Rally Fizzles
by Jerome "Mel" Hickerson
We began the holiday shortened week with the foreign markets bouncing higher as well as the futures. The Non-manufacturing ISM at 10am came in lower than consensus but still above 50, indicating economic expansion.
The week began with a 12 point upward gap, continued upward five more points and put the high of the day on the chart at 10:16. The next 90 minutes were sideways with a downward bias but at noon sellers stepped in and took the SPX down almost ten points during lunch hour. And then another ten points were erased before the low of day was on the chart at 3:25. The market responded with a rather weak bounce into the close, finishing almost eight points off the lows.
Today’s action was pretty bearish. The early market bounce then rejection just above 1040 would be difficult to interpret in any other fashion. Recently, every market bounce fades long before the session closes; this is a characteristic of a bear market. After the early morning pump, today’s bounce attempts were merely attempts; the lifetime of each bounce to be measured in moments only. It was truly a session made for bears who sell every rally.
But when the day was done, today’s SPX chart bar painted a higher high and a higher low. On the candle chart, we see a small body doji with the open and the close near the middle of the range, suggesting a lot of market indecision.
But it sure had that look of a reversal bar prior to the final bounce at the close. The 1040 area apparently proves to be just too much resistance as the SPX continues in the downward channel.
Regardless of where your bias may be, the chart clearly shows an intermediate term downward channel with the last three sessions showing a reversal bar, an inside day, and doji; all with higher lows. This pattern mildly suggests a possible bounce away from the lower range of the channel but the intermediate term direction remains downward.
Day Trade Systems Update: (Signals today)
* GDX at: 10:08
* SSO at: 11:05
* GDX at: 11:31
* SSO at: 12:20
* SSO at: 1:02
* GDX at: 1:19
* SSO at: 2:05
* GDX at: 2:21
Breadth usually leads the market; today it certainly did not. After 28 profitable days out of the prior 30, our trade systems took it on the chin today. We had a pretty good morning but the afternoon was not at all kind to us. Every system will have “those days” and today was ours. It’s not much fun to be the bug; I much prefer to be the windshield. My apologies to those of you who expect every day to be a winner; I only wish it were so. The strategy that worked best today was simply to fade every pop.
Wednesday, July 7
Economics
10:30 Crude Inventories
02:45 France Merchandise Trade
05:00 European Union GDP
06:00 German Manufacturing Orders
Earnings
Before: FDO, GBX
After: WDFC
Speeches
12:30 Dennis Lockhart
The American Bankers Association releases its report on consumer credit delinquencies.
Mel’s Missives from the Matrix:
- Total tick for the day was -151,000 and the average tick for the day was -98. There were 79 ticks greater than 600 and 232 ticks more extreme than -600. There were 2 ticks greater than 1000 and 50 ticks more extreme than -1000. The tick action suggests institutional distribution.
- The day's range was 24.15 points. The intraday trading range - 9:35 to the close - was 23.85. The 5 DMA of daily range is 20.9.
- Evidence of the intraday trend: At 10am volume was 90.02% of the 10 day average. By noon the volume was 88.19% of the 10 day average, and by 2pm volume was 95.21% of the 10 day average.
- The day's volume was 101.1% of the average daily volume for the last year. Volume was 95.9% of the last 10 day average and 118.1% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 1:45 and 2:00 when relative volume increased 48.2% while the SPX was dropping -0.26%. The largest drop in relative volume came between 2:30 and 2:45 when relative volume dropped -45.4% while the SPX was rising 0.02%.
- 2% of the SPX stocks closed with two day RSI above 90. 5% closed with RSI above 80. 52% closed with RSI below 20 and 38% closed with RSI below 10.
- 38.8% of the SPX are above their five day moving average, 11.6% are above their 10 day average, 9.6% are above their 20 day moving average, 9% are above their 50 day moving average, 10.8% are above their 100 day moving average, and 19.2% are above their 150 day moving average.
- 10% of the SPX closed above their most recent previous high.
- 31% of the SPX stocks closed below their most recent previous lows.
- 319 SPX issues advanced and 170 issues declined, a net SPX advance/decline of 149.
- Evidence of the intraday trend: At 10am, 65.6% of the SPX components were in the top half of the range. By noon, 53.2% were in the top half of the range, and by 2pm, 5.2% were in the top half of the range.
- 18.6% of stocks closed in the top half of the day's range. (81.2% closed in bottom half.)
- 1.4% of stocks closed in the top 10% of the day's range. 3.2% of stocks closed in the top 20% of the day's range.
- 2% of stocks closed in the bottom 10% of the day's range. 12.4% of stocks closed in the bottom 20% of the day's range.
- 1.2% of stocks closed within 2% of their 52 week high. 3.4% of stocks closed within 5% of their 52 week high.
- 73.2% of stocks closed within 50% of their 52 week low. 44.8% of stocks closed within 25% of their 52 week low.
- 3% of stocks closed within ¼% of their high for the day.
- 0.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 96.6% of the SPX components were up since the open. By noon, 90.4% were up since the open, and by 2pm, 51.4% were up since the open.
- 60.4% of the SPX closed up from the previous close; 23% closed higher than the open.
- Sectors stronger than the SPX for Tuesday:
- Energy -- Outperformed the SPX by +34%.
- Technology -- Outperformed the SPX by +19%.
- Consumer Staples -- Outperformed the SPX by +5%.
- Utilities -- Outperformed the SPX by +63%.
- Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -43%.
- Financials -- Underperformed the SPX by -10%.
- Industrials -- Underperformed the SPX by -35%.
- Health Care -- Underperformed the SPX by -7%.
- Consumer Discretionary -- Underperformed the SPX by -53%.
- The $SOX index strength was weaker relative to the SPX Tuesday by -0.67%.
- The XLF underperformed the SPX by -0.1% Tuesday.
- The 2 Day RSI of the SPX is 44. The Dow RSI is 47, the NASDAQ is 12 and the Russell is 1.
- Over the last four sessions, the average session closed 40.98% of the range above the low. Tuesday closed at 39.5% of the daily range.
- Upside momentum moved upward Tuesday, from Friday’s -4.44 to today’s -3.86. The ratio of SPX components giving a crossover sell signal compared to buy signals increased to the sell side to S 47.89 to 1.
- The ISEE Equity 10 day moving average Tuesday was 159. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 228 SPX components moved upward and 142 components downward during the after hours with 249 million shares traded.
Trade 'em well on Wednesday everyone!
-Mel
