SPX Violates Long-Term Support Level
by Jerome "Mel" Hickerson
Fears over global growth were back this morning after the Conference Board in China said that their latest economic indicators contained a "calculation error" which meant that the Chinese economy grew just +0.3% in April instead of the +1.7% that had been previously reported. While there was no U.S. economic data to review before the bell, stock futures trended down all night and pointed to a seriously weak opening. Overseas markets were red across the board and down hard.
The session began with a 14 point gap down. The SPX worked its way down another 16 points trying to find a bottom around 10:30. The ensuing bounce was a feeble six points as the index was on a mission downward today. The only other bounce worth mentioning occurred just before the close to bring the index off the lows of the session. It was truly a bearish day, inside and out.
Last night's work on the Golden and Death Crossovers generated a lot of email response which basically fell into one camp ("Mel, you're nuts!") with two broad subdivisions. I was alternately criticized for not using enough history and for not ignoring everything but the last few Death Crosses. The peril of analysis with numerical data is always using too little; you must have a mathematically sound sample size. The other hazard is the amount of effort it takes; I found that 30 years of data was ample effort and provided enough data to be comfortable with. Indeed, the crossover this time may well be very bearish. I just analyzed the past data and hopefully presented it in a cogent fashion for you the trader to make your own decision on whether this is a tradable event and how to trade it.
Today was a significant event for the SPX. Not only was today the lowest close for the year, but we violated the long-term support in the 1040 area. Today was the lowest close since October 30th, some nine months ago. Interestingly, this was not the lowest close of the year for the Dow (June 7th) nor did the Dow violate the area of long-term support. The broadest index that I follow, the NYSE Composite, also did not violate the long-term support levels but it did close at the lowest level of the year.
Tomorrow is likely a decision day for the market. A bottom must be found, here and now, or it's going to be a bearish summer. I think Wednesday will bring some kind of bounce attempt; but I am not certain that this ship can be turned around before it runs aground.
Day Trade Systems Update: (Signals today)
* SDS at: 10:05
* SDS at: 11:14
* SDS at: 2:20
We had a highly successful day focused on ProShares Ultrashort S&P500 ETF (SDS) today. We simply stayed with the trend, trading in and out, and left SDS with about ten minutes left in the day, catching the high of the day.
SPX Summary for Tuesday, June 29, 2010
2 Advancers/490 Decliners
Note: This was the worst SPX A/D since 9/28/08.
Today's SPX component winners and losers:
- Largest one day loser is MU with -13.84%
- Largest three day loser is ODP with -16.99%
- Largest five day loser is ODP with -19.05%
- Largest ten day loser is ODP with -30.70%
- Largest one day winner is ZMH with 0.05%
- Largest three day winner is HRB with 5.01%
- Largest five day winner is PPL with 3.38%
- Largest ten day winner is MTB with 8.74%
*** SPX Technical Summary ***
The lowest 14 day RSI component is DHR; the highest 14 day RSI component is BDK. The average 14 day RSI of all 500 components is 48.
The greatest positive five day momentum component is PPL; the greatest negative five day momentum component is ODP. The average five day momentum of all 500 components is -5.1.
4.60% of the SPX components are giving a crossover Buy signal; 33.00% of the SPX components are giving a Sell signal. This is a 7.2 to 1 ratio of Sell signals over Buy signals.
SPX component signal changes today (evidence of trend):
- From Sell to Neutral: 0 components.
- From Buy to Neutral: 9 components.
- From Neutral to Sell: 56 components.
- From Neutral to Buy: 2 components.
The action remains all to the Sell side, as would be expected on a day such as today.
The moving averages: SPX NYA
Close 1041.24 6520.09
9 EMA 1067.34 Falling 6687.06 Falling
5 DMA 1071.66 Falling 6720.18 Falling
10 DMA 1091.50 Falling 6838.51 Falling
20 DMA 1086.62 Falling 6787.99 Falling
50 DMA 1122.48 Falling 7019.70 Falling
100 DMA 1132.86 Falling 7156.95 Falling
200 DMA 1112.19 Falling 7123.98 Falling
10 Wk MA 1100.61 Falling
DOW 5 DMA crossed below 20 DMA
All averages are falling.
NYSE Summary
On the NYSE 3204 issues were traded with 288 advancing issues and 2864 retreating issues, a ratio of 9.94 to 1 declining. There were 25 new highs and 123 new lows.
Declining volume was higher at a ratio of 59.35 to 1. The closing TRIN was 5.97 and the final tick was -755.
That final tick suggests heavy selling into the close. Breadth was strongly negative.
Evidence of trend:
Relative to the previous 30 session average, volume was 8.35% above 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, 16 sessions ended on a positive tick, 6 of last 10.
The 5 day moving average of New Highs is 47 while the 5 day moving average of new lows is 60 and the 10 day moving average of Net Advancing is -577. The Net Advancing data indicates a bearish trend.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line decreased from 203029 to 200453. This -1.29% decrease came while the SPX was losing -3.2%. The 10 day moving ratio of positive volume is 0.6 and the 10 day moving Advance/Decline ratio is 0.69. The 10 day moving ratio of positive volume has trended -0.33 over the last three days and the 10 day moving Advance/Decline ratio has trended -0.31 over the last three days.
The NYSE Composite Index lost -3.21% today.
NYSE Statistics:
Absolute Breadth Index: 47.86 up from previous day of 44.28
Cumulative Volume Index: 34,829.77 down from previous day of 41,775.69
High Low Logic Index: 0.72 up from previous day of 0.70
McClellan Oscillator: (165.24) down from previous day of (32.38)
McClellan 10 DMA: 37.28 down from previous day of 81.25
McClellan Summation Index: (1,165.18) down from previous day of (999.94)
% Stocks Above 200 DMA: 39.35 down from previous day of 49.67
% Stocks Above 40 DMA: 25.70 down from previous day of 40.31
New High / New Low Ratio: 20.98 down from previous day of 57.00
26wk New High/Low Ratio: 15.74 down from previous day of 52.19
13wk New High/Low Ratio: 10.26 down from previous day of 49.40
4wk New High/Low Ratio: 11.49 down from previous day of 66.09
Cumulative 4-Week New Hi-Low: 438,583 down from previous day of 439,393
Nasdaq Adv/Decline: 1,300 down from previous day of 1,375
Russell 1000 Advance/ Decline Line: 2,167 down from previous day of 2,267
Russell 2000 Advance/ Decline Line: (2,059) down from previous day of (1,967)
Notes:
Absolute Breadth Index: Low numbers suggest a topping process and high numbers suggest a bottoming process.
Cumulative Volume Index: If this begins to trend down while the averages are trending up, it is a bearish sign. If this begins to trend up while the averages are trending down, it is a bullish sign.
High Low Logic Index: High readings are bearish; low readings are bullish.
McClellan Oscillator: -100 is oversold and +100 is overbought. Also watch for crosses above and below zero.
McClellan Summation Index: Interpreted as bullish or bearish when it crosses over the zero line.
Cumulative 4-Week New Hi-Low: The difference between the number of issues reaching new highs (during a 4-week period) and the number of issues reaching new lows (during the same 4-week period).
Wednesday, June 30
Economics
08:15 ADP Employment Change 3.5% cons.
09:45 Chicago PMI 59.5 cons.
10:30 Crude Inventories
04:00 Italy CPI
04:00 Italy PPI
04:30 Great Britain GDP
05:00 European Union HICP Flash
08:30 Canadian IPPI
09:30 Australian Retail Sales
Earnings
Before: AYI, AAP, AM, CSIQ, LNN, MON, UNF
After: APOL, CBK, OMER, SCHN, SWHC, XRTX
Speeches
12:30 Dennis Lockhart
In addition to the jobs reports, the Chicago PMI manufacturing report and the government's weekly oil inventories report are due.
The Matrix Window and Nine Sectors Report
As an extra tonight, I’ll provide a sample of a nightly message that subscribers get each evening after the close.
Here is the way I see the nine sectors of the SPX using my software:
• Basic Materials – Sell
• Energy – Sell
• Financials – Neutral
• Industrials – Sell
• Tech – Sell
• Consumer Staples – Neutral
• Utilities – From Buy to Neutral
• Health Care – Sell
• Consumer Discretionary –Sell
One change today. No Buys, six Sells, and three Neutral.
I can’t find anything bullish within the Nine Sectors. But many factors have started to lineup in the extreme area where bounces often occur. Most notable to me is the percentage of the SPX above their 20 DMA: 7.8%. This percentage reached 8.6% on June 1st (next two days were +33 points) and 7.4% on June 7th (next six days were +66 points.)
So a bounce here may be on the way. I usually would have gone long at the close today – Thursday’s close should be higher than Wednesday’s open – but I elected to wait until I see the whites of their eyes. A gap down on Wednesday morning wouldn’t surprise me and it could present a good fade opportunity.
Note: The Matrix has moved back to a long term bullish outlook.
Mel’s Missives from the Matrix:
- Total tick for the day was -341,000 and the average tick for the day was -221. There were 27 ticks greater than 600 and 281 ticks more extreme than -600. There were no ticks greater than 1000 and 29 ticks more extreme than -1000. The tick action suggests institutional distribution.
- The day's range was 35.55 points. The intraday trading range - 9:35 to the close - was 24.17. The 5 DMA of daily range is 20.52.
- Evidence of the intraday trend: At 10am volume was 115.81% of the 10 day average. By noon the volume was 137.06% of the 10 day average, and by 2pm volume was 140.67% of the 10 day average.
- The day's volume was 112.3% of the average daily volume for the last year. Volume was 142.8% of the last 10 day average and 155.7% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 1:15 and 1:30 when relative volume increased 51.5% while the SPX was dropping -0.10%. The largest drop in relative volume came between 1:45 and 2:00 when relative volume dropped -50.2% while the SPX was rising 0.27%.
- 0% of the SPX stocks closed with two day RSI above 90. 0% closed with RSI above 80. 89% closed with RSI below 20 and 60% closed with RSI below 10.
- 3.2% of the SPX are above their five day moving average, 2.8% are above their 10 day average, 7.8% are above their 20 day moving average, 7% are above their 50 day moving average, 15% are above their 100 day moving average, and 23.6% are above their 150 day moving average.
- 0% of the SPX closed above their most recent previous high.
- 97% of the SPX stocks closed below their most recent previous lows.
- 2 SPX issues advanced and 490 issues declined, a net SPX advance/decline of -488.
- Evidence of the intraday trend: At 10am, 19.4% of the SPX components were in the top half of the range. By noon, 18% were in the top half of the range, and by 2pm, 16.4% were in the top half of the range.
- 8% of stocks closed in the top half of the day's range. (91.8% closed in bottom half.)
- 0.2% of stocks closed in the top 10% of the day's range. 1% of stocks closed in the top 20% of the day's range.
- 6% of stocks closed in the bottom 10% of the day's range. 41% of stocks closed in the bottom 20% of the day's range.
- 1.4% of stocks closed within 2% of their 52 week high. 4.4% of stocks closed within 5% of their 52 week high.
- 71% of stocks closed within 50% of their 52 week low. 41.6% of stocks closed within 25% of their 52 week low.
- 1.2% of stocks closed within ¼% of their high for the day.
- 2.2% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 1% of the SPX components were up since the open. By noon, 1% were up since the open, and by 2pm, 1.6% were up since the open.
- 0.6% of the SPX closed up from the previous close; 5.8% closed higher than the open.
- Sectors stronger than the SPX for Tuesday:
- Consumer Staples -- Outperformed the SPX by +148%.
- Utilities -- Outperformed the SPX by +104%.
- Health Care -- Outperformed the SPX by +125%.
- Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -67%.
- Energy -- Underperformed the SPX by -32%.
- Financials -- Underperformed the SPX by -61%.
- Industrials -- Underperformed the SPX by -82%.
- Technology -- Underperformed the SPX by -87%.
- Consumer Discretionary -- Underperformed the SPX by -38%.
- The $SOX index strength was weaker relative to the SPX Tuesday by -1.64%.
- The XLF underperformed the SPX by -0.61% Tuesday.
- The 2 Day RSI of the SPX is 2. The Dow RSI is 0, the NASDAQ is 1 and the Russell is 9.
- Over the last four sessions, the average session closed 28.07% of the range above the low. Tuesday closed at 24.2% of the daily range.
- Upside momentum was negative Tuesday, from Monday’s -3.66 to today’s -5.1. The ratio of SPX components giving a crossover sell signal compared to buy signals increased to the sell side to S 7.17 to 1.
- The ISEE Equity 10 day moving average Tuesday was 145.4. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 155 SPX components moved upward and 245 components downward during the after hours with 209 million shares traded.
Trade 'em well on Wednesday everyone!
-Mel
