Merkets Get an Oversold Bounce
by Jerome "Mel" Hickerson
Solid auctions in both Spain and Ireland as well as talk of stimulus in Japan had markets in an up mood and bond yields on the rise. Housing Starts rose 1.7% in July to an annualized rate of 546K, which was below the consensus for 557K. Building Permits for July fell by 3% to 565K. This was below the consensus of 574K and the June reading of 583K. The Labor Department reported the Producer Price Index for July rose by +0.2%, which was in line with the consensus estimate for +0.2% but above June’s unrevised -0.5% (May’s reading was -0.3%). When you strip out food and energy, the so-called Core PPI came in up +0.3%, which above the consensus for +0.1% and June’s +0.1% (May was +0.2%). Futures pointed to a strong open.
The session opened with a ten point pop within the first three minutes followed by 75 minutes of sideways trade. But a bit before 11am, the SPX began climbing and tacked on another ten points by noon. Another 75 minutes of sideways was followed by another pop upward tacking on yet another five points to put the high of the day on the chart at 1:34pm. The index then drifted sideways with a downward bias until the last half hour which sold off rather harshly.
In spite of the closing sell-off, the action today was pretty positive. We finally got the oversold bounce that we've been looking for the last couple of sessions.
Looking at our Nine Sectors tonight, it's not too surprising to see eight of the nine sectors change today. But I was surprised to see only one sector move to a Buy. Still, the changes tonight strongly suggest a short-term trend change. So we will remove our Sell signal and change to a short-term Buy.
I remain unconvinced that this market will go much higher. We are currently stuck in a rut between 1060 and 1130, an area that the index has closed in more than 100 times the last year. So this definitely defines the idea of being range bound.
Still, I've seen enough of the internal action to believe that we eventually breakdown through the range. Possibly we head-fake upward above 1131 first, although I thought that was more likely before this latest pullback.
I'll continue to sell the rallies until we break through 1131 on volume.
We struggled today. The large gap upward left us faced with difficult entry points on the long side and there just weren't any suitable pullbacks until the close. We thrive on volatility and there really wasn't much today.
Wednesday, August 18
Economics
10:30 Crude Inventories
Global Economic Data
Japan Leading Index
Great Britain Bank of England Minutes
Euro Zone Construction Minutes
Earnings
Before: BJ, CHS, CTRN, COCO, DE, DGW, EV, GU, LCRY, STP, TGT
After: AFCE, AMAT, BRCD, DL, GYMB, HOTT, LTD, NTAP, NTES, OTEX, PTES, SNPS
The weekly crude oil inventories report is due in the morning.
Mel’s Missives from the Matrix:
- Total tick for the day was 246,000 and the average tick for the day was 160. There were 204 ticks greater than 600 and 31 ticks more extreme than -600. There were 28 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 18.98 points. The intraday trading range - 9:35 to the close - was 14.57. The 5 DMA of daily range is 12.35.
- Evidence of the intraday trend: At 10am volume was 89.98% of the 10 day average. By noon the volume was 100.09% of the 10 day average, and by 2pm volume was 102.66% of the 10 day average.
- The day's volume was 81.5% of the average daily volume for the last year. Volume was 104.6% of the last 10 day average and 127% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 13:15 and 13:30 when relative volume increased 101.8% while the SPX was rising 0.23%. The largest drop in relative volume came between 13:30 and 13:45 when relative volume dropped -59.4% while the SPX was dropping -0.02%.
- 7% of the SPX stocks closed with two day RSI above 90. 35% closed with RSI above 80. 6% closed with RSI below 20 and 3% closed with RSI below 10.
- 79% of the SPX are above their five day moving average, 32.4% are above their 10 day average, 36.8% are above their 20 day moving average, 49.4% are above their 50 day moving average, 37.8% are above their 100 day moving average, and 42.4% are above their 150 day moving average.
- 70% of the SPX closed above their most recent previous high.
- 3% of the SPX stocks closed below their most recent previous lows.
- 453 SPX issues advanced and 38 issues declined, a net SPX advance/decline of 415.
- Evidence of the intraday trend: At 10am, 52.2% of the SPX components were in the top half of the range. By noon, 92.2% were in the top half of the range, and by 2pm, 90.8% were in the top half of the range.
- 67.6% of stocks closed in the top half of the day's range. (32.2% closed in bottom half.)
- 4.8% of stocks closed in the top 10% of the day's range. 14.4% of stocks closed in the top 20% of the day's range.
- 4.8% of stocks closed in the bottom 10% of the day's range. 9.8% of stocks closed in the bottom 20% of the day's range.
- 6.8% of stocks closed within 2% of their 52 week high. 17.6% of stocks closed within 5% of their 52 week high.
- 84.2% of stocks closed within 50% of their 52 week low. 55.4% of stocks closed within 25% of their 52 week low.
- 5.8% of stocks closed within ¼% of their high for the day.
- 7.2% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 84.2% of the SPX components were up since the open. By noon, 93.8% were up since the open, and by 2pm, 94.6% were up since the open.
- 90.4% of the SPX closed up from the previous close; 75.2% closed higher than the open.
- Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +132%.
- Energy -- Outperformed the SPX by +32%.
- Industrials -- Outperformed the SPX by +50%.
- Health Care -- Outperformed the SPX by +15%.
- Consumer Discretionary -- Outperformed the SPX by +39%.
- Sectors weaker than the SPX for Tuesday:
- Financials -- Underperformed the SPX by -52%.
- Technology -- Underperformed the SPX by -20%.
- Consumer Staples -- Underperformed the SPX by -26%.
- Utilities -- Underperformed the SPX by -32%.
- The $SOX index strength was stronger relative to the SPX Tuesday by 0.1%.
- The XLF underperformed the SPX by -0.52% Tuesday.
- The 2 Day RSI of the SPX is 76. The Dow RSI is 77, the NASDAQ is 73 and the Russell is 76.
- Over the last four sessions, the average session closed 51.93% of the range above the low. Tuesday closed at 48.1% of the daily range.
- Upside momentum increased Tuesday, from Monday’s -4.78 to today’s -2.51. The ratio of SPX components giving a crossover sell signal compared to buy signals decreased to S 8.2 to 1.
- The ISEE Equity 10 day moving average Tuesday was 166.9. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10 and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 138 SPX components moved upward and 270 components downward during the after hours with 117 million shares traded.
Trade 'em well on Wednesday everyone!
-Mel
