways to begin the day but then turned lower to put the low of the day on the chart just after the end of the first hour of trading. Several hours followed of sluggish upward trading until the high was made just before 2:00 pm. The final two hours chopped around within a six point range and closed at 90% of the intraday trading range.
Checking our Market Leaders Board we that the chip makers (SOX) closed higher and the rest of the leaders closed lower. Germany pretty much got whacked but the rest of our leaders suffered only modest losses.
SPX big winners were Genworth Financial (GNW) 16.14%, Starbucks Corporation (SBUX) 6.5%, and US Steel Corp (X) 5.22%. SPX big losers were Fluor Corp (New) (FLR) -6.77%, Chesapeake Energy Corp (CHK) -6.6%, and Bank Of America Corp (BAC) -6.24%.
SPX five day big winners are Zions Bancorporation (ZION) 17.58%, Estee Lauder Companies Inc (EL) 16.3%, and Big Lots Inc (BIG) 9.78%. SPX five day big losers are Abercrombie & Fitch Co (ANF) -24.22%, Memc Electronic Material (WFR) -21.84%, and Morgan Stanley (MS) -13.41%.
New Ten Day Highs: AES, AKAM, AEE, BIG, CF, CVS, DVA, DNR, ROST, ERTS, EOG, FAST, FLS, GPS, GNW, LXK, MA, MCHP, MU, NTAP, PHM, SHW, S, SWK, SBUX, TE, TSO, X
New Ten Day Lows: ANF, AIG, AIV, AN, BAX, CMCSA, FTR, GILD, HNZ, LH, NWSA, PG, SIAL, TWC, UNH, VIA/B, WPI
Market Recap – Weekly Review:
The SPX lost 31.86 points during the week (-2.48%). The range for the week was 69.54 points, 5.41%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 64. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was 286,000. On the NYSE, the advance/decline line decreased during the week by 1,014 and the 10 day average of Net Advancing decreased from 589 to 320. There were 162 New Highs and 85 New Lows.
The week closed at 54.37% of the weekly range.
For the week, SPX advancing issues (109) averaged 5.1 million shares traded per day ($196.4 million each stock) and declining issues (378) averaged 7.7 million shares traded per day ($246.6 million each stock.)
For the week, the NASADQ 100 advancing issues (31) averaged 6.6 million shares traded ($232.6 million each stock) each day and declining (67) issues averaged 8.4 million shares traded ($378.3 million each stock each day.)
Notice from the above data that traders were focusing their money on the declining stocks.
Looking at the weekly sector chart we can see that six sectors outperformed the SPX this week but the key sectors of Basic Materials and Financials were weaker, with the Financials taking a significant pounding. The defensive sectors were the strongest sectors.
Volume & Breadth Indicators
For the SPX Index there were 158 components advancing and 312 components declining. On the NYSE 3,098 issues were traded with 1,180 advancing issues and 1,812 retreating issues, a ratio of 1.54 to one declining. There were 39 new highs and 16 new lows. The five day moving average of New Highs is 32 while the five day moving average of New Lows is 17 and the ten day moving average of Net Advancing is 320. The Net Advancing data indicates a bullish trend.
Declining volume was higher at a ratio of 1.83 to one. The closing TRIN was 1.21 and the final tick was 466. The five day average of TRIN is 1.61 and the ten day average of TRIN is 1.3. The NYSE Composite Index lost -0.7% today while the SPX lost -0.63%.
For the NYSE, relative to the previous 30 session average, volume was -21.27% below the average. Of the last 15 sessions 3 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, 6 of last 10. For the SPX, the day's volume was 88.9% of the average daily volume for the last year. Volume was 79.1% of the last 10 day average and 84.3% of the previous day’s volume.
Breadth was modestly negative Friday while TRIN remained strong. The broad NYSE Composite Index underperformed the SPX which suggests that the selling was broader than the SPX reflects.
Total tick for the day was 23,000 and the average tick for the day was 15. There were 91 ticks greater than 600 and 106 ticks more extreme than -600. There were 10 ticks greater than 1000 and 17 ticks more extreme than -1000.
The tick data today shows that after the opening hour buyers had the edge but only modestly.
The intraday volume pattern shows that relative volume was declining throughout the session as the SPX was rising. This is often not a good sign for the following session.
Moving Average and Support/Resistance Indicators:
78.8% of the SPX are above their five day moving average, 66.2% are above their 10 day average, 81.4% are above their 20 day moving average, 83.6% are above their 50 day moving average, and 36.8% are above their 200 day moving average.
There were two significant moving average crossovers Friday as the SPX 20 DMA crossed above the 100 DMA and Germany's 5 DMA crossed below the 20 DMA. Our moving average Power Rating is 66 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +42%.
- Energy -- Outperformed the SPX by +64%.
- Industrials -- Outperformed the SPX by +18%.
- Technology -- Outperformed the SPX by +1%.
- Consumer Staples -- Outperformed the SPX by +17%.
- Utilities -- Outperformed the SPX by +8%.
- Consumer Discretionary -- Outperformed the SPX by +24%.
Sectors weaker than the SPX for Friday:
- Financials -- Underperformed the SPX by -58%.
- Health Care -- Underperformed the SPX by -28%.
In Late Trading:
162 SPX components moved upward and 163 components downward during the after hours with 219.1 million shares traded.
What We Learned from Friday's Action:
Friday was session 2 to close above the 5 DMA, session 2 to close above the 10 DMA, session 20 to close above the 20 DMA, and session 20 to close above the 50 DMA. This was also session 19 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 1.35 points above the 10 DMA. Indecision time.
The SPX 5 DMA is 1244.77, 10 DMA is 1251.88, 20 DMA is 1231.72, 50 DMA is 1195.85, 100 DMA is 1228.96, and 200 DMA is 1273.2.
Looking Ahead:
Greece, lately it is all about Greece. But technicals are working if your timing is good. So we will remain focused on the technicals. We’re sure that other blogs are adequately focused on Greece and you can read their analysis while we stay focused purely on the technicals.
As mentioned above, this was a week that traders were fleeing risk and moving money into the defensive sectors. Traders were buying the declining stocks rather than chasing the leaders. They were bottom feeding. We have not seen this in six weeks so this may mark a short-term trend change in trader sentiment.
We are overbought on a weekly basis and indicators are curling over. This frequently results in a multi-week decline unless the market is in a strong uptrend.
Market breadth remains strong although less so this last week. The small caps, Financials, and chip makers are all underperforming, although the chip makers and small caps are trying to narrow the gap.
One final thing we wish to mention is that Friday painted an inside day. As we frequently mention, inside days show market indecision and often are the start of a trend change. Key levels to watch this week are 1293 on the upside and 1215 on the low side. A break of either level marks momentum in that direction.
Evaluating everything we can see, we look for choppy trade lower for possibly a couple of weeks. But we believe that this is a buyable dip as the markets appear most likely to turn higher.
Week of November 07 - November 11 Overview
Date/Time Release/Consensus
11/07/11 15:00 Consumer Credit/$5.0B
11/09/11 7:00 MBA Mortgage Index/NA
11/09/11 10:00 Wholesale Inventories/0.006
11/09/11 10:30 Crude Inventories/NA
11/10/11 8:30 Initial Claims/400K
11/10/11 8:30 Continuing Claims/3690K
11/10/11 8:30 Export Prices ex-ag./NA
11/10/11 8:30 Import Prices ex-oil/NA
11/10/11 8:30 Trade Balance/-$45.8B
11/10/11 14:00 Treasury Budget/-$105B
11/11/11 9:55 Mich Sentiment/61.5
Monday, November 7
Economics
3:00 Consumer Credit – consensus 5.475B
11:00 Fed to purchase $2.25b-$2.75b in 25 to 30-year notes
11:30 U.S. to sell $29b 3-month bills, $27b 6-month bills
06:45 CHF Unemployment Rate
08:15 CHF CPI
10:00 EUR Euro-Zone Retail Sales
11:00 EUR German Industrial Production
05:15 Germany to sell EU4b 6-month bills
09:00 France to sell EU1.5b 343-day bills, Eu1b 161-day bills, EU4.5b 84-day bills
Earnings
Before: BSFT, CCJ, CRNT, CHOP, DISH, DYN, SATS, ENOC, HPT, HWCC, JKS, LOJN, LPX, MFA, MNTA, NNN, ORBK, KWK, SOL, SYY, NGLS, TESO, TW, TRCR, TA
After: APEI, ASEI, ANDA, ARRY, ATLS, BWC, TEU, BEXP, BRS, CATM, CFN, CKEC, TAST, CLDT, CUTR, DAC, DPM, TRAK, DMD, PLOW, DTSI, DCO, EGLE, EM, FNGN, FTEK, GSM, GTE, LOPE, GTAT, HALO, HOLX, IPHS, IRWD, ISI, LLNW, LXU, MKL, MWE, MR, MITK, OAS, PKY, PCLN, QNST, RAX, REN, SONE, BID, SSNC, STFC, STXS, SNHY, SHO, SYKE, TWTC, TWGP, EGY, VAST, VVUS, WMS, YOKU
Personal Note: I continue to recover from Tuesday’s surgery. I will remain off the chemo for at least two more weeks to allow my body to recover. I can not say often enough how much difference being off the chemo makes. I really almost feel well again. And I thank all of you who have written to me and prayed for my recovery. Life is good. Make sure you tell your loved ones that you love them. Enjoy your late fall weekend!
Thank you for reading. Think on it, trade on it, and be well.
-Mel