SPX Closes Lower after Volatile Session
by Jerome "Mel" Hickerson
Market Recap:
This morning we had a downgrade of Spain and more worries about Irish banks to keep traders on edge. Futures worked lower overnight but completely reversed and spiked higher with economic data released before the open. The Labor Department reported that initial claims for unemployment insurance for the week ending September 25 fell by 16,000 to 453K. The week’s total was 4K below the Reuters consensus for a reading of 457K. Continuing Claims for unemployment for the week ending Sept. 18 were in line with consensus at 4.457M vs. expectations for 4.46M and last week’s revised 4.54M. The government’s report (final revision) on the nation’s second quarter GDP shows the economy grew at an annualized rate of 1.7% in the quarter, which is above the consensus expectations for a growth rate of 1.6%. Looking at the all-important consumer activity, the Personal Consumption component of the report came above expectations with a gain of 2.2% vs. 2.0%. This gain was the best in three years.
A very volatile session began by gapping higher about eight points, quickly bringing the SPX above the 1150 resistance. Just nine minutes into the day the index stalled at 1157 and put the high of the day on the chart. The next two hours were sharply downhill 22 points without a significant bounce along the way, putting the intraday low on the chart at 12:04. Bulls managed to work the tape back upward about eight points but the final hour saw some mild selling as the index closed in the bottom third of the daily range. It was certainly a wild ride.
Looking at our Market Leaders board, we see some mixed results. Both China and emerging markets are up, with emerging markets continuing to build a 52 week high. All the other indices were down today with the financial sector and chip makers continuing to lag. The XLF was up during most of the day until a late day sell off brought it back into negative territory.
Market Trend: Nine Sectors Report
The inability of the equities to hold their early gains today can hardly be construed bullishly. We've often pointed out that an early day low followed by ramping into the close is a characteristic of a bullish trend; the converse is also true. A strong characteristic of a downtrend is morning highs with selling the rest of the day. We are beginning to see this characteristic more frequently the last several days. Upward momentum has obviously waned; the index has hardly moved from its close eight sessions ago.
Turning to our Nine Sectors Report, we have one change tonight as the Utilities sector moves from Neutral to Sell. So we will once again hold our Sell signal. But let's take a moment to discuss this signal. This has probably been mentioned previously but it never hurts to review. The algorithms used to determine our signals, whether day trading or swing trading, have one known weakness. The algorithms have a tendency to be "confused" by market stalls and interpret those stalls as a trend change. This is by design because most often, the stall does turn into a trend change. But on occasion the market simply rests and then takes off again; those occasions result in losses when trading the signals. Nothing works every time. Market tops are notoriously difficult to call and this Nine Sectors Sell signal is getting rather long in the tooth. So we are concerned and we want to share that concern with you. We will continue to hold the Sell signal as long as the data continues to support doing so but a trader must use stops and evaluate their own risk tolerances.
A word about tomorrow. While the first of the month and the first of the quarter trend bullishly, the first session of October ranks only 142nd since 1950. That's in the lower half of the rankings so anything may happen tomorrow; just don't be too convinced if you hear about the bullishness of the first day of the quarter.
Volume & Breadth Indicators
For the SPX Index there were 198 Advancers/289 Decliners. On the NYSE 3,139 issues were traded with 1,530 advancing issues and 1,489 retreating issues, a ratio of 1.03 to one advancing. There were 249 new highs and 9 new lows. The five day moving average of New Highs is 202 while the five day moving average of New Lows is 9 and the ten day moving average of Net Advancing is 275. The Net Advancing data indicates a bullish trend.
Declining volume was higher at a ratio of 1.31 to one. The closing TRIN was 1.35 and the final tick was 343. The NYSE Composite Index lost -0.25% today.
For the NYSE, relative to the previous 30 session average, volume was 25.07% above the average. Of the last 15 sessions 5 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 19 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 91.5% of the average daily volume for the last year. Volume was 108.9% of the last 10 day average and 104.2% of the previous day’s volume.
Breadth was positive but advancing volume was once again negative. This is rare to see two days in a row. Volume did surge a bit today but it was all before noon and mostly on the down move after the open.
Total tick for the day was 77,000 and the average tick for the day was 50. There were 128 ticks greater than 600 and 113 ticks more extreme than -600. There were 7 ticks greater than 1000 and 11 ticks more extreme than -1000.
The volatility of today’s session shows in the ticks; a total of 18 ticks exceeding 1000 is unusual except at market tops and bottoms. This doesn’t look much like a bottom.
Moving Average Indicators:
68.80% of the SPX components are giving a crossover Buy signal; 10.40% of the SPX components are giving a Sell signal. This is a 6.6 to 1 ratio of Buy signals over Sell signals.
43.6% of the SPX are above their five day moving average, 64% are above their 10 day average, 77% are above their 20 day moving average, 81.4% are above their 50 day moving average, 73.4% are above their 100 day moving average, and 62.4% are above their 150 day moving average.
There were no significant moving average crossovers today but several of the short-term averages inched closer to crossovers today.
Sectors on the Move:
Sectors stronger than the SPX for Thursday:
- Energy -- Outperformed the SPX by +44%.
- Financials -- Outperformed the SPX by +25%.
- Utilities -- Outperformed the SPX by +0%.
- Health Care -- Outperformed the SPX by +6%.
- Consumer Discretionary -- Outperformed the SPX by +5%.
Sectors weaker than the SPX for Thursday:
- Basic Materials -- Underperformed the SPX by -7%.
- Industrials -- Underperformed the SPX by -6%.
- Technology -- Underperformed the SPX by -11%.
- Consumer Staples -- Underperformed the SPX by -4%.
Stocks on the Move:
Today's SPX component winners and losers:
- Largest one day loser is PRU with -4.18%
- Largest three day loser is MON with -9.87%
- Largest five day loser is MON with -10.91%
- Largest ten day loser is ADBE with -20.44%
- Largest one day winner is DV with 5.08%
- Largest three day winner is WAG with 10.38%
- Largest five day winner is JBL with 13.73%
- Largest ten day winner is JBL with 16.87%
In Late Trading:
240 SPX components moved upward and 148 components downward during the after hours with 206 million shares traded..
Friday, October 1
Economics
08:30 Personal Income 1.6% cons.
08:30 Personal Spending 0.3% cons.
08:30 PCE Prices-Core 0.1% cons.
09:55 University Michigan Consumer Sentiment 66.9 cons.
10:00 Construction Spending -0.3% cons.
10:00 ISM Index 55.0 cons.
02:00 Auto Sales 3.8M
02:00 Truck Sales 4.8M
China PMI Manufacturing 51.7 cons.
Swiss Retail Sales 4.8% cons.
Swiss SVME Purchasing Managers Index 61.4 cons.
German Purchasing Manager
Euro-Zone Unemployment Rate 10.0% cons.
Earnings
No earnings reports.
Speeches
08:30 William Dudley
A government report on personal income and spending is due before the opening bell. Economists surveyed expect income to have edged up 0.3% in August after rising 0.2% in July. Spending is forecast to tick up 0.3% after increasing 0.4%. The University of Michigan's final reading on consumer sentiment in September is due shortly after the market open. It's expected to inch up to 67.1 from the last reading 66.6. The Institute for Supply Management's (ISM) index of manufacturing is also due after the start of trading. Economists forecast the index to have slipped to 54.5 in September from 56.3 in August. Any number above 50 indicates growth in the sector. Meanwhile, the government is expected to report that construction spending fell 0.5% in August, after dropping 1% in July. Auto and truck sales for September are due throughout the day.
Have a great Friday!
-Mel
