Resistance is Futile...Or is it?
by Jerome "Mel" Hickerson
The session today opened with a mild pop upward setting the high for the day at 10:16. The SPX then settled down to set the low of the session at 12:24 before chopping around sideways with an upward bias into the close. Mostly, it was a dull boring session, consolidating after yesterday’s run.
The daily bar painted yet another doji, closing once again in the same area as many recent closes. Some analysts will tell you that today’s bar is bearish; I don’t see it that way. A doji after an exhausting run up like yesterday can go either way. On the bull’s side of things, we did manage to set a new high for the year today and it was not quickly and harshly rejected like so many other highs have been. The bears may respond that we have covered this territory many times without successfully breaking out above; bulls might counter that resistance gets weaker each time it is tested.
My response is simply stay tuned. Sooner or later the market will tell us its decision and we will jump. Right now, anyone suggesting that they know for certain which way this will go is simply seeing with their heart and not with their eyes and mind.
Two things are certain: 1) The bulls are struggling here, and 2) The bears are struggling here. Neither side seems able to retain possession of the momentum long enough to push the ball beyond the 20 yard lines; we are playing in the middle of the field. Until we move definitively above 1111 or below 1084, we are range bound and the future direction is unclear.
Today’s early ramp upward was suspect from the beginning because the canary in the coal mine (the financials) was not participating. This eventually brought the market down with it. But today was an odd day looking at the internal signals. Breadth was wildly positive the entire day; the internals (other than the financials) look more like a +10 SPX day rather than a doji. This suggests that we had better be watching the financials closely again tomorrow and for the near future.
If you are bullish, you have to examine this chart and grasp that the financials led this rally upward; the SPX did not pull the financials upward. Since mid October, the SPX has made new highs while the XLF is not even close. Something will change soon, and my best guess is that it’s the SPX that declines. Everything I see suggests that we are watching a topping pattern.
Many of us, including myself, are anxious to get short. Like a little child on a long ride, “Are we there yet?” I think we are getting close. I am not among those expecting a large pullback, but I do see it likely that we visit 1070 sometime relatively soon, before rallying into year end. My data suggests we still have a couple more days to wait to swing short.
For Thursday, our model is generating a -4. This is nearly a neutral indicator and suggests to me that tomorrow we see a day much similar to today; choppy trade, narrow range – a difficult day to look forward to as a trader, so I’d like to be wrong. For those not yet short but anxious, a strong day upward would work nicely tomorrow.
Thursday, December 3
Economics
08:30 Initial Claims 483k. cons.
08:30 Continuing Claims
08:30 Productivity 8.5% cons.
08:30 Employment Cost Index
10:00 ISM Services 51.4 cons.
Earnings
Before: APWR, STS, DLM, MOV, TOL
After: ARST, AVGO, DMND, LQDT, MRVL, MENT, NOVL
The weekly jobless claims report from the Labor Department is due before the start of trading. Approximately 483,000 Americans are expected to have filed new claims for unemployment, up from 466,000 the previous week. Continuing claims is expected to have risen to 5,517,000 from 5,423,000 the previous week. The nation's retailers release their sales figures for November in the early morning. The figures will include the critical Black Friday period.
Mel’s Random Hits:
• Total tick for today was more than 234,000. This is an indicator of bullish breadth; an amazing total for a day that was flat. Breadth was positive at the open and had only two negative periods the entire day; around 11:30 and just before 12:45. The amazing thing to watch was the extreme ticks. Positive extreme ticks outnumbered negative by more than three to one. Some days are clearly distribution days; but today, clearly HAL was on a buying spree.
• Today's range was 10.29 points. Our systems can struggle on days with range less than 12; we had early warning from our range indicator that today was likely to be a narrow range affair and we stood down to preserve capital. We did have a bounce alert that we posted for subscribers at 12:31, just seven minutes after the low of the day was painted on the chart.
• Today's volume was 69% of the average daily volume.
• 20% of the SPX stocks closed with two day RSI above 90. 44% closed with RSI above 80. 5% closed with RSI below 20 and 3% closed with RSI below 10. We are nearing short-term overbought but not quite there yet.
• 66% of the SPX are above their 10 day moving average and 64% are above their 20 day moving average.
• 13% of the SPX stocks closed below their most recent previous lows.
• 39% of the SPX closed above their most recent previous high.
• 53% of stocks closed in the top half of today's range. (47% closed in bottom half.)
• 20.8 of stocks closed in the bottom 20% of today's range.
• 11.8% of stocks closed in the top 10% of today's range.
• 24.2% of stocks closed within 2% of their 52 week high. This number keeps creeping upward. Think about what frequently happens when a stock sets a new 52 week high. Now imagine one quarter of the SPX surging at the same time. This is the breadth that keeps us from retreating when other signals suggest we have an imminent pullback.
• 23.0% of stocks closed within 50% of their 52 week low.
• 13.2% of stocks closed within ¼% of their high for today.
• 8.2% of stocks closed within ¼% of their low for today.
• 61.2% of the SPX closed up for today. Even with the flat index, almost 2/3rds of the components closed upward today.
• The 2 Day RSI of the SPX is 77. The Dow RSI is 68, NASDAQ is 83 and Russell 83. The NASDAQ and Russell had been lagging but have rebounded strongly. Personal observation: If a trader simply can’t wait to get short, shorting the Russell might be the best option.
• SPX components moved upward significantly during the after hours.
Have a great Thursday!
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"Mel"
Today we closed out of:
Proshares Ultrashort S&P500 (SDS) -1.07%
Proshares Ultrashort QQQ (QID) -1.21%
