More Bad News for Bulls
Market Recap:
The markets were treated to a slew of new confidence killers overnight into Wednesday morning. The Fed is now officially worried about Europe and announced a new round of 'global shock' stress tests for the biggest banks. China's Flash PMI dove to 48, signaling contraction. Europe's PMI also showed slowdowns in place. And a German bond auction was not well received. Initial Claims for Unemployment Insurance for the week ending 11/18 rose by 2,000 to 393K. Continuing Claims for the week ending 11/11 came in at 3.691M vs. 3.627M. The Commerce Department reported that Durable Goods orders declined by -0.7% during the month, which was better than the consensus expectations for -1.1%. When you strip out the volatile orders for transportation, orders rose by +0.7%, which was above the consensus for +0.1%. The September reading was revised to +1.8% from +0.6%. Finally, Personal Incomes rose by +0.4% in October, which was above the consensus expectations for an increase of +0.3%. Personal Spending for the month rose by +0.1%, which was below the expectations for +0.4% and below the September reading of +0.7%.
The day before Thanksgiving session began with a large gap lower and relentlessly worked lower throughout the day without much respite. A late afternoon rally attempt died on the table as the SPX dropped ten points during the final fifteen minutes of trading to close as the session lows. This was a gory session producing some of the most extreme data we have seen.
Checking our Market Leaders Board we see that all of our leaders were down large with the DOW getting off the easiest.
SPX big winners were Walgreen Co (WAG) 4.39%, Deere & Co (DE) 3.71%, and Gilead Sciences Inc (GILD) 2.29%. SPX big losers were Ak Steel Holding Corp (AKS) -8.97%, Jabil Circuit Inc (JBL) -8.68%, and US Steel Corp (X) -7.68%.
SPX five day big winners are Autonation Inc (AN) 3.12%, Marathon Petroleum Corp (MPC) .58%, and Reynolds American Inc (RAI) .48%. SPX five day big losers are Alpha Natural Resources (ANR) -21.63%, Ak Steel Holding Corp (AKS) -19.75%, and Salesforce.com Inc (CRM) -19.71%.
New Ten Day Highs: SH, WAG
New Ten Day Lows: MMM, ABT, ANF, ADBE, AMD, AES, AET, URBN, AFL, A, APD, AKS, AKAM, AA, ATI, AGN, ALL, MO, AEE, AEP, AXP, AIG, AMT, AMP, ABC, APH, APC, ADI, APA, AIV, AMAT, ADM, AIZ, T, ADSK, ADP, AZO, AVB, AVY, AVP, BHI, BLL, BAC, BCR, BAX, BBT, BDX, BBBY, BBY, BIG, XL, HRB, BMC, BA, BXP, BSX, BMY, BRCM, BRK.B, CA, COG, CAM, CPB, COF, CAH, CFN, CCL, CAT, CBS, CELG, CNP, CTL, CF, CHRW, CHK, CVX, CB, XEL, CI, CINF, CTAS, CSCO, CTXS, CLX, CMS, COH, KO, CCE, CTSH, CL, CMA, CSC, CPWR, CAG, COP, CNX, ED, STZ, CEG, SAI, GLW, COST, CVH, CSX, CMI, CVS, DHR, DRI, DF, DELL, DNR, XRAY, DVN, DV, DO, D, RRD, DOV, DOW, DPS, DTE, DUK, DNB, DD, ETFC, EMN, ETN, ECL, EIX, EMC, EMR, ESV, ETR, EOG, EQT, EFX, EQR, EL, EXC, EXPD, ESRX, XOM, FAST, FII, FDX, FIS, FITB, FHN, FSLR, FE, FISV, FLIR, FLS, FLR, FMC, FRX, BEN, FCX, GCI, GPS, GD, GE, GIS, GPC, GNW, GWW, HAL, HOG, HAR, HRS, HIG, HAS, HCP, HCN, HNZ, HES, HD, HON, HRL, DHI, HST, HCBK, HUM, HBAN, ITW, TEG, INTC, IPG, IBM, IFF, IGT, IP, INTU, ISRG, IVZ, IRM, JBL, JDSU, JNJ, JCI, JPM, JNPR, CLF, K, KEY, KMB, KIM, KLAC, KSS, KR, LLL, LM, LEG, LEN, LUK, LXK, LLY, LTD, LNC, LLTC, L, LSI, MTB, M, MRO, MAR, MMC, MAS, MA, MKC, MHP, MCK, MWV, MHS, WFR, MRK, MET, PCS, MCHP, MSFT, MOLX, TAP, MON, MWW, MCO, MS, MUR, NBR, NDAQ, NOV, NYT, NWL, NEM, NWSA, GAS, NI, NBL, JWN, NSC, NU, NTRS, NOC, NVLS, NUE, NYX, ORLY, OXY, ODP, OMC, ORCL, OI, PCAR, PLL, PH, PAYX, BTU, JCP, PBCT, POM, PKI, PFE, PCG, PNW, PXD, PBI, PCL, PNC, RL, PPG, PPL, PX, PCP, PFG, PG, PGN, PGR, PLD, PRU, PEG, PSA, PHM, QLGC, QCOM, STR, RSH, RRC, RHT, RF, RSG, RHI, ROK, COL, RDC, R, SWY, CRM, SNDK, SLE, SCG, CVG, SLB, SCHW, SNI, SEE, SHLD, SRE, SHW, SIAL, SPG, SLM, SNA, SO, LUV, SWN, SE, S, STJ, SWK, HOT, STT, SRCL, SYK, STI, SVU, SYMC, SYY, TROW, TE, TLAB, THC, TDC, TER, TSO, TXN, TXT, BK, TMO, TIF, TWC, TWX, TIE, TMK, TSS, TRV, UNP, UPS, X, UTX, UNH, DRYS, QLD, AEM, DYN, KBH, UNM, USB, VLO, VTR, VRSN, VZ, VNO, WAG, WLP, WFC, WY, WHR, C, GS, GOOG, ICE
Volume & Breadth Indicators
For the SPX Index there were 16 components advancing and 458 components declining. On the NYSE 3,136 issues were traded with 381 advancing issues and 2,701 retreating issues, a ratio of 7.09 to one declining. There were 33 new highs and 170 new lows. The five day moving average of New Highs is 32 while the five day moving average of New Lows is 96 and the ten day moving average of Net Advancing is -567. The Net Advancing data indicates a bearish trend.
Declining volume was higher at a ratio of 25.34 to one. The closing TRIN was 3.54 and the final tick was -385. The five day average of TRIN is 2.51 and the ten day average of TRIN is 1.86. The NYSE Composite Index lost -2.47% today while the SPX lost -2.26%.
For the NYSE, relative to the previous 30 session average, volume was -9.83% below the average. Of the last 15 sessions 2 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 17 sessions ended on a positive tick, 4 of last 10. For the SPX, the day's volume was 87.4% of the average daily volume for the last year. Volume was 95.7% of the last 10 day average and 96.8% of the previous day’s volume.
Total tick for the day was -215,000 and the average tick for the day was -139. There were 41 ticks greater than 600 and 193 ticks more extreme than -600. There were 3 ticks greater than 1000 and 25 ticks more extreme than -1000. The tick action suggests institutional distribution.
The tick data Wednesday shows bears had the bulls completely throttled but most of the huge extremely negative ticks were during the opening hour. This does not often signal the end of the selling as the panic appears to have subsided after the open.
The intraday volume pattern shows three volume peaks, two of which were associated with (minor) SPX up moves. Looking at the Nightly Breadth Indicators shows that the McClellan Oscillator is heavily oversold at the most extreme level since August 10th, 2001. The SPX bounced sixty-six points intraday on August 11th.
Moving Average and Support/Resistance Indicators:
2.8% of the SPX are above their five day moving average, 2.2% are above their 10 day average, 3.4% are above their 20 day moving average, 25.4% are above their 50 day moving average, and 17.2% are above their 200 day moving average.
There was one significant moving average crossover Wednesday as the NYSE Composite Index 20 DMA crossed below the 100 DMA. Our moving average Power Rating is 37 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Wednesday:
- Consumer Staples -- Outperformed the SPX by +113%.
- Utilities -- Outperformed the SPX by +61%.
- Health Care -- Outperformed the SPX by +72%.
- Consumer Discretionary -- Outperformed the SPX by +18%.
Sectors weaker than the SPX for Wednesday:
- Basic Materials -- Underperformed the SPX by -56%.
- Energy -- Underperformed the SPX by -92%.
- Financials -- Underperformed the SPX by -74%.
- Industrials -- Underperformed the SPX by -18%.
- Technology -- Underperformed the SPX by -22%.
In Late Trading:
87 SPX components moved upward and 188 components downward during the after hours with 89.6 million shares traded.
What We Learned from Wednesday's Action:
Wednesday was session 6 to close below the 5 DMA, session 6 to close below the 10 DMA, session 6 to close below the 20 DMA, and session 3 to close below the 50 DMA. This was also session 5 for the 5 DMA to close below 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 60.7 points below the 10 DMA.
The SPX 5 DMA is 1194.95, 10 DMA is 1222.49, 20 DMA is 1239.23, 50 DMA is 1207.17, 100 DMA is 1220.53, and 200 DMA is 1268.48.
On Wednesday the SPX traded below the opening range but did not trade above the opening range. 4% of the SPX closed up from the previous close; 10.4% closed higher than the open. During Wednesday's session the SPX lost -25.69 points from open to close.
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 Thursday is +7. Greater than three is bullish and less than negative three is bearish. Based solely on the technicals, we are bullish for Thursday's session.
The last time the SPX posted six consecutive lower closes in November was in 1974. The index is now down 10% from the high on October 27th after losing 4.43% so far this week. This is so far the worst Thanksgiving week ever.
But the pump is primed for a short-covering rally. When the SPX two-day RSI falls below one the SPX has closed at a higher level one or two days later on 41 out of the last 42 occurrences.
The next two days will be interesting. Volume will be light during Friday’s short session because of the holiday and the opportunity to create a substantial short covering rally is there. If it doesn’t materialize, it’s a sign that the selling pressure is too strong and that we are amidst a cascading decline similar to 2008. We feel that this is unlikely.
Monday’s close has a three-to-one chance of being higher than Friday’s open.
Thursday, November 24
US Markets are closed for Thanksgiving holidays
Economics
07:00 EUR German GDP
09:00 EUR German IFO – Business Climate
09:30 GBP GDP
23:30 JPY National CPI
Earnings
No earnings reports due to holidays
Friday, November 25
US Markets are open for half the day
Economics
No major reports scheduled
Earnings
No earnings reports due to holidays
The post-holiday docket is bare on Friday, when U.S. markets will close at 1 p.m. Eastern.
Have a great Thanksgiving Holiday with your family and friends!
Thank you for reading. Think on it, trade on it, and be well.
-Mel