Reversal Day
by Jerome "Mel" Hickerson
The morning began with news that German Chancellor Merkel was saying that she will support a combination of IMF and EU aid to Greece as a measure of last resort. The Labor Department reported that initial claims for unemployment insurance for the week ending March 20th fell by 14,000 to 442K, which was below the expectations for a reading of 450K and last week’s revised total of 456K. Continuing Claims for unemployment for the week ending March 13th were above consensus at 4.648M vs. expectations for 4.562M but below last week’s revised total was 4.702M. Asian markets were lower while European were higher on the Greece news.
Our markets opened with futures up and immediately gapped higher in response. The SPX retraced half the gap by 10:15, and then bears were agonized as the tape screamed higher setting the high of the day at 12:47 along with new 18 month highs. Then a familiar pattern was painted on the chart, an intraday double top. At 1:27 the market topped again, and was rejected sharply. Heavy selling ensued until 2pm when the market attempted weakly to bounce. From 2:00 through 3:00 trade was choppy with a downward bias and a brief bounce right at 3pm. But the final 45 minutes belonged entirely to the bears. What a change.
Today’s chart action was strongly reminiscent of February 5th, except inverted. Whether we see the follow through to the downside will largely be determined on Friday, I believe. One early key to watch for would be a gap down open below 1163. Another key to watch would be the action of the XLF.
While the tape has relentlessly worked higher the last two weeks, many internal signs have been signaling imminent pullback. Yet the bulls have maintained control and kept the pressure on the bears. Today painted a bearish hammer on the daily SPX chart.
This bearish hammer has been rare for the SPX for the last year; the closest candle to today is August 25th. But looking at other indicators: the MACD is suggesting sell, MACD Slope says sell, stochastics stays sell, and many others as well.
Nothing is ever certain, especially in this manipulated market. But things changed a great deal on the charts over the last three hours today. Today has all of the appearance of a key reversal day signaling a multi-day pullback.
Trade Systems Update:
Our trade systems had some mixed results today starting out with a failed pullback alert at 11:17. But the scalp short signal at 12:12 and the pullback alert at 12:50 met their objectives. The bounce alert at 2pm wasn’t worth much, but the pullback signal at 3:09 hit the ball out of the yard. See the attached graph; money can be made trading this market in either direction, buying dips or selling rallies.
SPX Summary for Thursday, March 25, 2010
180 Advancers/307 Decliners
Today's SPX component winners and losers:
• Largest one day loser is GENZ with -7.69%
• Largest three day loser is GENZ with -13.36%
• Largest five day loser is GENZ with -10.76%
• Largest ten day loser is CNX with -20.34%
• Largest one day winner is AMZN with 5.28%
• Largest three day winner is LEN with 11.17%
• Largest five day winner is TIE with 11.90%
• Largest ten day winner is LSI with 16.64%
*** SPX Technical Summary ***
The lowest 14 day RSI component is EQT; the highest 14 day RSI component is RX. The average 14 day RSI of all 500 components is 58.
The greatest positive five day momentum component is TIE; the greatest negative five day momentum component is GENZ. The average five day momentum of all 500 components is -0.27.
62.80% of the SPX components are giving a crossover Buy signal; 9.80% of the SPX components are giving a Sell signal. This is a 6.4 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 2 components.
• From Buy to Neutral: 43 components.
• From Neutral to Sell: 13 components.
• From Neutral to Buy: 8 components.
NYSE Summary
On the NYSE 3192 issues were traded with 1269 advancing issues and 1828 retreating issues, a ratio of 1.44 to 1 declining. There were 410 new highs and 10 new lows.
Declining volume was higher at a ratio of 1.34 to 1. The closing TRIN was 0.93 and the final tick was -308. This is the third consecutive session to close the day on a negative final tick.
Evidence of trend:
Relative to the previous 30 session average, volume was 7.42% above the average. Of the last 15 sessions 3 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 26 sessions ended on a positive tick, 7 of last 10.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line decreased from 203704 to 203145. This -0.28% decrease came while the SPX was losing -0.17%. The 10 day moving ratio of positive volume is 1.01 and the 10 day moving Advance/Decline ratio is 1.11. The 10 day moving ratio of positive volume has trended -0.29 over the last three days and the 10 day moving Advance/Decline ratio has trended -0.26 over the last three days.
The NYSE Composite Index lost -0.3% today.
Friday, March 26
Economics
08:30 GDP- Third Estimate
08:30 GDP Deflator- Third Estimate
09:55 Michigan Sentiment-Final
06:00 EMU: Money Supply
Earnings
Before: PERY
Speeches
11:30 Kevin Warsh
Events
CHK, ITRI, SSD, VCI at Barclays Capital High Yield Bond and Syndicated Loan Conference
Mel’s Random Hits:
• Total tick for the day was 30,000. There were 82 ticks greater than 600 and 124 ticks more extreme than -600. There were 2 ticks greater than 1000 and 25 ticks more extreme than -1000. The tick action strongly suggests institutional distribution.
• The day's range was 15.6 points. The 5 DMA of daily range is 12.12.
• Evidence of the intraday trend: At 10am volume was 102.3% of the 10 day average. By noon the volume was 113.61% of the 10 day average, and by 2pm volume was 121.81% of the 10 day average.
• The day's volume was 110.6% of the average daily volume for the last year. Volume was 122% of the last 10 day average and 122.3% of the previous day’s volume.
• 7% of the SPX stocks closed with two day RSI above 90. 13% closed with RSI above 80. 34% closed with RSI below 20 and 15% closed with RSI below 10.
• 39.4% of the SPX are above their five day moving average, 51.2% are above their 10 day average, and 73.2% are above their 20 day moving average.
• 12% of the SPX closed above their most recent previous high.
• 44% of the SPX stocks closed below their most recent previous lows.
• 180 SPX issues advanced and 307 issues declined, a net SPX advance/decline of -127.
• Evidence of the intraday trend: At 10am, 35.8% of the SPX components were in the top half of the range. By noon, 64.2% were in the top half of the range, and by 2pm, 35.2% were in the top half of the range.
• 7.4% of stocks closed in the top half of the day's range. (92.6% closed in bottom half.)
• 0.6% of stocks closed in the top 10% of the day's range. 1.2% of stocks closed in the top 20% of the day's range.
• 58.8% of stocks closed in the bottom 10% of the day's range. 76.8% of stocks closed in the bottom 20% of the day's range.
• 18% of stocks closed within 2% of their 52 week high. 52.2% of stocks closed within 5% of their 52 week high.
• 39.2% of stocks closed within 50% of their 52 week low. 10% of stocks closed within 25% of their 52 week low.
• 1% of stocks closed within ¼% of their high for the day.
• 63.8% of stocks closed within ¼% of their low for the day.
• Evidence of the intraday trend: At 10am, 77.8% of the SPX components were up since the open. By noon, 77.6% were up since the open, and by 2pm, 63.8% were up since the open.
• 37.2% of the SPX closed up from the previous close; 17.2% closed higher than the open.
• Sectors stronger than the SPX for Thursday:
- Financials -- Outperformed the SPX by +66%.
- Industrials -- Outperformed the SPX by +10%.
- Technology -- Outperformed the SPX by +33%.
- Consumer Staples -- Outperformed the SPX by +13%.
- Consumer Discretionary -- Outperformed the SPX by +80%.
• Sectors weaker than the SPX for Thursday:
- Basic Materials -- Underperformed the SPX by -181%.
- Energy -- Underperformed the SPX by -139%.
- Utilities -- Underperformed the SPX by -58%.
- Health Care -- Underperformed the SPX by -36%.
• The $SOX index strength was weaker relative to the SPX Thursday by 0%.
• The XLF outperformed the SPX by 0.66% Thursday.
• The 2 Day RSI of the SPX is 56. The Dow RSI is 70, the NASDAQ is 61 and the Russell is 46.
• Over the last four sessions, the average session closed 52.48% of the range above the low. Thursday closed at 4.7% of the daily range.
• Upside momentum decreased Thursday, from Wednesday’s -0.08 to today’s -0.27. The ratio of SPX components giving a crossover buy signal compared to sell signals also dropped to B 6.41 to 1.
• The ISEE Equity 10 day moving average Thursday was 192.1. The lowest 10 day average in the last 52 weeks was 141.5 on 06/29/09 and the highest 10 day average in the last 52 weeks was 207.3 on 01/19/10.
• 116 SPX components moved upward and 253 components downward during the after hours with 118 million shares traded.
• The SPX rallied more than 1% today, set a new 52 week high, and then closed red. This last happened on 12/15/2003.
• The SPX dropped yesterday and today. The last two day decline was more than a month ago, February 22nd and 23rd.
• The reversal was particularly noteworthy on the Russell 2000 today. Small caps led us on the way upward and were quick to take the lead on the downturn today. We’ll watch them carefully on Friday.
Good trading on Friday everyone!
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"Mel"
