SPX Successfully Tests 100-Day Average for Second Time
Market Recap:
Stock index futures dropped Friday as traders digested the news of JPMorgan Chase’s $2 billion trading loss as a result of a failed hedging strategy. JPMorgan’s trading loss dragged on the entire banking sector. European shares reduced earlier losses after Greek conservative leader Samaras said there were still hopes a coalition government could be formed.
Friday's session opened with a large gap lower but the low of the day was on the chart within the opening moments as the SPX rebounded sixteen points during the opening two hours of trading. But sellers then took command and ruled the rest of the day as the SPX slowly surrendered more than ten points to close out the day and the week on a negative note.
Our Market Leaders Board for Friday is mixed with the Sox closing in positive territory while the Financials gave up more than 1%.
SPX big winners were Netflix Inc (NFLX) 6.8%, NVIDIA Corporation (NVDA) 5.87%, and Bed Bath & Beyond Inc (BBBY) 4.%. SPX big losers were Chesapeake Energy Corp (CHK) -14.09%, JPMorgan Chase and Co (JPM) -10.18%, and Nordstrom Inc (JWN) -5.%.
SPX five day big winners are Dean Foods Company (DF) 17.72%, Tyson Foods Inc (TSN) 8.54%, and NVIDIA Corporation (NVDA) 7.75%. SPX five day big losers are Fossil Inc (FOSL) -39.2%, Chesapeake Energy Corp (CHK) -14.84%, and Cisco Systems Inc (CSCO) -13.7%.
New Ten Day Highs: ALL, T, BBBY, BIIB, CPB, CTL, XEL, ED, DUK, FE, GIS, HNZ, K, MWW, NYT, NWSA, NVDA, POM, PEP, PGN, PGR, PEG, RAI, SCG, TSN, VZ, WMT
New Ten Day Lows: AET, A, APD, AA, ATI, MO, AMP, APOL, AIZ, AVY, BAC, BBY, BA, CBG, CF, CHK, CI, CSCO, CTXS, STZ, CSX, DVA, DE, DV, DO, DD, ETFC, ETN, EMC, EL, XOM, FII, FDX, FSLR, BEN, FCX, GME, GD, GPC, GWW, HOG, HAR, HES, HON, HCBK, HUM, IVZ, JBL, JDSU, JNJ, JPM, KEY, KSS, LM, LEG, LUK, LXK, LMT, LOW, MTB, WFR, MRK, MON, MCO, MS, MUR, NBL, JWN, NSC, NTRS, NOC, PBCT, PM, PCL, PX, PFG, PSA, RSH, RTN, RHT, COL, R, SWY, SLE, CVG, SCHW, SNA, LUV, SWK, STT, SVU, SYMC, BK, TIE, UPS, UTX, DRYS, QLD, MBI, UNM, WAG, WPO, WM, WLP, WU, C, GS
Market Recap – Weekly Review:
The SPX lost -15.71 points during the week (-1.15%). The range for the week was 30.78, 2.25%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 33. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was -45,000. On the NYSE, the advance/decline line decreased during the week by -1,315 and the 10 day average of Net Advancing decreased by -472. There were 310 New Highs and 276 New Lows. The week closed at 33.33% of the weekly range.
This was the first week with negative total tick since late November.
For the week, Russell 2000 advancing issues (978) totaled 22,921,304 shares traded (23,437 average per stock) and declining issues (901) totaled 23,244,244 shares traded (25,798 average per stock.) 687 components are on a weekly uptrend (110 new uptrends this week) and 1,201 components are on a weekly downtrend (96 new downtrends this week.) There were 73 New Highs and 132 New Lows.
Notice that the Russell had more advancing issues than declining. This could signal a bottom forming.
For the week, SPX advancing issues (173) totaled 44,951,552 shares traded (259,836 average per stock) and declining issues (318) totaled 100,176,477 shares traded (315,020 average per stock.) 208 components are on a weekly uptrend (12 new uptrends this week) and 283 components are on a weekly downtrend (46 new downtrends this week.) There were 24 New Highs and 16 New Lows.
For the week, NASDAQ Composite Index advancing issues (1,006) totaled 40,780,152 shares traded (40,537 average per stock) and declining issues (1,459) totaled 55,056,688 shares traded (37,736 average per stock.) There were 53 New Highs and 90 New Lows.
Checking the sectors of the SPX for the week:
The Basic Materials sector advancing issues (7) totaled 465,655 shares traded (66,522 average per stock) and declining issues (23) totaled 5,001,855 shares traded (217,472 average per stock.) 10 components are on a weekly uptrend (2 new uptrends this week) and 20 components are on a weekly downtrend (3 new downtrends this week.) There were 3 New Highs and 1 New Lows.
The Energy sector advancing issues (10) totaled 3,055,863 shares traded (305,586 average per stock) and declining issues (33) totaled 10,875,023 shares traded (329,546 average per stock.) 7 components are on a weekly uptrend (1 new uptrends this week) and 36 components are on a weekly downtrend (2 new downtrends this week.) There were no New Highs and 2 New Lows.
The Financials sector advancing issues (32) totaled 8,110,833 shares traded (253,464 average per stock) and declining issues (48) totaled 26,478,085 shares traded (551,627 average per stock.) 41 components are on a weekly uptrend (2 new uptrends this week) and 39 components are on a weekly downtrend (3 new downtrends this week.) There were 3 New Highs and no New Lows.
The Industrials sector advancing issues (9) totaled 851,790 shares traded (94,643 average per stock) and declining issues (50) totaled 8,595,474 shares traded (171,909 average per stock.) 16 components are on a weekly uptrend (no new uptrends this week) and 43 components are on a weekly downtrend (11 new downtrends this week.) There were 1 New Highs and 3 New Lows.
The four 'risk sectors' totaled 58 advancing issues and 154 declining issues this week with 14 new uptrends and 14 new downtrends.
The Technology sector advancing issues (22) totaled 13,192,839 shares traded (599,675 average per stock) and declining issues (56) totaled 25,335,280 shares traded (452,416 average per stock.) 21 components are on a weekly uptrend (1 new uptrends this week) and 57 components are on a weekly downtrend (7 new downtrends this week.) There were 2 New Highs and 7 New Lows.
The Consumer Staples sector advancing issues (22) totaled 3,546,457 shares traded (161,203 average per stock) and declining issues (19) totaled 5,872,438 shares traded (309,076 average per stock.) 24 components are on a weekly uptrend (2 new uptrends this week) and 17 components are on a weekly downtrend (2 new downtrends this week.) There were 5 New Highs and no New Lows.
The Utilities sector advancing issues (25) totaled 4,160,111 shares traded (166,404 average per stock) and declining issues (5) totaled 432,143 shares traded (86,429 average per stock.) 24 components are on a weekly uptrend (3 new uptrends this week) and 6 components are on a weekly downtrend (no new downtrends this week.) There were 5 New Highs and no New Lows.
The Health Care sector advancing issues (23) totaled 6,136,039 shares traded (266,784 average per stock) and declining issues (28) totaled 4,514,134 shares traded (161,219 average per stock.) 24 components are on a weekly uptrend (no new uptrends this week) and 27 components are on a weekly downtrend (2 new downtrends this week.) There were 1 New Highs and no New Lows.
The Consumer Discretionary sector advancing issues (23) totaled 5,431,965 shares traded (236,172 average per stock) and declining issues (56) totaled 13,072,045 shares traded (233,429 average per stock.) 41 components are on a weekly uptrend (1 new uptrends this week) and 38 components are on a weekly downtrend (16 new downtrends this week.) There were 4 New Highs and 3 New Lows.
Volume & Breadth Indicators
For the SPX Index there were 202 components advancing and 282 components declining. On the NYSE 3,137 issues were traded with 1,207 advancing issues and 1,829 retreating issues, a ratio of 1.52 to one declining. There were 61 new highs and 45 new lows. The five day moving average of New Highs is 62 while the five day moving average of New Lows is 55 and the ten day moving average of Net Advancing is -422. The Net Advancing data indicates a bearish trend.
Declining volume was higher at a ratio of 2.0 to one. The closing TRIN was 1.53 and the final tick was 361. The five day average of TRIN is 1.31 and the ten day average of TRIN is 1.38. The NYSE Composite Index lost -0.47% today while the SPX lost -0.34%.
For the NYSE, relative to the previous 30 session average, volume was -2.71% below the average. Of the last 15 sessions 6 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 18 sessions ended on a positive tick, 5 of last 10. For the SPX, the day's volume was 93.3% of the average daily volume for the last year. Volume was 100.1% of the last 10 day average and 102.1% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was -45,000 and the average tick for the day was -29. There were 36 ticks greater than 600 and 53 ticks more extreme than -600. There were 2 ticks greater than 1000 and 2 ticks more extreme than -1000. The tick action suggests institutional distribution.
Moving Average and Support/Resistance Indicators:
37% of the SPX are above their five day moving average, 21.8% are above their 10 day average, 29.2% are above their 20 day moving average, 32.4% are above their 50 day moving average, and 62.8% are above their 200 day moving average.
There were no significant moving average crossovers Friday. Our moving average Power Rating is 33 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +6%.
- Industrials -- Outperformed the SPX by +15%.
- Technology -- Outperformed the SPX by +41%.
- Consumer Staples -- Outperformed the SPX by +5%.
- Utilities -- Outperformed the SPX by +40%.
- Health Care -- Outperformed the SPX by +23%.
- Consumer Discretionary -- Outperformed the SPX by +14%.
Sectors weaker than the SPX for Friday:
- Energy -- Underperformed the SPX by -53%.
- Financials -- Underperformed the SPX by -89%.
Checking the sectors of the SPX from Friday: (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 (8) totaled 171,161 shares traded (21,395 average per stock) and declining issues (20) totaled 622,474 shares traded (31,124 average per stock.) 5 components are on an uptrend (no new uptrends Friday) and 25 components are on a downtrend (no new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.65% below the 20-Day average.
The Energy sector advancing issues (9) totaled 410,743 shares traded (45,638 average per stock) and declining issues (34) totaled 2,399,221 shares traded (70,565 average per stock.) 7 components are on an uptrend (no new uptrends Friday) and 36 components are on a downtrend (2 new downtrends Friday.) There were no New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.53% below the 20-Day average.
The Financials sector advancing issues (37) totaled 1,642,640 shares traded (44,396 average per stock) and declining issues (42) totaled 7,228,000 shares traded (172,095 average per stock.) 29 components are on an uptrend (4 new uptrends Friday) and 51 components are on a downtrend (2 new downtrends Friday.) There were 1 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -1.86% below the 20-Day average.
The Industrials sector advancing issues (22) totaled 357,473 shares traded (16,249 average per stock) and declining issues (37) totaled 1,115,279 shares traded (30,143 average per stock.) 14 components are on an uptrend (5 new uptrends Friday) and 45 components are on a downtrend (1 new downtrends Friday.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -1.95% below the 20-Day average.
The four 'risk sectors' totaled 76 advancing issues and 133 declining issues Friday with 9 new uptrends and 5 new downtrends. 25.9% of Risk Sector components are uptrending.
The Technology sector advancing issues (36) totaled 3,299,039 shares traded (91,640 average per stock) and declining issues (41) totaled 3,582,843 shares traded (87,386 average per stock.) 11 components are on an uptrend (3 new uptrends Friday) and 67 components are on a downtrend (2 new downtrends Friday.) There were 2 New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -2.2% below the 20-Day average.
The Consumer Staples sector advancing issues (16) totaled 457,538 shares traded (28,596 average per stock) and declining issues (24) totaled 1,346,337 shares traded (56,097 average per stock.) 20 components are on an uptrend (no new uptrends Friday) and 21 components are on a downtrend (no new downtrends Friday.) There were 1 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.08% below the 20-Day average.
The Utilities sector advancing issues (11) totaled 242,398 shares traded (22,036 average per stock) and declining issues (17) totaled 753,053 shares traded (44,297 average per stock.) 29 components are on an uptrend (2 new uptrends Friday) and 1 components are on a downtrend (no new downtrends Friday.) 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 .97% above the 20-Day average.
The Health Care sector advancing issues (24) totaled 860,023 shares traded (35,834 average per stock) and declining issues (27) totaled 1,375,009 shares traded (50,926 average per stock.) 21 components are on an uptrend (5 new uptrends Friday) and 30 components are on a downtrend (no new downtrends Friday.) There were 1 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.65% below the 20-Day average.
The Consumer Discretionary sector advancing issues (39) totaled 1,305,284 shares traded (33,469 average per stock) and declining issues (40) totaled 1,932,355 shares traded (48,309 average per stock.) 25 components are on an uptrend (5 new uptrends Friday) and 54 components are on a downtrend (1 new downtrends Friday.) There were 2 New Highs and 3 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -1.25% below the 20-Day average.
Based on the SPX sector data, we are on a Sell for the SPX and the Russell 2000.
What We Learned from Friday's Action:
Friday was session 7 to close below the 5 DMA, session 6 to close below the 10 DMA, session 6 to close below the 20 DMA, and session 6 to close below the 50 DMA. This was also session 4 for the 5 DMA to close below 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 23.21 points below the 10 DMA.
The SPX 5 DMA is 1359.86, 10 DMA is 1376.6, 20 DMA is 1380, 50 DMA is 1385.71, 100 DMA is 1349.66, and 200 DMA is 1277.22.
Notice the confluence of moving average resistance around the 1376-1385 level.
On Friday the SPX traded above the opening range but did not trade below the opening range. 40% of the SPX closed up from the previous close; 66.4% closed higher than the open. During Friday's session the SPX lost -4.72 points from open to close. The SPX intraday trading range was 15.23 points. The 5-Day average intraday trading range is 14.97 points, the 10-Day average is 14.08 points, and the 20-Day average is 12.45 points. The trading range is expanding. The 5-Day SPX gain is -1.15%, the 10-Day gain is -3.56%, and the 15-Day gain is -1.82%.
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 Monday is +4. 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 7 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, we are bullish for Monday's session.
The headlines during the week were ugly, from start to finish. Yet the equity markets continue to show resilience and the sky refuses to fall. The SPX successfully tested the 100-day average mid-week and finished the week ten points higher than the lows after a second test at Friday's open. But experience suggests that a third test could have different results.
This upcoming week, Tuesday and Wednesday appear to be big days for economic news with German GDP and eurozone GDP as well as U.S. retail sales, consumer price index, and housing data being reported. So we look for continued volatility.
Checking the charts, we see strong evidence that an extended downtrend is in the works. The weekly and monthly charts clearly suggest the possibility of further work to the downside.
Checking that McClellan Summation Index we find that the SPX has moved into bearish territory while the Russell 2000 and the NASDAQ Composite have not. So this data remains mixed and unclear for now.
Our Market Internals data continues to look bearish but several data indicators are off the mid-week lows warning of a potential bounce in the works. There is nothing yet to suggest a long position but the curving upward of several data elements does suggest caution on the short-side.
We're so oversold that a short-term bounce should be in the works very soon. Our own Oscillator is at levels last seen on November 28th which was followed by a violent bounce. So it should be an interesting week with charts pointing lower and oversold indicators being at extremes.
Week of May 14 - May 18 Overview
Date/Time Release/Consensus
05/15/12 8:30 Retail Sales/0.002
05/15/12 8:30 Retail Sales ex-auto/0.002
05/15/12 8:30 CPI/0
05/15/12 8:30 Core CPI/0.002
05/15/12 8:30 Empire Manufacturing/8.4
05/15/12 9:00 Net Long-Term TIC Flows/NA
05/15/12 10:00 Business Inventories/0.003
05/15/12 10:00 NAHB Housing Market Index/26
05/16/12 7:00 MBA Mortgage Index/NA
05/16/12 8:30 Housing Starts/680K
05/16/12 8:30 Building Permits/730K
05/16/12 9:15 Industrial Production/0.005
05/16/12 9:15 Capacity Utilization/0.79
05/16/12 10:30 Crude Inventories/NA
05/16/12 14:00 FOMC Minutes/
05/17/12 8:30 Initial Claims/365K
05/17/12 8:30 Continuing Claims/3250K
05/17/12 10:00 Philadelphia Fed/8.8
05/17/12 10:00 Leading Indicators/0.002
Monday, May 14
Economics
No major U.S. economic reports
11:00 Fed to purchase $4.25b-$5b notes in 6-8 year range
11:30 Treasury selling $30b 3-month notes, $27b 6-month note
01:30 AUD Home Loans
08:30 EUR Italian General Government Debt
09:00 EUR Euro-Zone Industrial Production
2:00 France to sell EU4b in 84-day, EU1.8b in 174-day, EU2.2b in 357-day bills
Earnings
Before:
Seadrill (SDRL) EPS 67c, revs $1.05B
Silver Wheaton (SLW): EPS 42c, revs $203.86M
After:
Agilent (A) EPS 73c, revs $1.71B
Groupon (GRPN): EPS -3c, revs $530.72M
Youku (YOKU): EPS -19c, revs $41.28M
The PPI was unchanged. The consensus was for a rise of 0.2%. Consumer sentiment came in at 77.8, better than last month's 76.4. On Monday there are no important economic releases.
Happy Mother’s Day to all the mothers.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel