Modest Weekly Losses with a Dow Golden Cross
by Jerome "Mel" Hickerson
Market Recap:
Overnight futures were climbing and pointing to a positive start for Friday's session. Economic data released before the open showed that personal income was up 0.5% in August and personal spending rose 0.2%.
The session opened with a bang, gapping eight points higher reaching just above 1150 to put the high of the day on the chart just two minutes in. Trading was extremely choppy for the first 45 minutes as the index gyrated. At 10:18 the index began a wild down move to put the low of the day on the chart twenty minutes later. The rest of the session traded in muti-waves higher but the SPX closed near the middle of the intraday range.
Friday continued the recent action of the index putting the high of the day on the chart early in the session. There was heavy volume on the down move and lighter volume on the day-long drift back upward. This could be a bear flag in the making; Monday's action will be telling.
Looking at our Market Leaders board, we see a mixed session but mostly up, with Technology and chip makers showing weakness. The Financial Sector is finally beginning to show some signs of life and this must be watched closely because that sector has really been the only thing keeping a lid on this rally.
Weekly Recap:
Average daily volume ticked upward for the highest week of the last nine but the increase was minimal.
Total tick for the week exceeded 673,000; the highest weekly total since the first week of August. Yet the index lost a couple points. This may suggest a lot of churning as sellers are moving out and new buyers moving into the market.
The weekly range was barely 25 points as the month of September averaged just 22 points a week versus the weekly average for 2010 of more than 41 points per week and a weekly average range of almost 49 points in August.
The weekly loss of 2.43 points was only the fourth time in 2010 that the gain/loss of the week was less than three points, a near perfect doji on the weekly chart. The other three occurrences (4/12, 5/24, 7/26) were soon followed by pullbacks.
• 4/12 was followed by -127 points over the following seven weeks.
• 5/24 was followed by -67 points over the following five weeks.
• 7/26 was followed by -37 points over the following four weeks.
There is something unusual to be seen on the weekly charts. The weekly ADX is falling while the DI bands are narrowing. This commonly is seen during pullbacks but is uncommon to see during an uptrend. Going back several years, we can find only two examples other than the current time. One example is May of 2008. If you've been trading for a while, you’ll recall June, 2008, probably with some pain. April and May were great rally months for trading but June came as a blindside to many of us because what was working before just suddenly stopped working. The all-time market high in October, 2007 was also similar on the ADX.
The setup now is quite similar to these rallies. If you are swing trading and are long, examine these charts and study your own charts; this is a time for caution.
Market Trend: Nine Sectors Report
Turning to our Nine Sectors Report, we had three changes from Friday's action, two positive and one negative. This will cause us to continue to hold our Sell signal for the SPX. We've also attached some of the underlying charts showing the SPX and the sectors. While the charts are probably too small, you should still be able to visually see the topping process and the loss of upward momentum. This may rest and gather steam and take off again but for now, it looks like a top in the making. Yet we want to continue to emphasize that tops are notoriously slow to form; this could continue for quite some time.
Volume & Breadth Indicators
For the SPX Index there were 329 Advancers/160 Decliners. On the NYSE 3,136 issues were traded with 2,081 advancing issues and 941 retreating issues, a ratio of 2.21 to one advancing. There were 203 new highs and 7 new lows. The five day moving average of New Highs is 197 while the five day moving average of New Lows is 9 and the ten day moving average of Net Advancing is 334. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 3.1 to one. The closing TRIN was 0.71 and the final tick was 838. The NYSE Composite Index gained 0.75% today while the SPX gained 0.44%.
For the NYSE, relative to the previous 30 session average, volume was 5.24% above the average. Of the last 15 sessions 6 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 20 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 91.9% of the average daily volume for the last year. Volume was 111.8% of the last 10 day average and 104.6% of the previous day’s volume.
Breadth was strong. As a matter of fact, the NYSE Advance/Decline is currently at its all-time high. The broad NYSE Composite Index outperformed the SPX; this is bullish. An extremely strong final tick for the weekly close; this is seven consecutive Fridays with a positive final tick.
Total tick for the day was 172,000 and the average tick for the day was 112. There were 183 ticks greater than 600 and 45 ticks more extreme than -600. There were 7 ticks greater than 1000 and 2 ticks more extreme than -1000. The tick action suggests institutional accumulation.
It is unusual to see such strong tick action on a day that gapped upward eight points yet closed lower than the opening minutes. But the ticks do not lie or mislead; Friday simply had buyers willing to pay higher prices. Institutions were buying on the first day of the quarter.
Looking over the nightly indicators, the only hint of weakness is that the Russell 1000 (large caps) advance/decline line retreated slightly.
Moving Average Indicators:
63.20% of the SPX components are giving a crossover Buy signal; 10.40% of the SPX components are giving a Sell signal. This is a 6.1 to 1 ratio of Buy signals over Sell signals.
59.8% of the SPX are above their five day moving average, 66.2% are above their 10 day average, 80% are above their 20 day moving average, 83.6% are above their 50 day moving average, 75.6% are above their 100 day moving average, and 63.4% are above their 150 day moving average.
The Dow 50 DMA crossed above the 200 DMA. It's funny how the "Death Cross" was big news a few months ago but this "Golden Cross" doesn't seem to get any respect. Statistically, the Golden Crosses have a greater impact to the market than the Death Crosses. Especially, keep an eye open for additional green appearing on the right of the chart as other indices make this crossover. While this has little or no impact on the likelihood of a pullback, this could be bullish longer-term.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +82%.
- Energy -- Outperformed the SPX by +78%.
- Financials -- Outperformed the SPX by +58%.
- Consumer Staples -- Outperformed the SPX by +1%.
- Utilities -- Outperformed the SPX by +28%.
Sectors weaker than the SPX for Friday:
- Industrials -- Underperformed the SPX by -33%.
- Technology -- Underperformed the SPX by -38%.
- Health Care -- Underperformed the SPX by -42%.
- Consumer Discretionary -- Underperformed the SPX by -30%.
Stocks on the Move:
Today's SPX component winners and losers:
- Largest one day loser is ANF with -3.90%
- Largest three day loser is URBN with -9.75%
- Largest five day loser is MON with -12.92%
- Largest ten day loser is ADBE with -20.01%
- Largest one day winner is C with 4.73%
- Largest three day winner is OXY with 7.01%
- Largest five day winner is WAG with 10.94%
- Largest ten day winner is PCS with 15.43%
In Late Trading:
251 SPX components moved upward and 130 components downward during the after hours with 107 million shares traded.
Week of October 04 - October 08 Overview
Date/Time Release/Consensus
10/04/10 10:00 Factory Orders/-0.004
10/04/10 10:00 Pending Home Sales/0.01
10/05/10 10:00 ISM Services/51.8
10/06/10 7:00 MBA Mortgage Application/NA
10/06/10 8:15 ADP Employment Change/18K
10/06/10 10:30 Crude Inventories/NA
10/07/10 8:30 Initial Claims
10/07/10 8:30 Continuing Claims/4450K
10/07/10 15:00 Consumer Credit/-$3.0B
10/08/10 8:30 Nonfarm Payrolls/0K
10/08/10 8:30 Nonfarm Private Payrolls/70K
10/08/10 8:30 Unemployment Rate/0.097
10/08/10 8:30 Hourly Earnings/0.001
10/08/10 8:30 Average Workweek
10/08/10 10:00 Wholesale Inventories/0.004
Monday, October 4
Economics
10:00 Factory Orders -0.5% cons.
10:00 Pending Homes Sales
New Zealand NZIER Business Opinion Survey 18 cons.
Australia TD Securities Inflation 3.0% cons.
Euro-Zone Sentix 7.6 cons.
Euro-Zone Producer Price Index 4.0% cons
Earnings
After: MOS
Have a great weekend!
-Mel
