Stocks Rebound to Close the Week
Market Recap:
Prior to Friday’s open, foreign markets were up nicely for the most part on word that the Saudi's were boosting oil production to nine million barrels per day. And although oil futures were higher, they were more than $5 below where they had been just 36 hours previously. So the market was primed to open higher. The government’s first revision of the nation’s fourth quarter GDP shows the economy grew at an annualized rate of +2.8% during the quarter. This was below the consensus expectations for a growth rate of +3.3% as well as the first estimate of +3.2% but still above the Q3 rate of 2.6%. Consumer spending came in at a rate of +4.1%, which was 0.3% below the first estimate’s level. We'll also got a look at consumer sentiment from the University of Michigan at 10:00 am.
The Friday session began with a significant gap higher. There were several waves upward but the only real pullback came just before noon as the SPX pulled back a bit more than three points. But for the bears, that was really the only play of the day as the rest of the session belonged to the bulls. The session closed near the highs for the day but the fourteen point rally for the SPX seemed rather tame after the three down days. Still, small caps and financials rallied hard on Friday.
Checking our Market Leaders board shows that the leaders were in agreement as all leaders closed higher Friday. The big winner was once again the SOX along with the Russell 2000. Inthe past, having these two lead the way is most often bullish.
SPX big winners were Interpublic Gr Of Cos (IPG) 7.41%, CBS Corp Class B (CBS) 6.8%, and Valero Energy Corp (VLO) 6.46%. SPX big losers were J.C. Penney Company Inc (JCP) -6.52%, First Solar Inc (FSLR) -5.55%, and American Internat Group (AIG) -4.69%.
SPX five day big winners are Chesapeake Energy Corp (CHK) 16.01%, Cabot Oil & Gas Corp (COG) 12.26%, and Range Resources Corp (RRC) 11.48%. SPX five day big losers are Expeditors International of Washington Inc (EXPD) -12.45%, Hewlett-Packard Co (HPQ) -1
Market Recap – Weekly Review:
The SPX lost 23.13 points during the week. The range for the week was 44.65 points, 3.33%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 61. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was -53,000. On the NYSE, the advance/decline line declined during the week by 1,177 and the 10 day average of Net Advancing decreased from 528 to 268. There were 411 New Highs and 71 New Lows.
Despite three down days out of four the ten day Net Advancing remains bullish and New Highs outnumbered New Lows six to one.
Market Trend: Nine Sectors Report
Turning to our Nine Sectors Report we have a rare configuration as a result of Friday's rally. All nine sectors are in Neutral; we can't recall having seen this over the last year. This results in the Nine Sectors signal being in Neutral but having four sectors move positively is often bullish.
The outlook for next week is exceptionally murky, as reflected by the Nine Sectors Report showing all sectors in Neutral. So much next week will depend on the Middle East but it is also a very busy economic calendar. We believe next week could be a good trading week with some volatility. If forced to guess, we lean slightly bullish for the week but our money is on the sideline this weekend.
Volume & Breadth Indicators
For the SPX Index there were 432 components advancing and 52 components declining. On the NYSE 3,132 issues were traded with 2,478 advancing issues and 587 retreating issues, a ratio of 4.22 to one advancing. There were 135 new highs and 12 new lows. The five day moving average of New Highs is 235 while the five day moving average of New Lows is 16 and the ten day moving average of Net Advancing is 268. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 6.16 to one. The closing TRIN was 0.69 and the final tick was 277. The five day average of TRIN is 1.21 and the ten day average of TRIN is 1.07. The NYSE Composite Index gained 1.23% today while the SPX gained 1.04%.
For the NYSE, relative to the previous 30 session average, volume was -9.62% below 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, 21 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 85.2% of the average daily volume for the last year. Volume was 82.9% of the last 10 day average and 72.9% of the previous day’s volume.
Breadth was outstanding on Friday but volume was light. In a normal market this is not too encouraging for the bulls but we’ll have to see what next week brings.
Total tick for the day was 311,000 and the average tick for the day was 201. There were 118 ticks greater than 600 and 3 ticks more extreme than -600. There were 1 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
Volume was light on Friday and the intraday volume pattern was a bit erratic; no real significance to the pattern. Looking at the Nightly Breadth Indicators also is a bit inconclusive. All the New High/New Low ratios are declining while the McClellan oscillators are on the increase. This would suggest some upward but choppy trade is likely next week.
Moving Average and Support/Resistance Indicators:
61.8% of the SPX are above their five day moving average, 42.6% are above their 10 day average, 58.6% are above their 20 day moving average, 71.2% are above their 50 day moving average, and 88.4% are above their 200 day moving average.
We had a few important moving average crossovers after Friday. The XLF 5 DMA crossed below the 20 DMA, the SOX 5 DMA crossed below the 20 DMA, and Germany 5 DMA crossed below the 20 DMA. So we are seeing more red creep into the left of our chart. These short-term averages crossing will often lead to a deeper and more significant pullback than what we have already. Of course, this POMO influenced market is on steroids so hints of downside should never be taken for certain because there are other suggestions that next week could see more upside.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +41%.
- Energy -- Outperformed the SPX by +41%.
- Financials -- Outperformed the SPX by +38%.
- Technology -- Outperformed the SPX by +19%.
Sectors weaker than the SPX for Friday:
- Industrials -- Underperformed the SPX by -16%.
- Consumer Staples -- Underperformed the SPX by -55%.
- Utilities -- Underperformed the SPX by -50%.
- Health Care -- Underperformed the SPX by -28%.
- Consumer Discretionary -- Underperformed the SPX by -3%.
In Late Trading:
161 SPX components moved upward and 156 components downward during the after hours with 101 million shares traded.
Week of February 28 - March 04 Overview
Date/Time Release/Consensus
02/28/11 8:30 Personal Income/0.003
02/28/11 8:30 Personal Spending/0.004
02/28/11 8:30 PCE Prices - Core/0.001
02/28/11 9:45 Chicago PMI/67.5
02/28/11 10:00 Pending Home Sales/-0.032
03/01/11 10:00 Construction Spending/-0.006
03/01/11 10:00 ISM Index
03/01/11 15:00 Auto Sales/NA
03/01/11 15:00 Truck Sales/NA
03/02/11 7:00 MBA Mortgage Index/NA
03/02/11 7:30 Challenger Job Cuts/NA
03/02/11 8:15 ADP Employment Change/163K
03/02/11 10:30 Crude Inventories/NA
03/02/11 14:00 Fed's Beige Book
03/03/11 8:30 Initial Claims/400K
03/03/11 8:30 Continuing Claims/3800K
03/03/11 8:30 Productivity-Rev./0.023
03/03/11 8:30 Unit Labor Costs - Revised/-0.003
03/03/11 10:00 ISM Services/59
03/04/11 8:30 Nonfarm Payrolls/180K
03/04/11 8:30 Nonfarm Private Payrolls/193K
03/04/11 8:30 Unemployment Rate/0.091
03/04/11 8:30 Average Workweek/34.3
03/04/11 8:30 Hourly Earnings/0.002
03/04/11 10:00 Factory Orders/0.021
Monday, February 28
Economics
08:30 Personal Income: 0.1% cons.
08:30 Personal Spending: 0.4% cons.
08:30 PCE Prices-Core: 0.4% cons.
09:45 Chicago PMI: 68.8 prior.
10:00 Pending Home Sales : 2.0% prior.
Japan small business confidence
Canada GDP
POMO Schedule
Treasury Coupon Purchase: 08/31/2013-02/15/2015: $5-7 bln
Earnings
Before: ANV, AWI, EX, ENDP, FELE, JKS, NSA, MINI, OSG, TREX, VIT, WRI
After: AONE, DGI, DTSI, ISIS, KAMN, LYV, RST, SLXP, SONS, SYKE, TWGP, UHS, VVUS, YOKU
Enjoy the weekend!
-Mel