No Technical Damage Done but It Wasn't Pretty
by Jerome "Mel" Hickerson
A most interesting session began under heavy fire from the futures, gapped down, bounced briefly, then worked its way downward until shortly after 10:00: The hour from 10:00 until 11:00 was mostly upward choppy trade, but from 11:30 until 1:00 the index had work to be done on the downside. The low for the day was set at 12:49, from which the market tried to rally reaching an afternoon high at 2:39. From there, it gave up and rolled over moving back downward to close near the lows for the day.
The struggle for the market today was caused by continued credit concerns surrounding Greece, the strengthening dollar after Wednesday’s FOMC announcement, as well as the market trying to absorb the liquidity requests of several banks.
The way I see it, this session could have been a rout. When the bottom of the range was broken through just before 1:00, the bears had possession of the ball and were inside the 20 yard line. But the bears were forced to settle for a field goal at the end. I’m not trying to make a bullish case out of today; it was pretty ugly under the hood. But it really could have been much more damaging for the bulls if the bears had been able to press their case at the lows of the day at 1:00. A 13 point loss on the index does little technical damage; but tomorrow is going to be important.
Friday is options expirations. December expirations are about as bullish as they get; a failure by the bears to recover some of today’s losses would seem significant. On the other hand, if the bulls were to manage to close the week above last Friday’s close of 1105.88 this would strike me as quite damaging technically to the bears.
When you sum it all up, today was yet another close within the tight trading range. It’s not a pretty bar on the daily chart, but the most important line in the sand is 1086 and the SPX is a long way from there (by today’s small range standard.)
For the next couple days, my model suggests that Friday closes higher than today’s open, and that Monday closes higher than Friday’s open. This model takes no account of news, simply historical data. While this indicator has a slightly better than three to one success ratio, its ratio is higher during strong markets and lower during weaker markets.
The problem is determining whether the market is strong. We’ll have a better idea at the end of Monday’s session. But I usually don’t try to guess ahead of time; I simply recognize that the model will be right more often than wrong and play the numbers also knowing that this means some losses go into the mix.
For Friday, our model has generated a +9. This strongly suggests that we see some kind of bounce on Friday.
Friday, December 18
Economics
No economic market moving news is expected
Earnings
Before : KMX, NEOG, STEI
The market may feel the impact of the quadruple options expiration, a quarterly event in which stock index futures and options and individual stock futures and options all expire simultaneously. The process can cause increased volatility in the underlying issues.
Mel’s Random Hits:
• Total tick for the day was almost -86,000. Looking really hard for bright spots under the hood, I see a positive period just around 11:00 and about an hour between 2:00 and 3:00. The rest of the day looks like you’d expect for a -13 day.
• The day's range was 10.48 points. This is still only half of the average daily range.
• The day's volume was 134% of the average 2009 daily volume. Volume was 179% of the 10 day average. Please note that I track the SPX volume. The other indices were the normal low volume. The SPX volume spike was caused by the banks and their new stock offerings; if you subtract those billions of shares which were traded today, the SPX volume was very low.
• 9% of the SPX stocks closed with two day RSI above 90. 14% closed with RSI above 80. 29% closed with RSI below 20 and 12% closed with RSI below 10.
• 58% of the SPX are above their 10 day moving average and 63% are above their 20 day moving average.
• 53% of the SPX stocks closed below their most recent previous lows.
• 6% of the SPX closed above their most recent previous high.
• 27.6% of stocks closed in the top half of the day's range. (72.4% closed in bottom half.)
• 37.0% of stocks closed in the bottom 20% of the day's range.
• 3.0% of stocks closed in the top 10% of the day's range.
• 13.0% of stocks closed within 2% of their 52 week high. Notice that 50 of the SPX moved off this number tonight.
• 26.8% of stocks closed within 50% of their 52 week low.
• 4.6% of stocks closed within ¼% of their high for the day.
• 30.2% of stocks closed within ¼% of their low for the day.
• 15.6% of the SPX closed up from the previous close; 28.6% closed higher than the open.
• Sectors weaker than the SPX for the day: Basic materials, Financials, Technology, and Consumer Discretionary
• Sectors stronger than the SPX for the day: Industrials, Health Care, Energy, Consumer Staples, and Utilities
• The $SOX index was weaker than the SPX today.
• The 2 Day RSI of the SPX is 14. The Dow RSI is 7, NASDAQ is 18 and Russell 33. The broader Russell index remains much stronger than the Dow. But these appear to be oversold numbers suggesting a possible bounce.
• There are several indicators for a bounce tomorrow. One is the Vix: It jumped over 9% today. Often such Vix increases are followed by a bounce.
• SPX components moved upward significantly during the after hours. Earnings reports, most significantly RIMM and their guidance, boosted the after hours market. We’ll have to see if this carries into Friday. Oddly enough, futures were down slightly while the stocks were moving upward.
Have a great Friday!
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"Mel"
Today we closed out of:
Ultra S&P 500 ProShares (SSO) +0.43%
