Support at 1131 Holds Twice
by Jerome "Mel" Hickerson
Market Recap:
There was no economic news to review before the open, however, stock futures were pointing to a modestly lower open on the back of weak earnings from ADBE, declines in Europe, and a disappointing bond auction in Portugal.
The midweek session began without a significant gap and almost immediately surged higher quickly putting the high of the day on the chart at 9:45. But then the index turned downward for 90 minutes and put the first leg of what proved to be an intraday double bottom on the chart around 11:30. The rest of the session was spent mostly working between 1131 and 1136 with a brief excursion as high as 1137. The session closed in the bottom quarter of the intraday range.
The bears owned the internals today yet the best they could muster was not much more than five points on the SPX in spite of the overbought conditions. This does not seem to bode well for the bears. But the dollar continued to get pasted today which is usually bullish for the equities; one has to wonder what will happen to the equities if the dollar catches a rebound.
Looking at our Market Leaders board, we see a mixed board but most of the market leaders were down. Technology, financials and small caps were all weak today yet the broader indices held their own.
Market Trend: Nine Sectors Report
Turning to our Nine Sectors Report, we have three changes, two negative and one positive. It can be rather discouraging to watch day after day while the internals are suggesting a pullback yet the market keeps ramping higher, or like today, simply showing great resilience and holding on. This is not particularly unusual behavior during strong bullish runs and with the end of quarter on hand, we have to be aware of the possibility of fund managers reallocating resources and ramping things higher, although last year end of September dropped 38 points in four days. As a matter of fact, 12 of the last 14 Septembers have ended weakly.
We will hold our Sell signal yet again tonight but traders should be alert for anything that suggests stepping aside. The support at 1131 seemed formidable today and until it is broken this market seems to want higher. But if 1131 fails to hold, the next level of significant support is at the 200 DMA around 1116 and below that the 50 DMA at 1097.
Volume & Breadth Indicators
For the SPX Index there were 153 Advancers/332 Decliners. On the NYSE 3,140 issues were traded with 1,141 advancing issues and 1,911 retreating issues, a ratio of 1.67 to one declining. There were 141 new highs and 15 new lows. The five day moving average of New Highs is 208 while the five day moving average of New Lows is 11 and the ten day moving average of Net Advancing is 357. The Net Advancing data indicates a bullish trend.
Declining volume was higher at a ratio of 2.03 to one. The closing TRIN was 1.21 and the final tick was -563. The NYSE Composite Index lost -0.48% today.
For the NYSE, relative to the previous 30 session average, volume was -5.12% below the average. Of the last 15 sessions 3 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 18 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 88.6% of the average daily volume for the last year. Volume was 114.7% of the last 10 day average and 101.1% of the previous day’s volume.
Breadth was decidedly negative today and we closed on another significantly negative tick. The last time we saw back-to-back strong negative closing ticks was during the August downturn. Volume was up today on the SPX compared to the 10 day average but lower on the NYSE.
Further, total tick for the day was -55,000 and the average tick for the day was -36. There were 41 ticks greater than 600 and 111 ticks more extreme than -600. There were no ticks greater than 1000 and 4 ticks more extreme than -1000. The tick action suggests institutional distribution.
Today’s tick action was also decidedly negative as the data strongly implies that large institutional activity was on the sell side. But the market simply absorbed the large sells and the Ultimate Indicator, Price, was little fazed. Still, one has to wonder if some of the “big boys” had some advance knowledge of tomorrow’s employment data. Not that we’d ever suggest such a thing.
The nightly indicators remain somewhat mixed but a bit more bullish tonight. We will point out that the number of stocks above their 40 DMA and 200 DMA has been falling the last few days so this is at least a little concerning to bulls.
Moving Average Indicators:
72.80% of the SPX components are giving a crossover Buy signal; 2.60% of the SPX components are giving a Sell signal. This is a 28 to 1 ratio of Buy signals over Sell signals.
50% of the SPX are above their five day moving average, 67.2% are above their 10 day average, 86.6% are above their 20 day moving average, 74.6% are above their 50 day moving average, 66.2% are above their 100 day moving average, and 56.2% are above their 150 day moving average.
Several significant moving average crossovers this evening:
- SPX 20 DMA crossed above the 50 DMA
- SPX 20 DMA crossed above the 100 DMA
- RUT 20 DMA crossed above the 50 DMA
- China 20 DMA crossed above the 50 DMA
- China 50 DMA crossed above the 200 DMA
These crossovers continue to be bullish longer-term even if we see a pullback soon.
Sectors on the Move:
Sectors stronger than the SPX for Wednesday:
- Basic Materials -- Outperformed the SPX by +71%.
- Consumer Staples -- Outperformed the SPX by +65%.
- Utilities -- Outperformed the SPX by +117%.
- Health Care -- Outperformed the SPX by +63%.
Sectors weaker than the SPX for Wednesday:
- Energy -- Underperformed the SPX by -24%.
- Financials -- Underperformed the SPX by -110%.
- Industrials -- Underperformed the SPX by -5%.
- Technology -- Underperformed the SPX by -2%.
- Consumer Discretionary -- Underperformed the SPX by -19%.
Stocks on the Move:
Today's SPX component winners and losers:
- Largest one day loser is ADBE with -19.26%
- Largest three day loser is ADBE with -18.67%
- Largest five day loser is ADBE with -18.62%
- Largest ten day loser is NYT with -10.99%
- Largest one day winner is SHLD with 5.31%
- Largest three day winner is NBR with 7.80%
- Largest five day winner is NOVL with 10.34%
- Largest ten day winner is JCP with 17.53%
In Late Trading:
143 SPX components moved upward and 179 components downward during the after hours with 156 million shares traded.
Thursday, September 23
Economics
08:30 Initial Claims
08:30 Continuing Claims
10:00 Existing Home Sales
10:00 Leading Indicators
German Purchasing Manager Index
Euro-Zone Purchasing Manager Index
Great Britain BBA Loans for House Purchase
Swiss KOF Institute September Economic Forecast
Earnings
Before: NEOG, RAD, SCHL, TXI, MTN
After: CMTL, FINL, NKE, SABA, SPEC, TIBX
Speeches
10:40 Charles Evans
01:00 Paul Volcker
The Department of Labor will release weekly jobless claims figures before the start of trade. The number of Americans filing new claims for unemployment last week is expected to remain unchanged from 450,000 the previous week. The Leading Economic Indicators from the Conference Board, is expected to have risen 0.1% in August after increasing by that amount in July. The National Association of Realtors will release its monthly report on existing home sales, which analysts expect rose to an annual rate of 4.04 million in August from 3.83 million the previous month.
Good trading!
-Mel
