Morning Dip Brings Buyers, but Volume Remains Low
by Jerome "Mel" Hickerson
Market Recap:
Concerns over the lack of a deal in Greece and new worries about Portugal were overshadowing a better than expected T-Bill auction in Spain and decent preliminary PMI date in Europe. Futures were down several points as the open approached.
The session began with a gap lower and traded sharply lower for all of twelve minutes before the dip buyers put a bid under the market and the equities began a steady climb back towards positive ground. The middle of the day was mostly sideways but the final hour the bulls made a push to the high of the day just before the close.
Checking our Market Leaders Board, we find a mixed board with the Russell 2000 small caps leading the way higher and the Dow and the NYSE Composite Index lagging.
SPX big winners were Waters Corp (WAT) 8.02%, Quest Diagnostics Inc (DGX) 7.19%, and Emc Corp (EMC) 6.99%. SPX big losers were Zions Bancorporation (ZION) -8.19%, Cablevision Systems Cl A (CVC) -4.17%, and The Travelers Companies Inc (TRV) -3.83%.
SPX five day big winners are Sears Holding Corp (SHLD) 24.57%, Marathon Petroleum Corp (MPC) 16.4%, and F5 Networks Inc (FFIV) 15.79%. SPX five day big losers are Sunoco Inc (SUN) -10.85%, Johnson Controls Inc (JCI) -9.08%, and Capital One Financial Cp (COF) -7.7%.
New Ten Day Highs: ADBE, AMD, AFL, A, MO, ADI, AN, AVB, BCR, BAX, BDX, BMC, BXP, BF/B, COH, CTSH, CMI, DHR, DELL, DFS, DD, ROST, ECL, EMC, EMR, EQR, FDO, FII, FIS, F, BEN, GILD, GR, GWW, HOG, HAS, HRL, HST, ITW, INTC, IBM, IFF, INTU, JDSU, CLF, KIM, LH, LIFE, LSI, MAR, MAT, MOLX, NDAQ, NTAP, NVLS, NUE, NVDA, ODP, PCAR, PDCO, PKI, RL, PLD, QLGC, DGX, RHT, RF, SWY, CRM, CVG, SEE, SIAL, SPG, SNA, HOT, SYK, SYY, TLAB, THC, TDC, TER, TSO, TMO, X, UNM, VLO, VTR, VRSN, VNO, WMT, WM, WAT, WDC, WU, ICE
New Ten Day Lows: AET, MO, AEE, AEP, BHI, BMY, CNP, CL, COP, ED, CEG, CSX, D, DTE, DUK, ETR, EL, EXC, FTR, HNZ, HUM, TEG, IPG, IGT, JNJ, KMB, MJN, MCD, TAP, MYL, NEM, NSC, PG, PGN, PWR, RAI, S, SWK, TE, TRV, TSN, UNH, AEM, DYN, MBI, VAR, VZ, VFC, WPI, WLP, GOOG
Volume & Breadth Indicators
For the SPX Index there were 233 components advancing and 232 components declining. On the NYSE 3,120 issues were traded with 1,634 advancing issues and 1,383 retreating issues, a ratio of 1.18 to one advancing. There were 85 new highs and 10 new lows. The five day moving average of New Highs is 133 while the five day moving average of New Lows is 12 and the ten day moving average of Net Advancing is 636. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 1.1 to one. The closing TRIN was 0.98 and the final tick was 465. The five day average of TRIN is .88 and the ten day average of TRIN is 1.01. The NYSE Composite Index lost -0.19% today while the SPX lost -0.1%.
For the NYSE, relative to the previous 30 session average, volume was -6.83% 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, 21 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 81.6% of the average daily volume for the last year. Volume was 87.4% of the last 10 day average and 92.2% of the previous day’s volume.
Total tick for the day was 71,000 and the average tick for the day was 46. There were 20 ticks greater than 600 and 41 ticks more extreme than -600. There were 2 ticks greater than 1000 and 9 ticks more extreme than -1000. The tick action suggests institutional distribution.
The tick data today shows just how much different the first hour was from the rest of the day as the bears ruled early and then disappeared as the buyers took command of the rest of the session. But it took more than five hours for the buyers to recover from the opening hour.
The intraday volume pattern shows that the most significant spike of volume came on the early morning rally but that volume diminished after that.
Moving Average and Support/Resistance Indicators:
62.8% of the SPX are above their five day moving average, 75.4% are above their 10 day average, 81.4% are above their 20 day moving average, 83.8% are above their 50 day moving average, and 59.6% are above their 200 day moving average.
There were no significant moving average crossovers today. But the SPX "Golden Cross" is imminent. Our moving average Power Rating is 86 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +15%.
- Industrials -- Outperformed the SPX by +19%.
- Health Care -- Outperformed the SPX by +20%.
- Consumer Discretionary -- Outperformed the SPX by +49%.
Sectors weaker than the SPX for Tuesday:
- Energy -- Underperformed the SPX by -16%.
- Financials -- Underperformed the SPX by -10%.
- Technology -- Underperformed the SPX by -4%.
- Consumer Staples -- Underperformed the SPX by -35%.
- Utilities -- Underperformed the SPX by -72%.
In Late Trading:
314 SPX components moved upward and 116 components downward during the after hours with 205.7 million shares traded.
What We Learned from Tuesday's Action:
Tuesday was session 6 to close above the 5 DMA, session 23 to close above the 10 DMA, session 23 to close above the 20 DMA, and session 23 to close above the 50 DMA. This was also session 21 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 11.49 points above the 10 DMA.
The SPX 5 DMA is 1313.71, 10 DMA is 1303.14, 20 DMA is 1286.32, 50 DMA is 1251.07, 100 DMA is 1225.12, and 200 DMA is 1257.24.
On Tuesday the SPX traded above the opening range but did not trade below the opening range. 47.6% of the SPX closed up from the previous close; 70.6% closed higher than the open. During Tuesday's session the SPX lost -1.33 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 Wednesday is -1. Greater than three is bullish and less than negative three is bearish. Based solely on the technicals, our bias is slightly bearish for Wednesday's session. Mel's 10 Day Oscillator is 69 (below 35 is oversold and above 65 is overbought.)
Topping patterns are among the most difficult patterns to trade. We are unwilling to take the risk of holding a long position overnight and the intraday trading range is often six or eight points making day trading treacherous. It is certainly much more fun after the top.
Emotions run high at both bottoms and tops but tops take longer to build, thus allowing emotions much longer to run. Tomorrow's Fed announcement and the market reaction should make clear whether this market is simply pausing for another push higher or whether this "rounded top" indeed becomes a topping pattern.
After hours today AAPL reported earnings and surprised the market expectations by selling even more iPads than the consensus expectation. This seems likely to bring us a gap higher on Wednesday morning, especially because the morning of a Fed announcement tends to be bullish.
At bottoms, traders always believe that the market will "never" turn higher; at tops, traders always believe that the move upward will "never" abate. Things always look most bullish before a market turn. AAPL has gapped up more than 10% following earnings four times in the last thirteen years and over the next week, the NASDAQ was negative each time.
Today was the fourteenth consecutive session without a 2% intraday trading range. This is the longest such stretch since May 20th, 2011. Stretches such as this often are a characteristic of a topping process but we emphasize that a topping process can be slow. This market will require a catalyst to prevent dip buyers from rapidly bringing the market back higher. Something must occur that changes the reaction to every dip. This is inevitable but can take more time than many traders have the patience to wait.
Wednesday, January 25
Economics
07:00 MBA Mortgage Purchase Index
10:00 House Price Index – consensus 0.1%
10:00 Pending Home Sales – consensus -1.0%
12:30 FOMC Rate Decision – consensus 0.25%
11:30 U.S. to $35b in 5-yr notes
00:30 AUD CPI
02:00 NZD Credit Card Spending
09:00 EUR German IFO – Business Climate
09:30 GBP BoE Minutes
09:30 GBP GDP
5:15 Germany to sell EU3b 30-yr notes
Earnings
Before: ABT, ACXM, ATI, APU, AIT, ADP, AVX, BMS, BA, ELY, COP, GLW, CFR, DAL, DOV, EXC, FCFS, FCF, FMBI, GD, HES, HCBK, IGTE, LCRY, ERIC, MWV, VIVO, MOLX, MSI, NYB, NVS, OXY, PJC, PII, BPOP, PX, ROK, RES, SAP, SEIC, SLAB, SO, STJ, TEL, TXT, UGI, UTX, LCC, USG, GWW, WLP, WRLD
After: ANEN, AF, BRKL, CGI, CTXS, CNS, COHR, CVD, CCI, CTS, DLPH, DRE, DXPE, ETFC, EGN, FICO, FFBC, HXL, HRC, IPHI, ISSI, JEC, KNX, LRCX, LOGI, LSI, MLNX, MSTR, MIPS, MUR, NFLX, NE, NWPX, OI, PMTC, QTM, RJF, RLI, SNDK, SWK, SRDX, SUSQ, SYMC, SYMM, TER, TCBI, UMPQ, URI, VAR, ZNGA
There were no significant economic releases on Tuesday. On Wednesday we will get pending home sales and oil inventories as well as the FOMC decision on interest rates.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel
