New Highs for the Dow
As the U.S. market was about to open, the world seemed to be leaning modestly positive. We had no economic data to move things before the open but we did get the report on Factory Orders at 10:00 am and then the FOMC Minutes at 2:00 pm. Factory orders rose 0.7%, compared to last month’s drop of 0.9%. Vehicle sales came in at 9.4 million, more than the expected 9.2 million.
The session began with a modest one point gap higher and quickly moved higher another point and put the high of the day on the chart in the opening minute. The morning consisted of several waves of gentle and orderly selling taking the index to the low of the day at 12:48. The rest of the afternoon was a gentle ascent with only very modest moves along the way. This session seemed to be simple consolidation rather than a suggestion of further decline. But under the covers, the concern for the bulls has to be the action of the small caps, the Russell 2000. The Russell 2000 was selling pretty hard today and when money runs away from the small caps, especially in January, you have to take notice. This could be a clue of future action.
Looking at our Market Leaders board tonight we find the results of a very mixed session. Overseas markets were mixed, the Russell Technology index diverged from the SOX (chip makers), and the U.S. markets were mixed with the SPX down and the Dow up.
Market Trend: Nine Sectors Report
Turning to our Nine Sectors Report we had three changes, two negative and one positive. The Nine Sectors continues to show a Sell signal for the SPX.
Looking ahead, we are overbought on all timeframes. Market breadth, while bullish, does not stand up well when looking at previous 52 week highs. History suggests that entering earnings season overbought frequently results in a sharp pullback. But the daily charts continue to trend higher. So there is plenty of risk swing trading either direction at the moment. Patience and staying in cash might be the safer and wiser play until the market reveals more of its plans. The resilience of this market was clearly on display again today as the afternoon bounced back strongly from the mild morning decline.
Volume & Breadth Indicators
For the SPX Index there were 155 components advancing and 328 components declining. On the NYSE 3,127 issues were traded with 1,107 advancing issues and 1,933 retreating issues, a ratio of 1.75 to one declining. There were 200 new highs and 9 new lows. The five day moving average of New Highs is 187 while the five day moving average of New Lows is 8 and the ten day moving average of Net Advancing is 381. The Net Advancing data indicates a bullish trend.
Declining volume was higher at a ratio of 1.48 to one. The closing TRIN was 0.85 and the final tick was 217. The five day average of TRIN is .95 and the ten day average of TRIN is .98. The NYSE Composite Index lost -0.27% today while the SPX lost -0.13%.
For the NYSE, relative to the previous 30 session average, volume was 15.95% above the average. Of the last 15 sessions 4 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, 5 of last 10. For the SPX, the day's volume was 104.8% of the average daily volume for the last year. Volume was 179% of the last 10 day average and 106.8% of the previous day’s volume.
The broad NYSE Composite Index lost more than the SPX today. Market breadth was really abysmal for a day that the SPX lost less than two points. But this market keeps bouncing back as every tiny dip is bought.
Total tick for the day was 37,000 and the average tick for the day was 24. There were 83 ticks greater than 600 and 71 ticks more extreme than -600. There were 4 ticks greater than 1000 and 1 tick more extreme than -1000.
The intraday volume pattern reveals nothing of significance today. Checking the Nightly Breadth Indicators also reveals quite a mix. Our gut feeling is that the indicators continue to suggest a topping process but we've felt that way for the last thirty SPX points. Still, the indicators reveal ratios that are about as bullish as they get and starting to decline. Usually Price either leads or follows the indicators quickly.
Moving Average and Support/Resistance Indicators:
47.4% of the SPX are above their five day moving average, 55% are above their 10 day average, 66% are above their 20 day moving average, 81% are above their 50 day moving average, and 86.6% are above their 200 day moving average.
China's 5 DMA crossed above the 20 DMA. This will bear watching closely as China's divergence from the U.S. markets has been a strong reason to suspect we have a pullback coming.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Industrials -- Outperformed the SPX by +0%.
- Technology -- Outperformed the SPX by +54%.
- Utilities -- Outperformed the SPX by +60%.
- Health Care -- Outperformed the SPX by +47%.
Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -52%.
- Energy -- Underperformed the SPX by -62%.
- Financials -- Underperformed the SPX by -2%.
- Consumer Staples -- Underperformed the SPX by -26%.
- Consumer Discretionary -- Underperformed the SPX by -41%.
In Late Trading:
230 SPX components moved upward and 142 components downward during the after hours with 111 million shares traded.
Wednesday, January 5
07:00 MBA Mortgage Applications
07:30 Challenger Job Cuts
08:15 ADP Employment Change
10:00 ISM Services
10:30 Crude Inventories
Australia New Home Sales
Euro-Zone Purchasing Manger Index
Euro-Zone Producer Price Index
Treasury Coupon Purchase: 8/15/2028-11/15/2040: $1.5-2.5 bln
Before: FDO, UNF, WOR
After: CCG, BLUD, RECN, RT, SHAW, SNX