Mr. Market Keeps Traders Guessing
by Jerome "Mel" Hickerson
Futures were flat at the open and the SPX opened similarly with a little up down up move. At 10:00 the FED released a statement regarding tightening of interest rates and the market responded with the expected down hard move, setting the low of the session at 10:28. From there it was choppy trade upward until the high of the day at 1:29. Then there was mostly choppy sideways trade with a downward bias into the close. For the most part, today’s action is what should be expected on a low volume day following a significant gain the prior day; it seemed like consolidation.
The daily chart painted a lower high along with a lower low today. We certainly may be looking at a bear flag on the chart but closing today in the top half of the range leaves that question open for now.
Today’s trading was hampered by low volume blamed on the northeast snowstorm but I think volume would have been low regardless; traders are caught between so many conflicting signals here and the news is overwhelming any technical indicators. Tomorrow may also be overwhelmed by news and/or fears as the EU has a summit and some news coming out may be regarding any possible Greece bailout. I personally have a preference to being in cash when news is in control because I don’t like betting on the news. It has an evil way of surprising you, stopping you out, and then reversing again.
At the risk of sounding like a broken recording, I will reiterate that I believe we yet have more upside to come on Thursday and Friday. The last few days we have seen support hold and dips being bought. Sentiment data suggests extremes of bearish sentiment which usually signifies a short-term bottom. I’ll remain bullish until the weekend or until last Friday’s lows are taken out.
But even though I am short-term bullish, it should be obvious that this correction is different than what we have seen since the beginning of last March. It’s much deeper and longer and scarier for the bulls than previous pullbacks.
Or is it? From June 11th through July 8th (18 sessions) the SPX pulled back from 956 to 869, 9.1%. Our current correction is on the 14th day and peak to trough has seen a drop of 9.2%. So in both depth and duration it seems no worse than the late June correction. Your senses may be telling you that this is worse, but if your memory is good and you are unbiased you’ll recall that everyone thought the late June pullback signaled the end of the rally as well. Keeping an open mind to possibilities is the best course here until the market shows its hand. What “everyone knows” isn’t always truth.
For the SPX, a close above 1072, then above 1085 is necessary to pull off a return to the rally. And until we trade below 1045 or close above those points, anyone who claims to know which way we are going is guessing. This market is good at keeping everyone guessing.
SPX Summary for Wednesday, February 10, 2010
185 Advancers/307 Decliners
Today's SPX component winners and losers:
• Largest one day loser is DF with -13.88%
• Largest three day loser is DF with -14.37%
• Largest five day loser is DF with -15.79%
• Largest ten day loser is NYT with -20.11%
• Largest one day winner is AIG with 16.76%
• Largest three day winner is HAR with 20.97%
• Largest five day winner is ARG with 38.73%
• Largest ten day winner is ARG with 29.13%
*** SPX Technical Summary ***
The lowest 14 day RSI component is QCOM; the highest 14 day RSI component is TSN. The average 14 day RSI of all 500 components is 39.
The greatest positive five day momentum component is ARG; the greatest negative five day momentum component is DF. The average five day momentum of all 500 components is -2.72.
5.20% of the SPX components are giving a crossover Buy signal; 78.00% of the SPX components are giving a Sell signal. This is a 15.0 to 1 ratio of Sell signals over Buy signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 10 components.
• From Buy to Neutral: 5 components.
• From Neutral to Sell: 28 components.
• From Neutral to Buy: 3 components.
Thursday, February 11
Economics
08:30 Initial Claims
08:30 Continuing Claims
08:30 Retail Sales 0.4% cons.
08:30 Retail Sales ex Auto 0.4% cons.
10:00 Business Inventories. 0.4% cons.
Earnings
Before: ASF, ALU, ARE, AN, BWA, ECL, ECA, EXPE, FLIR, IPCC, JASO, LH, LF, LUFK, MAR, PTEN, PEP, PM, PGN, STRA, ELOS, THR, VFC, WWE, VIA.B
After: ACL, AB, BEC, BJRI, NILE, BWLD, CAKE, CMG, BGC, LVS, MFE, NVDA, PNRA, PRAA, SPWRA, KNOT
Auctions
01:00 30-Yr Bond Auction
Mel’s Random Hits:
• Total tick for the day was +107,000. The first 90 minutes belonged to the bears followed by a bullish response with only brief negative breadth around 3:00 and 3:45.
• The day's range was 14.33 points.
• The day's volume was 77.71% of the average daily volume for the last year. Volume was 83.54% of the last 10 day average but 86.5% of Tuesday.
• 5% of the SPX stocks closed with two day RSI above 90. 15% closed with RSI above 80. 10% closed with RSI below 20 and 5% closed with RSI below 10. Very little change from yesterday.
• 61.4% of the SPX are above their five day moving average, 29.8% are above their 10 day average, and 15.0% are above their 20 day moving average. Very little change with these numbers for today and the numbers still suggest an oversold condition.
• 14% of the SPX stocks closed below their most recent previous lows.
• 13% of the SPX closed above their most recent previous high.
• 57.2% of stocks closed in the top half of the day's range. (42.8% closed in bottom half.)
• 7.2% of stocks closed in the bottom 20% of the day's range.
• 1.4% of stocks closed in the top 10% of the day's range.
• 2.0% of stocks closed within 2% of their 52 week high. 7.8% of stocks closed within 5% of their 52 week high. The 52 week highs are rapidly becoming a memory.
• 30.4% of stocks closed within 50% of their 52 week low. 10.0% of stocks closed within 25% of their 52 week low.
• 3.4% of stocks closed within ¼% of their high for the day.
• 3.8% of stocks closed within ¼% of their low for the day.
• 37.0% of the SPX closed up from the previous close; 38.0% closed higher than the open.
• Sectors weaker than the SPX for the day: Energy, Basic Materials, Consumer Discretionary, Health Care, Technology, and Utilities.
• Sectors stronger than the SPX for the day: Financials, Industrials, and Consumer Staples.
• The $SOX index strength was stronger again (very marginally) than the SPX today.
• The 2 Day RSI of the SPX is 50. The Dow RSI is 56, NASDAQ is 55 and Russell 60.
• Over the last five sessions, the average session closed 43% of the range above the low.
• Downside momentum moderated from yesterday’s -3.10 to today’s -2.72. The ratio of SPX components giving a crossover sell signal compared to buy signals has jumped to 15 to 1.
• 161 SPX components moved upward and 143 components downward during the after hours with 89 million shares traded. Volume was light.
Have a great Thursday everyone.
-----------
"Mel"
ETF’s we trade:
Ultra S&P500 ProShares (NYSE: SSO)
Ultra Dow30 ProShares (NYSE: DDM)
Ultra QQQ ProShares (NYSE: QLD)
PS UTLRSHRT QQQ (NYSE: QID)
UltraShort S&P500 ProShares (NYSE: SDS)
UltraShort Dow30 ProShares (NYSE: DXD)
PowerShares QQQ Trust (NASDAQ: QQQQ)
Direxion Daily Small Cp Bear 3X (NYSE:TZA)
Direxion Daily Small Cp Bull 3X (NYSE:TNA)
