SPX Winning Streak Ends at Six
by Jerome "Mel" Hickerson
The futures sold off overnight and today’s regular session opened under pressure. This resulted in a quick gap downward of about seven points. The index then moved sideways until about 11:30 before gently drifting downward setting the low of the day at 1:20. The rest of the session was choppy trade sideways with a couple of mild rally attempts, closing the day moving upward.
The high of the day was at the open, but the afternoon high was at the close. Today began like a typical routine -2% session; yet closed with less than a 1% loss. Volume looked bearish earlier in the day as volume increased as the indices declined. But volume kept increasing as the indices bounced later in the day. So I am unsure what to make of the volume patterns.
My analysis had indicated that we would pull back to at least 1130, and more likely 1105-1120 before making another challenge of the highs. The shallowness of today’s action has me thinking that we are more likely to have a very mild bounce before once again pulling back. I had really seen breaking the support at 1130 as crucial and will be watching that area closely again tomorrow.
If you’re bullish, today’s action seemed quite bullish. Yet when I peer under the hood, I see things that should trouble a bullish trader. Breadth took a large hit today and even when the index was advancing, breadth did not look bullish. We’ll have to wait a few days to determine if this is a new trend or just a one day aberration. But when technology and the financials both retreat relative to the SPX two days in a row, it is often a sign of weakness to come.
For Wednesday, my model is giving me mixed signals tonight. I see the signal that “Thursday’s close should be higher than Wednesday’s open” mixed in with all sorts of “Sell” signals. So here’s my novel way to interpret the signals: I’ll fade the gap, whichever way it goes. If we gap up, it looks like a good sell opportunity if you can be patient a day or two. And a gap up also seems quite likely to be filled soon.
Wednesday, January 13
Economics
10:30 Crude Inventories
02:00 Treasury Budget -$70.4B
02:00 Fed’s Beige Book
Earnings
After: CLC, ZZ
Auction
01:00 10-Yr Note Auction
The December Treasury budget, due out in the afternoon, is expected to have narrowed to $70.4 billion from $120.3 billion. Federal Reserve Governor Charles L. Evans is speaking in the afternoon. The Federal Reserve's Beige Book report is due Wednesday at 2 p.m. ET. This anecdotal look at the economy will be studied closely for discussions of regional housing conditions, retail and auto sales and labor conditions.
Mel’s Random Hits:
• Total tick for the day was -74,000. Breadth was negative at the open, turned positive after about 30 minutes and enjoyed a positive stretch until around 11:30. The rest of the day was negative, even the closing half hour. Breath remains bullish longer term.
• The day's range was 12.04 points. You know it’s a miserable time of range contraction when 12 points feels like a large range day. But my systems fare better with at least 12 points of daily range and today was no exception.
• The day's volume was 84.9% of the average daily volume for the last year. Volume was 132% of the last 10 day average. The volume increased throughout the day.
• 4% of the SPX stocks closed with two day RSI above 90. 8% closed with RSI above 80. 37% closed with RSI below 20 and 16% closed with RSI below 10.
• 31% of the SPX are above their five day moving average, 51% are above their 10 day average, and 64% are above their 20 day moving average.
• 59% of the SPX stocks closed below their most recent previous lows.
• 5% of the SPX closed above their most recent previous high.
• 37.4% of stocks closed in the top half of the day's range. (62.6% closed in bottom half.)
• 18.2% of stocks closed in the bottom 20% of the day's range.
• 7.0% of stocks closed in the top 10% of the day's range.
• 13.0% of stocks closed within 2% of their 52 week high. This is the lowest number I can recall for this stat in months. As I’ve mentioned before, I watch this stat because it (partially) explains sudden surges in the SPX. When you have 200 SPX components hitting their 52 week high at the same time, buyers often rush in to try to join the ride. But having only 65 components at their 52 week high is likely to diminish these sudden surges at the close.
• 24.8% of stocks closed within 50% of their 52 week low.
• 11.8% of stocks closed within ¼% of their high for the day.
• 6.4% of stocks closed within ¼% of their low for the day.
• 20.0% of the SPX closed up from the previous close; 34.8% closed higher than the open.
• Sectors weaker than the SPX for the day: Industrials, Basic Materials, Energy, Financials, Technology, and Consumer Discretionary.
• Sectors stronger than the SPX for the day: Health Care, Utilities, and Consumer Staples.
• The $SOX index strength was again weaker than the SPX today. This is five of the last six days that the SOX has underperformed.
• The sell off today was reflected by the fact that Tech, Financials, SOX and Basic Materials were all significantly weak.
• The 2 Day RSI of the SPX is 44. The Dow RSI is 60, NASDAQ is 32 and Russell 36. The NASDAQ was leading the way down today.
• SPX components moved upward slightly during the after hours with almost 110 million shares traded.
• From last night: “Odds therefore seem to favor a down Tuesday.” Which is pretty much what we got.
• After hours, Kraft raised guidance slightly and this seemed to boost futures a bit.
Have a great Wednesday!
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"Mel"
