Rally Continues but Weakness Continues in Financials and Small Caps
Market Recap:
Our Market Leaders Board has modest strength everywhere but the Financials and the Russell 2000 small caps. Technology and the Sox carried things today.
SPX big winners were Walgreen Co (WAG) 10.67%, Textron Inc (TXT) 10.6%, and Snap-On Inc (SNA) 9.51%. SPX big losers were Johnson Controls Inc (JCI) -8.61%, Cvs Caremark Corp (CVS) -6.92%, and Laboratory Corporation of America Holdings (LH) -6.18%.
SPX five day big winners are Textron Inc (TXT) 16.43%, Sprint Nextel Corp (S) 15.94%, and Walgreen Co (WAG) 15.02%. SPX five day big losers are Lexmark International (LXK) -18.47%, Dean Foods Company (DF) -14.75%, and Alpha Natural Resources (ANR) -9.15%.
New Ten Day Highs: MMM, ANF, URBN, AFL, APD, ARG, MO, AEP, AMP, AMGN, APH, ADI, AN, AVY, BHI, BLL, BAX, BBT, BDX, HRB, BA, CAM, CPB, COF, CAH, CELG, CVX, CLX, COH, CMCSA, CVH, CSX, DRI, DVN, DO, DPS, DTE, DNB, EBAY, EMC, ESV, ETR, EOG, EXC, ESRX, XOM, FAST, FDX, FITB, FE, FMC, FTI, GPS, GPC, GILD, HAL, HES, HON, HSP, HBAN, ITW, TEG, IPG, IFF, IP, ITT, JBL, JEC, JNJ, KEY, KSS, KFT, LEG, LMT, L, M, MRO, MMC, MCD, MHP, MCK, MSFT, MOLX, MUR, NDAQ, NOV, GAS, NKE, NI, NBL, JWN, NSC, NU, NOC, NYX, ORLY, OMC, ORCL, OI, PH, PFE, PNW, PXD, RL, PPG, PPL, PCP, QCOM, RTN, RSG, ROK, COL, RDC, SLB, SRE, SJM, SNA, LUV, SE, S, SWK, SBUX, SRCL, TROW, TXT, TIF, TWC, TWX, TMK, TSS, TRV, UNP, QLD, USB, VFC, VMC, WAG, WU, WHR
New Ten Day Lows: AGN, AXP, APOL, BAC, COG, CME, CAG, CVS, DF, DV, FDO, FII, FTR, GNW, HRL, HST, JCI, K, KR, LH, LEN, LXK, MS, PWR, RSH, SWY, SHW, SLM, SYK, THC, UNH, SH
Volume & Breadth Indicators
For the SPX Index there were 286 components advancing and 205 components declining. On the NYSE 3,145 issues were traded with 1,586 advancing issues and 1,425 retreating issues, a ratio of 1.11 to one advancing. There were 190 new highs and 23 new lows. The five day moving average of New Highs is 224 while the five day moving average of New Lows is 28 and the ten day moving average of Net Advancing is 67.
Advancing volume was higher at a ratio of 1.08 to one. The closing TRIN was 1.08 and the final tick was -182. The five day average of TRIN is 1.02 and the ten day average of TRIN is 1.41. The NYSE Composite Index gained 0.24% today while the SPX gained 0.27%.
For the NYSE, relative to the previous 30 session average, volume was -3.77% 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, 16 sessions ended on a positive tick, 3 of last 10. For the SPX, the day's volume was 108.8% of the average daily volume for the last year. Volume was 120.4% of the last 10 day average and 108.2% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 14,000 and the average tick for the day was 9. There were 26 ticks greater than 600 and 28 ticks more extreme than -600. There were no ticks greater than 1000 and 1 ticks more extreme than -1000.
Moving Average and Support/Resistance Indicators:
66.2% of the SPX are above their five day moving average, 69.8% are above their 10 day average, 70.8% are above their 20 day moving average, 68.2% are above their 50 day moving average, and 56.8% are above their 200 day moving average.
There were two significant moving average crossovers today as China's 5 DMA crossed above the 20 DMA and Technology's 20 DMA crossed above the 50 DMA. Our moving average Power Rating is 55 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Thursday:
- Basic Materials -- Outperformed the SPX by +86%.
- Energy -- Outperformed the SPX by +1%.
- Industrials -- Outperformed the SPX by +20%.
- Technology -- Outperformed the SPX by +59%.
- Consumer Discretionary -- Outperformed the SPX by +44%.
Sectors weaker than the SPX for Thursday:
- Financials -- Underperformed the SPX by -95%.
- Consumer Staples -- Underperformed the SPX by -41%.
- Utilities -- Underperformed the SPX by -8%.
- Health Care -- Underperformed the SPX by -14%.
Checking the sectors of the SPX tonight: (The sector Buy and Sell signals come from a mechanical trend trading system; there will be some whipsaw but the signal will never be on the wrong side for long.)
The Basic Materials sector advancing issues (24) totaled 1,013,227 shares traded (42,218 average per stock) and declining issues (6) totaled 118,202 shares traded (19,700 average per stock.) 27 components are on an uptrend (3 new uptrends today) and 3 components are on a downtrend (no new downtrends today.) There were 1 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .7% above the 20-Day average.
The Energy sector advancing issues (26) totaled 1,097,451 shares traded (42,210 average per stock) and declining issues (17) totaled 1,173,906 shares traded (69,053 average per stock.) 41 components are on an uptrend (1 new uptrends today) and 3 components are on a downtrend (1 new downtrends today.) There were 1 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 2.64% above the 20-Day average.
The Financials sector advancing issues (19) totaled 1,279,895 shares traded (67,363 average per stock) and declining issues (61) totaled 6,028,754 shares traded (98,832 average per stock.) 61 components are on an uptrend (no new uptrends today) and 20 components are on a downtrend (14 new downtrends today.) There were 3 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed 1.26% above the 20-Day average.
The Industrials sector advancing issues (47) totaled 1,136,340 shares traded (24,177 average per stock) and declining issues (13) totaled 914,328 shares traded (70,333 average per stock.) 54 components are on an uptrend (1 new uptrends today) and 7 components are on a downtrend (3 new downtrends today.) There were 4 New Highs and no New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .05% above the 20-Day average.
The four 'risk sectors' totaled 116 advancing issues and 97 declining issues today with 5 new uptrends and 18 new downtrends. 84.7% of Risk Sector components are uptrending.
The Technology sector advancing issues (53) totaled 4,578,405 shares traded (86,385 average per stock) and declining issues (24) totaled 2,493,848 shares traded (103,910 average per stock.) 61 components are on an uptrend (10 new uptrends today) and 18 components are on a downtrend (5 new downtrends today.) There were 2 New Highs and 1 New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .18% above the 20-Day average.
The Consumer Staples sector advancing issues (19) totaled 1,346,712 shares traded (70,880 average per stock) and declining issues (21) totaled 1,333,781 shares traded (63,513 average per stock.) 28 components are on an uptrend (no new uptrends today) and 13 components are on a downtrend (2 new downtrends today.) There were 3 New Highs and 1 New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.57% above the 20-Day average.
The Utilities sector advancing issues (18) totaled 456,496 shares traded (25,361 average per stock) and declining issues (12) totaled 215,241 shares traded (17,937 average per stock.) 29 components are on an uptrend (no new uptrends today) and 2 components are on a downtrend (no new downtrends today.) There were 7 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.29% above the 20-Day average.
The Health Care sector advancing issues (25) totaled 1,168,517 shares traded (46,741 average per stock) and declining issues (26) totaled 749,739 shares traded (28,836 average per stock.) 39 components are on an uptrend (no new uptrends today) and 13 components are on a downtrend (2 new downtrends today.) There were 5 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.53% above the 20-Day average.
The Consumer Discretionary sector advancing issues (55) totaled 2,261,313 shares traded (41,115 average per stock) and declining issues (25) totaled 1,548,519 shares traded (61,941 average per stock.) 63 components are on an uptrend (7 new uptrends today) and 18 components are on a downtrend (3 new downtrends today.) There were 6 New Highs and 1 New Lows. The sector is on a Sell signal and closed above the daily pivot. The sector 5-Day average closed .51% above the 20-Day average.
Based on the SPX sector data, we are on a Buy for the SPX and the Russell 2000.
What We Learned from Thursday's Action:
Thursday was session 5 to close above the 5 DMA, session 3 to close above the 10 DMA, session 5 to close above the 20 DMA, and session 5 to close above the 50 DMA. This was also session 3 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 21.69 points above the 10 DMA.
The SPX 5 DMA is 1364.68, 10 DMA is 1354.82, 20 DMA is 1348.63, 50 DMA is 1333.76, 100 DMA is 1360.2, and 200 DMA is 1312.3.
On Thursday the SPX traded above the opening range but did not trade below the opening range. 53.4% of the SPX closed up from the previous close; 49.4% closed higher than the open. During Thursday's session the SPX gained 3.5 points from open to close. The SPX intraday trading range was 9.03 points. The 5-Day average intraday trading range is 14.04 points, the 10-Day average is 13.16 points, and the 20-Day average is 13.59 points. The trading range is expanding. The 5-Day SPX gain is 3.13%, the 10-Day gain is 0.65%, and the 15-Day gain is 3.35%.
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 Friday is +2. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be sideways. Mel's 5-Day Oscillator is 66 and Mel's 10-Day Oscillator is 37 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bullish for Friday's session.
48.8% of the SPX components are currently overbought. This is the highest reading since April 2nd. The SPX soon fell off a cliff, going from 1422 to 1266. Might we see something similar again? Probably not, but a pullback seems more likely with each passing day.
Looking at the earnings season, the earnings beat rate so far this season has been 59% while the revenue beat rate has been 43%. Both are low numbers, but the revenues are really weak. This may soon take a toll on the market optimism.
Looking at our Market Internals this evening, we remain at levels that often lead to pullbacks, and the Risk Sectors were weak today with just a bit more than 50% advancing. On the bottom subgraph we're taking notice of the green line curling over, suggesting to us that traders are becoming more adverse to risk taking and less likely to chase the rising stocks higher. Also worth noting is the risk sector had more new downtrends today than new uptrends; not often a positive sign on an up day.
Friday, July 20
Economics
No major economic reports
11:00 Fed to sell $7b-$8b notes in 2 to 3-year range
03:00 NZD Credit Card Spending
06:00 EUR German Producer Prices
08:30 GBP Public Finances
12:30 CAD CPI
11:10 UK to sell bills
Earnings
Before:
Dover (DOV) EPS $1.14
General Electric (GE) EPS 37c
Schlumberger (SLB) EPS $1.01
Suntrust Banks (STI) EPS 45c
Xerox (XRX) EPS 26c
Jobless claims were 386,000, more than the expected 365,000. Existing home sales were 4.37 million, more than the consensus 4.65 million. The Philly Fed survey was minus 12.9, worse than the expected minus 8.0. There are no important economic releases on Friday.
Thank you for reading. Think on it, trade on it, and be well.
-Mel