Support at 50 DMA Holds - For Now
by Jerome "Mel" Hickerson
Overseas markets were unimpressed with Tuesday’s Fed actions and the pre-market futures seemed to agree that the real problem is the state of the U.S. economy right now, pointing to a rough open. The U.S. Trade Deficit widened in June to $49.9 billion, which was below the consensus estimate for a deficit of $42.4 billion and a 12-month high.
The day began with a sharp 15 point gap downward and continued sharply downward another seven points before trying to find some stability just minutes into the session. But there was no bottom to be found until much later in the day as the SPX continued to drift downwards until it reached the 50 DMA. The index tested the 50 DMA several times late afternoon but at least for now, this level of support has held.
Ok, so we missed seeing today’s plunge coming but that didn’t prevent us from making some money off the move today. But what comes now? Often, these ugly red bars come in pairs. But I am thinking it won’t be that way this time.
All of the nine sectors are on a Sell after today’s action; I don’t want to do anything to suggest that the selling is over. But for tomorrow, I am holding the Neutral signal. We are resting on significant support and plenty of the data is at a level where the index often finds a reason to bounce. Futures continue to plunge as I write this; we may well open with a gap down tomorrow and then bounce.
The Matrix is suggesting a bounce Thursday and Friday. It is for this reason that I hold off on the Sell signal in spite of the Nine Sectors Report. It is much more likely that we see a morning low Thursday followed by a bounce. Friday’s close is likely to be higher than Thursday’s open. But we may well work more to the downside again soon, too.
We missed the large gap today, then took a small loss on a failed bounce. But we quickly regrouped, switched sides and rode SDS a couple times, along with an SSO ride sandwiched in between. So it ended up as a productive day. We ended the day in cash, but I personally took a ½ position in TNA during the after hours move this evening.
Thursday, August 12
Economics
08:30 Initial Claims
08:30 Continuing Claims
08:30 Export Prices ex-ag
08:30 Import Prices ex-oil
Australia Employment Change
Australia Full Time Employment Change
Australia Unemployment Rate
Japan Consumer Confidence
Euro-zone Industrial Production
Earnings
Before: AH, BGG, EAT, BR, CACH, RDEN, EL, GIL, KSS, MHR, MTRX, CHUX, RPGO, RGLD, SLE, HEAT, SLOW, WEN, THI
After: ALIM, APP, ADY, ADSK, EPAY, BBI, DV, DNEX, FTK, MDSO, JWN, NVDA, SHOR
Auction
01:00 30-Yr Bond
The Department of Labor releases weekly jobless claims figures in the morning. The number of Americans filing new claims for unemployment last week is expected to have dropped slightly to 465,000. Continuing claims, a measure of Americans who have been receiving benefits for a week or more, is expected to rise to 4.55 million. Reports on July export and import prices also come out before the opening bell.
Mel’s Missives from the Matrix:
- Total tick for the day was -276,000 and the average tick for the day was -179. There were 19 ticks greater than 600 and 185 ticks more extreme than -600. There were 1 ticks greater than 1000 and 12 ticks more extreme than -1000. The tick action suggests institutional distribution.
- The day's range was 28.34 points. The intraday trading range - 9:35 to the close - was 14. The 5 DMA of daily range is 17.04.
- Evidence of the intraday trend: At 10am volume was 117.53% of the 10 day average. By noon the volume was 114.78% of the 10 day average, and by 2pm volume was 115.29% of the 10 day average.
- The day's volume was 92.3% of the average daily volume for the last year. Volume was 115.8% of the last 10 day average and 108.3% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 10:45 and 11:00 when relative volume increased 32.5% while the SPX was dropping -0.17%. The largest drop in relative volume came between 1:00 and 1:15 when relative volume dropped -26.7% while the SPX was rising 0.17%.
- 0% of the SPX stocks closed with two day RSI above 90. 1% closed with RSI above 80. 89% closed with RSI below 20 and 59% closed with RSI below 10.
- 2.6% of the SPX are above their five day moving average, 9.4% are above their 10 day average, 29% are above their 20 day moving average, 50.4% are above their 50 day moving average, 32.4% are above their 100 day moving average, and 41.8% are above their 150 day moving average.
- 1% of the SPX closed above their most recent previous high.
- 91% of the SPX stocks closed below their most recent previous lows.
- 5 SPX issues advanced and 487 issues declined, a net SPX advance/decline of -482.
- Evidence of the intraday trend: At 10am, 24.8% of the SPX components were in the top half of the range. By noon, 15% were in the top half of the range, and by 2pm, 13.4% were in the top half of the range.
- 12.8% of stocks closed in the top half of the day's range. (87% closed in bottom half.)
- 1.6% of stocks closed in the top 10% of the day's range. 3.4% of stocks closed in the top 20% of the day's range.
- 27.8% of stocks closed in the bottom 10% of the day's range. 50.4% of stocks closed in the bottom 20% of the day's range.
- 2.4% of stocks closed within 2% of their 52 week high. 12.6% of stocks closed within 5% of their 52 week high.
- 84.8% of stocks closed within 50% of their 52 week low. 55% of stocks closed within 25% of their 52 week low.
- 2.6% of stocks closed within ¼% of their high for the day.
- 30.2% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 1.2% of the SPX components were up since the open. By noon, 1.6% were up since the open, and by 2pm, 1% were up since the open.
- 1.2% of the SPX closed up from the previous close; 10.4% closed higher than the open.
- Sectors stronger than the SPX for Wednesday:
- Technology -- Outperformed the SPX by +38%.
- Consumer Staples -- Outperformed the SPX by +114%.
- Utilities -- Outperformed the SPX by +77%.
- Health Care -- Outperformed the SPX by +19%.
- Consumer Discretionary -- Outperformed the SPX by +14%.
- Sectors weaker than the SPX for Wednesday:
- Basic Materials -- Underperformed the SPX by -47%.
- Energy -- Underperformed the SPX by -3%.
- Financials -- Underperformed the SPX by -78%.
- Industrials -- Underperformed the SPX by -129%.
- The $SOX index strength was weaker relative to the SPX Wednesday by -1.56%.
- The XLF underperformed the SPX by -0.78% Wednesday.
- The 2 Day RSI of the SPX is 5. The Dow RSI is 4, the NASDAQ is 5 and the Russell is 6.
- Over the last four sessions, the average session closed 59.44% of the range above the low. Wednesday closed at 8.6% of the daily range.
- Upside momentum decreased Wednesday, from Tuesday’s 0.1 to today’s -3.76. The ratio of SPX components giving a crossover sell signal compared to buy signals decreased to B 2.34 to 1.
- The ISEE Equity 10 day moving average Wednesday was 163.7. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10 and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 83 SPX components moved upward and 321 components downward during the after hours with 171 million shares traded.
Trade 'em well on Thursday everyone!
-Mel
