SPX Breaks Above Resistance in Broad Rally
by Jerome "Mel" Hickerson
Market Recap:
Another Monday gap higher as traders appeared to be expecting something good from the FED Tuesday. There was no economic data to review before the open but we had the report on the NAHB Housing Market Index at 10:00 am. Overseas was mixed with Asia mostly down and Europe higher.
The first session of the last week of September began with a modest opening gap higher but shortly after 10 am the news broke that the recession officially ended 15 months ago and traders responded enthusiastically. The SPX pumped a quick ten points higher and then spent three hours consolidating. But from 2:00 pm through the close the tape once again belonged entirely to the bulls with the exception of a minor sell-off in the final moments as the index closed near the highs.
Looking at our Market Leaders board, we find all the major indices closing higher. Worth noting is that the Emerging Markets are less than 1% off their 52 week highs while the Financials are almost 13% off their highs.
Market Trend: Nine Sectors Report
Turning to our Nine Sectors Report we find three changes after today's action; all from Sell to Neutral. This is not a pleasant change if you happen to be short – but, of course, nothing about today was pleasant if you were short. Several of the other sectors are nearly Neutral as well but we will maintain the Sell signal for another day.
Tuesday is the FOMC announcement; all bets are off regarding the market reaction to the announcement. The only sure thing is that it will be a wild ride as the market does the dance.
Looking ahead, the SPX has now closed above all the significant moving averages. Most of the moving averages are rising. The SPX, Dow, Nasdaq, and Russell 2000 have all closed above their closing highs from June, July, and August. The XLF and the Dow Transportation Index have not yet done so. But the overall landscape is turning bullish for the longer-term as market breadth continues to suggest higher ahead.
The significant concern at this point is the overhead resistance at 1150 and the overbought conditions. As we have seen illustrated the last week, overhead resistance and overbought conditions do not always mean a market pullback; it simply increases the odds. Until the market actually makes a move downward, the trend is up.
Volume & Breadth Indicators
For the SPX Index there were 463 Advancers/28 Decliners. On the NYSE 3,143 issues were traded with 2,491 advancing issues and 589 retreating issues, a ratio of 4.23 to one advancing. There were 306 new highs and 9 new lows. The five day moving average of New Highs is 211 while the five day moving average of New Lows is 9 and the ten day moving average of Net Advancing is 494. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 13.16 to one. The closing TRIN was 0.32 and the final tick was 827. The NYSE Composite Index gained 1.56% today.
For the NYSE, relative to the previous 30 session average, volume was -4.75% below 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, 20 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 71.4% of the average daily volume for the last year. Volume was 100.4% of the last 10 day average and 84.6% of the previous day’s volume.
As would be expected on an up day such as today, breadth was strongly positive. New Highs were outstanding. Advancing Volume was strong and the final tick shows little reluctance to buy at the close.
Further, total tick for the day was 291,000 and the average tick for the day was 189. There were 184 ticks greater than 600 and seven ticks more extreme than -600. There were 12 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
A mere seven ticks more negative than -600. That is unheard of; there simply was no selling pressure today. Nightly Breadth Indicators are looking bullish.
Moving Average Indicators:
82.20% of the SPX components are giving a crossover Buy signal; 3.20% of the SPX components are giving a Sell signal. This is a 25.7 to 1 ratio of Buy signals over Sell signals.
87% of the SPX are above their five day moving average, 89.8% are above their 10 day average, 93.6% are above their 20 day moving average, 83.8% are above their 50 day moving average, 70% are above their 100 day moving average, and 60.8% are above their 150 day moving average.
There were no significant moving average crossovers today; most short-term averages are already above their longer-term counterparts. The percentage of SPX components above their 20 DMA remains in extreme overbought territory.
Sectors on the Move:
Sectors stronger than the SPX for Monday:
- Energy -- Outperformed the SPX by +23%.
- Financials -- Outperformed the SPX by +26%.
- Consumer Discretionary -- Outperformed the SPX by +40%.
Sectors weaker than the SPX for Monday:
- Basic Materials -- Underperformed the SPX by -88%.
- Industrials -- Underperformed the SPX by -2%.
- Technology -- Underperformed the SPX by -5%.
- Consumer Staples -- Underperformed the SPX by -25%.
- Utilities -- Underperformed the SPX by -38%.
- Health Care -- Underperformed the SPX by -24%.
Stocks on the Move:
Today's SPX component winners and losers:
- Largest one day loser is IP with -6.56%
- Largest three day loser is TSN with -5.20%
- Largest five day loser is CLF with -8.54%
- Largest ten day loser is DF with -9.22%
- Largest one day winner is ODP with 10.49%
- Largest three day winner is WHR with 9.85%
- Largest five day winner is MA with 13.30%
- Largest ten day winner is JDSU with 20.31%
In Late Trading:
181 SPX components moved upward and 149 components downward during the after hours with 109 million shares traded.
Tuesday, September 21
Economics
08:30 Housing Starts 550k cons.
08:30 Building Permits 555k cons.
02:15 FOMC Interest Rate Decision
New Zealand Credit Card Spending
Swiss SECO September Economic Forecasts
Swiss Trade Balance
Great Britain Public Finances
Great Britain Public Sector Net Borrowing
Canada Consumer Price Index
Earnings
Before: AZO, CCL, CAG, FDS
After: ADBE, ALOG, CTAS, DRI, PRGS
Before the opening bell, the Commerce Department will release its August report on housing starts and building permits. New home construction is expected to have risen slightly. Economists predict housing starts jumped to a 550,000-unit annualized rate in August from a 546,000-unit annualized rate the previous month. The report is also expected to show that building permits, a measure of builder confidence, rose to a 560,000-unit annualized rate in August from a 559,000-rate in the previous month. After the close, Adobe Systems (ADBE) will report its third-quarter earnings. The software developer is expected to have earned 49 cents per share versus 35 cents a year earlier, according to Thomson Reuters.
Make it a great Tuesday!
-Mel
