Stocks Recover Some of Tuesday's Loses
by Jerome "Mel" Hickerson
Market Recap:
Stock futures turned around before the open on word of an upbeat bond auction in Portugal. Concerns about the banking sector both here and overseas remained a concern. There was no economic data scheduled for release before the opening bell this morning.
The session began with a quick four point move higher and carried through almost unabated to put the high of the day on the chart at 12:48. But heavy selling hit the tape leading up to the Fed Beige Book report released at 2 pm. Interestingly enough, the downbeat report actually caused the selling to halt - is it possible the report leaked to some traders prior to the release? Because after the release the index found the will to bounce six points into the final hour. But the closing hour saw sellers again as the SPX gave back five points to close well off the highs.
Looking at the Market Leaders board, we see that all the indices we track were up except for the SOX. The SOX is the biggest drag on the entire board, down almost 20% from the 52 week highs. We believe that the SOX is an important trendsetter for the equities and that this behavior of the SOX will eventually be looked back upon as a canary in the coal mine.
Market Trend: Nine Sectors Report
But for the short-term, we will opt to stay with the Nine Sectors Report, which tonight has one change from yesterday; the Utility Sector has moved into Neutral from Buy. This may also prove to have been an early warning of a market top but for now, we hold the Long signal for another day.
Indeed, the charts do appear to be painting a topping pattern. But it's important for traders to know that topping patterns often take notoriously long times to build; certainly they can take much longer than bottoming processes. The SPX could go another 20 or 30 points higher while the top is built.
Which brings us to an important point about our methodology. Our systems are responsive rather than predictive. We believe that this is an important distinction. Rather than predict tops and bottoms, we prefer to watch the market and respond to its moves. Rather than try to predict, we try to listen carefully to what the market is telling us. We may therefore seem late to make calls; but we find being late is immensely preferable to being early.
Volume & Breadth Indicators
For the SPX Index there were 356 Advancers/130 Decliners. On the NYSE 3,144 issues were traded with 2,111 advancing issues and 919 retreating issues, a ratio of 2.3 to 1 advancing. There were 227 new highs and 9 new lows. The 5 day moving average of New Highs is 164 while the 5 day moving average of New Lows is 10 and the 10 day moving average of Net Advancing is 565. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 2.78 to 1. The closing TRIN was 0.83 and the final tick was 628. The NYSE Composite Index gained 0.57% today.
For the NYSE, relative to the previous 30 session average, volume was -12.65% below the average. Of the last 15 sessions 8 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 20 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 67.5% of the average daily volume for the last year. Volume was 87.5% of the last 10 day average and 108.1% of the previous day’s volume.
Volume continues to be abysmal. Breadth today was very strong and advancing volume outperformed the ratio of advancing issues, but not as strongly as we’ve seen recently. On the other hand, New Highs simply blew the New Lows out of the water today. And we see a bullish final tick as traders were not reluctant to hold overnight.
Further, total tick for the day was 133,000 and the average tick for the day was 86. There were 111 ticks greater than 600 and 54 ticks more extreme than -600. There were 1 ticks greater than 1000 and 3 ticks more extreme than -1000. The tick action suggests institutional accumulation.
The nightly indicators remain bullish looking and are improving. The tick data from today’s action is strong but the harsh sell off just before 2 pm shows up in the tick data as the ticks for those 30 minutes were harshly negative. This suggests to us that there are some weak players in the market who will exit in a rush if things turn against them.
Moving Average Indicators:
47.60% of the SPX components are giving a crossover Buy signal; 2.40% of the SPX components are giving a Sell signal. This is a 19.8 to 1 ratio of Buy signals over Sell signals.
65.8% of the SPX are above their five day moving average, 88.6% are above their 10 day average, 82.2% are above their 20 day moving average, 61.6% are above their 50 day moving average, 45.4% are above their 100 day moving average, and 46.2% are above their 150 day moving average.
The TECH 5 DMA crossed above the 20 DMA today. Only the SOX lags behind and it was the first to cross below back on August 3rd. Looking at the SPX, we see 82% of the components are above their 20 DMA. As this percentage nears 85%-90% it’s often a good time to begin to look for some kind of a pullback.
Sectors on the Move:
Sectors stronger than the SPX for Wednesday:
- Basic Materials -- Outperformed the SPX by +12%.
- Energy -- Outperformed the SPX by +31%.
- Financials -- Outperformed the SPX by +58%.
- Industrials -- Outperformed the SPX by +39%.
- Consumer Discretionary -- Outperformed the SPX by +8%.
Sectors weaker than the SPX for Wednesday:
- Technology -- Underperformed the SPX by -13%.
- Consumer Staples -- Underperformed the SPX by -20%.
- Utilities -- Underperformed the SPX by -90%.
- Health Care -- Underperformed the SPX by -23%.
Stocks on the Move:
Today's SPX component winners and losers:
- Largest one day loser is V with -4.17%
- Largest three day loser is EK with -6.50%
- Largest five day loser is CPB with -3.52%
- Largest ten day loser is MU with -6.65%
- Largest one day winner is NYT with 7.86%
- Largest three day winner is JNS with 8.22%
- Largest five day winner is ODP with 17.50%
- Largest ten day winner is LNC with 18.98%
In Late Trading:
197 SPX components moved upward and 147 components downward during the after hours with 189 million shares traded.
Thursday, September 9
Economics
08:30 Initial Claims
08:30 Continuing Claims
08:30 Trade Balance -$49.8 bln
Australia Employment Change 23.5k cons.
German Consumer Price Index
ECB September Monthly Reports
Bank of England Target Asset Purchase and interest rates announcement
Canada Housing Stats 189.2k cons.
Japan Gross Domestic Product 0.4% cons.
Earnings
Before: KFY, PNY, STEI
After: NSM, SWHC
Auction
01:00 30-Yr Bond
The government's weekly report on initial claims for unemployment and the July trade balance come out before the market opens. Economists expect the Labor Department report to show that the number of Americans filing first-time claims for unemployment benefits rose to 470,000 in the week ended Aug. 4, down from 472,000 the week before. The U.S. trade balance is expected to have fallen to $47.2 billion in July from $49.9 billion in June.
Have a great Thursday!
-Mel
