SPX Gaps Above the 50-Day and Continues Higher
Market Recap:
Oracle's strong earnings plus expectations for Fed action were keeping a bid under the market ahead of the open. Housing Starts in May were reported at an annualized rate of 708K, which was down 4.8% from April’s reading and below the consensus for 721K. Building Permits for May rose to a rate of 780K. This is up 7.9% from April’s revised 723K and was above the consensus of 728K.
The session began with a small gap higher but the real fireworks began after about thirty minutes of trading as traders placed a strong bid under the market and the indices climbed steadily higher until mid-afternoon. Bu the high of the day was on the chart at 1:39 pm and the final hours of trading saw the SPX give back about six points. The way the indices closed did not leave us feeling very bullish for tomorrow.
Our Market Leaders Board shows all of our leaders having impressive sessions with the Russell 2000 small caps and the Financials leading the charge while the Dow was trailing.
SPX big winners were US Steel Corp (X) 9.2%, NVIDIA Corporation (NVDA) 6.43%, and Tesoro Corp (TSO) 6.01%. SPX big losers were J.C. Penney Company Inc (JCP) -9.15%, Walgreen Co (WAG) -6.07%, and Archer Daniels Midland (ADM) -3.63%.
SPX five day big winners are Edwards Life Sciences (EW) 12.85%, Pulte Homes Inc (PHM) 12.%, and Netflix Inc (NFLX) 10.81%. SPX five day big losers are J.C. Penney Company Inc (JCP) -7.94%, Nike Inc Cl B (NKE) -5.63%, and Archer Daniels Midland (ADM) -5.57%.
New Ten Day Highs: MMM, ABT, ADBE, AES, URBN, AFL, A, APD, AKAM, AA, AGN, AEE, AEP, AXP, AIG, AMT, AMP, ABC, AMGN, APH, APC, ADI, AIV, AMAT, AIZ, ADSK, ADP, AN, BLL, BAC, BCR, BAX, BBT, BDX, BBBY, BBY, BIG, BIIB, BMC, BA, BXP, BMY, BRCM, BF/B, BRK.B, CA, COG, CPB, COF, CAH, CFN, CCL, CBG, CELG, CNP, CTL, CF, CHRW, CHK, CVX, CME, CI, CINF, CTAS, CSCO, CTXS, CMS, CCE, CL, CMCSA, CMA, COP, ED, STZ, GLW, COST, CVH, CSX, CVS, DHR, DVA, DF, DE, XRAY, DTV, DFS, D, DOW, DD, ROST, EMN, EBAY, ECL, EMC, ETR, EQT, EL, EXPD, XOM, FII, FDX, FIS, FITB, FHN, FSLR, FE, FLS, FMC, FCX, GCI, GPS, GD, GE, GIS, GPC, GILD, GT, HOG, HRS, HNZ, HSY, HD, HON, HRL, DHI, HSP, HST, HCBK, HUM, HBAN, TEG, INTC, IBM, INTU, ISRG, IRM, JNS, JNJ, JPM, CLF, K, KEY, KMB, KIM, KLAC, LLL, LH, LEN, LUK, LXK, LIFE, LLY, LTD, LNC, LLTC, LMT, L, LO, LOW, MTB, MAR, MAS, MA, MAT, MJN, MKC, MHP, MCK, MWV, MDT, WFR, MRK, MDP, MET, MCHP, MU, MSFT, MOLX, TAP, MON, MWW, MS, NYT, NWL, NWSA, GAS, JWN, NSC, NU, NTRS, NOC, NUE, NVDA, ORLY, ODP, ORCL, PCAR, PDCO, PAYX, PBCT, POM, PKI, PM, PNW, PCL, RL, PPG, PPL, PX, PCP, PFG, PLD, PEG, PSA, PHM, PWR, DGX, RRC, RTN, RHT, RF, RAI, RHI, CRM, SNDK, SLB, SCHW, SEE, SHLD, SRE, SHW, SIAL, SPG, SLM, SNA, SWN, SBUX, HOT, STT, SRCL, SYK, SUN, STI, SYMC, SYY, TROW, TE, THC, TDC, TER, TSO, TXT, BK, TMO, TWC, TWX, TJX, TMK, TRV, TSN, UNP, UPS, UTX, UNH, DRYS, QLD, AEM, KBH, MBI, USB, VLO, VAR, VTR, VRSN, VMC, DIS, WPO, WM, WAT, WLP, WFC, WY, WHR, AMZN, AAPL, C, ICE
New Ten Day Lows: ADM, HPQ, JCP, SLE, VXX, SH, WAG
Volume & Breadth Indicators
For the SPX Index there were 396 components advancing and 72 components declining. On the NYSE 3,164 issues were traded with 2,575 advancing issues and 503 retreating issues, a ratio of 5.12 to one advancing. There were 142 new highs and 11 new lows. The five day moving average of New Highs is 85 while the five day moving average of New Lows is 41 and the ten day moving average of Net Advancing is 713. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 5.33 to one. The closing TRIN was 0.98 and the final tick was 201. The five day average of TRIN is .95 and the ten day average of TRIN is 1.09. The NYSE Composite Index gained 1.36% today while the SPX gained 0.97%.
For the NYSE, relative to the previous 30 session average, volume was -11.59% below the average. Of the last 15 sessions 4 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 17 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 80.8% of the average daily volume for the last year. Volume was 90% of the last 10 day average and 102.9% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 175,000 and the average tick for the day was 113. There were 69 ticks greater than 600 and 4 ticks more extreme than -600. There were 6 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Moving Average and Support/Resistance Indicators:
93.6% of the SPX are above their five day moving average, 86.8% are above their 10 day average, 79.4% are above their 20 day moving average, 45.2% are above their 50 day moving average, and 55.2% are above their 200 day moving average.
There was one significant moving average crossover today as the Sox had the 50 DMA cross below the 200 DMA. This is the so-called Death Cross, which is often meaningless, but still worth taking notice of. Our moving average Power Rating is 47 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +145%.
- Energy -- Outperformed the SPX by +94%.
- Financials -- Outperformed the SPX by +121%.
- Industrials -- Outperformed the SPX by +80%.
- Technology -- Outperformed the SPX by +20%.
- Health Care -- Outperformed the SPX by +44%.
- Consumer Discretionary -- Outperformed the SPX by +24%.
Sectors weaker than the SPX for Tuesday:
- Consumer Staples -- Underperformed the SPX by -36%.
- Utilities -- Underperformed the SPX by -22%.
Checking the sectors of the SPX tonight: (The sector Buy and Sell signals come from a mechanical trend trading system; there will be some whipsaw but the signal will never be on the wrong side for long.)
The Basic Materials sector advancing issues (27) totaled 992,856 shares traded (36,772 average per stock) and declining issues (3) totaled 69,746 shares traded (23,249 average per stock.) 28 components are on an uptrend (7 new uptrends today) and 2 components are on a downtrend (no new downtrends today.) There were 2 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.43% above the 20-Day average.
The Energy sector advancing issues (41) totaled 2,340,562 shares traded (57,087 average per stock) and declining issues (2) totaled 102,293 shares traded (51,147 average per stock.) 31 components are on an uptrend (14 new uptrends today) and 13 components are on a downtrend (no new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed .81% above the 20-Day average.
The Financials sector advancing issues (76) totaled 6,597,378 shares traded (86,808 average per stock) and declining issues (5) totaled 114,332 shares traded (22,866 average per stock.) 75 components are on an uptrend (15 new uptrends today) and 6 components are on a downtrend (no new downtrends today.) There were 4 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.91% above the 20-Day average.
The Industrials sector advancing issues (57) totaled 1,584,885 shares traded (27,805 average per stock) and declining issues (4) totaled 120,727 shares traded (30,182 average per stock.) 49 components are on an uptrend (13 new uptrends today) and 12 components are on a downtrend (no new downtrends today.) There were 3 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed .92% above the 20-Day average.
The four 'risk sectors' totaled 201 advancing issues and 14 declining issues today with 49 new uptrends and 0 new downtrends. 84.7% of Risk Sector components are uptrending.
The Technology sector advancing issues (66) totaled 5,712,197 shares traded (86,548 average per stock) and declining issues (12) totaled 1,334,085 shares traded (111,174 average per stock.) 66 components are on an uptrend (5 new uptrends today) and 12 components are on a downtrend (1 new downtrends today.) There were 3 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.26% above the 20-Day average.
The Consumer Staples sector advancing issues (26) totaled 732,188 shares traded (28,161 average per stock) and declining issues (15) totaled 1,271,160 shares traded (84,744 average per stock.) 34 components are on an uptrend (2 new uptrends today) and 7 components are on a downtrend (1 new downtrends today.) There were 12 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.34% above the 20-Day average.
The Utilities sector advancing issues (13) totaled 320,333 shares traded (24,641 average per stock) and declining issues (19) totaled 516,832 shares traded (27,202 average per stock.) 31 components are on an uptrend (2 new uptrends today) and 1 components are on a downtrend (1 new downtrends today.) There were 9 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.84% above the 20-Day average.
The Health Care sector advancing issues (50) totaled 1,905,652 shares traded (38,113 average per stock) and declining issues (2) totaled 82,833 shares traded (41,417 average per stock.) 47 components are on an uptrend (6 new uptrends today) and 5 components are on a downtrend (no new downtrends today.) There were 10 New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.75% above the 20-Day average.
The Consumer Discretionary sector advancing issues (68) totaled 2,955,294 shares traded (43,460 average per stock) and declining issues (13) totaled 722,134 shares traded (55,549 average per stock.) 67 components are on an uptrend (18 new uptrends today) and 14 components are on a downtrend (1 new downtrends today.) There were 8 New Highs and 1 New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed .8% above the 20-Day average.
Based on the SPX sector data, we are on a Buy for the SPX and the Russell 2000.
What We Learned from Tuesday's Action:
Tuesday was session 4 to close above the 5 DMA, session 10 to close above the 10 DMA, session 6 to close above the 20 DMA, and session 1 to close above the 50 DMA. This was also session 6 for the 5 DMA to close above the 20 DMA. One early sign of a sustainable rally or pullback is often a close above or below the 10 DMA. The SPX closed 30.13 points above the 10 DMA.
The SPX 5 DMA is 1337.92, 10 DMA is 1327.85, 20 DMA is 1318.27, 50 DMA is 1347.21, 100 DMA is 1359.27, and 200 DMA is 1293.3.
On Tuesday the SPX traded above the opening range but did not trade below the opening range. 80.4% of the SPX closed up from the previous close; 71.2% closed higher than the open. During Tuesday's session the SPX gained 13.15 points from open to close. The SPX intraday trading range was 12.6 points. The 5-Day average intraday trading range is 14.5 points, the 10-Day average is 16.97 points, and the 20-Day average is 17.53 points. The trading range is contracting. The 5-Day SPX gain is 2.55%, the 10-Day gain is 5.64%, and the 15-Day gain is 3.40%.
Note: The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be in charge for the day. If we break out of that trading range, it's telling us that new buying or selling is impacting traders' assessments of value. Looking back at today’s breakouts also helps us grasp sentiment going forward because when a clear trend is established it often carries through for several sessions.
Looking Ahead:
The Market Environment for Wednesday is -2. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be sideways. Mel's 10 Day Oscillator is 53 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bearish for Wednesday's session.
The market is quite overbought and Wednesday is the FOMC announcement. While we have been long for weeks, we are 100% cash tonight. We don’t much like the combo of extremely overbought and possible Fed disappointment. A “sell-the-news” reaction seems quite possible to us and we prefer to be on the sideline watching. But we are not short, either. We just don’t feel like trading contra-trend without seeing a better reason although we may decide Wednesday to take a quick trade on the short-side if we see a good reason.
Even if we see a multi-day pullback here, we think the data will quickly tell us to buy the dip. We’ll be patient a bit as we have had an excellent run on the long side and have no desire to surrender gains trading contra-trend.
Note: No Market Internals chart tonight due to a data issue. This should be resolved by Wednesday evening.
Wednesday, June 20
Economics
07:00 MBA Mortgage Purchase Index
12:30 FOMC Rate Decision
2:00 FOMC Bernanke Press Conference
01:30 AUD Dwelling Starts
04:30 JPY All Industry Activity Index
06:00 EUR German Producer Prices
08:30 GBP BoE Minutes
08:30 GBP Jobless Claims Change
09:00 CHF ZEW Economic Survey Expectations
22:45 NZD GDP
11:30 Germany to sell 2-yr notes
Earnings
Before:
No major reports
After:
Bed Bath & Beyond (BBBY) EPS 84c, revs $2.24B
Micron (MU) EPS -19c, revs $2.02B
Housing starts were 708,000, lower than the expected 720,000. On Wednesday we will get oil inventories and the FOMC announcement.
Thank you for reading. Think on it, trade on it, and be well.
-Mel