Tech Powers Dow Higher
US stock index futures turned lower Friday morning as traders kept a close watch on Greece as the debt-ridden nation remains in talks with private creditors over a haircut on some of its bonds and after GE's revenue missed forecast. General Electric beat analyst expectations on profit but its revenue missed, sending its shares sharply lower in pre-market trading. In the technology sector, Intel, IBM and Microsoft all beat street estimates in afternoon earnings reports Thursday, but Google missed, sending its shares lower.
The Friday option expiration session opened with a small gap lower and continued to trade generally lower to put the low of the day on the chart just after 11:30 am. The rest of this tight range session traded with an upward bias and closed with a large (well, what seemed large on a day such as this) spike higher in the final minutes to close at the highs.
Checking our Market Leaders Board, all of our leaders closed marginally higher with the DOW, led by Microsoft and IBM, significantly stronger than the others.
SPX big winners were Sears Holding Corp (SHLD) 12.98%, Microsoft Corp (MSFT) 5.51%, and Suntrust Banks Inc (STI) 5.2%. SPX big losers were Google (GOOG) -9.07%, Intuitive Surgical Inc (ISRG) -6.51%, and Capital One Financial Cp (COF) -6.07%.
SPX five day big winners are Sears Holding Corp (SHLD) 44.12%, JDS Uniphase Corp (JDSU) 15.55%, and Amphenol Corp (APH) 14.83%. SPX five day big losers are R.R. Donnelley & Sons Company (RRD) -17.18%, Sunoco Inc (SUN) -12.84%, and Alpha Natural Resources (ANR) -11.71%.
New Ten Day Highs: ADBE, AMD, AES, AFL, ALL, AIG, AMP, ABC, AMGN, ADI, AMAT, ADM, T, ADP, AN, AZO, AVP, BCR, BDX, BBBY, BBY, BIG, BIIB, BMC, BSX, BF/B, BRK.B, CA, CAM, CAH, CAT, CBG, CBS, CTL, CF, CB, CINF, CMCSA, CMA, DRI, DVA, DELL, DFS, DOW, DNB, DD, ETFC, ECL, EMC, ESRX, XOM, FIS, FHN, FISV, BEN, GCI, GD, GE, HAL, HAR, HRS, HIG, HPQ, HD, HST, INTC, IBM, IFF, INTU, IVZ, IRM, JNS, JDSU, JPM, KMB, KIM, KLAC, LLL, LH, LUK, LXK, LNC, LSI, MRO, MJN, MCD, MDT, MET, MU, MSFT, MWW, MCO, NDAQ, NOV, NWSA, GAS, NKE, NTRS, NUE, ODP, ORCL, PDCO, BTU, JCP, RL, PCP, PFG, PGR, PLD, PRU, QLGC, RTN, RHT, RHI, SNDK, CVG, SLB, SCHW, SHLD, SIAL, SPG, SNA, LUV, SPLS, SBUX, HOT, SRCL, SYK, STI, SYMC, SYY, TGT, TDC, TER, TWC, TJX, TMK, TRV, UPS, VLO, VTR, VMC, WMT, WPO, WM, WDC, WU, GS
New Ten Day Lows: AKAM, AEE, BMY, COG, CHK, CMS, ED, CEG, D, ETR, EQT, EXC, FITB, FE, HNZ, TEG, ISRG, JCI, KR, LO, PBCT, PCG, PPL, PEG, RAI, SWN, VXX, AEM, DYN, GOOG
Market Recap – Weekly Review:
The SPX gained 26.29 points during the week (2.04%). The range for the week was 25.27, 1.96%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 78. Pullbacks often occur as this RSI reaches 80 and bounces near 20.
Total tick for the week was 614,000. On the NYSE, the advance/decline line increased during the week by 2,955 and the 10 day average of Net Advancing decreased by -89. There were 674 New Highs and 98 New Lows. The week closed at 99.56% of the weekly range.
For the week, SPX advancing issues (388) averaged 6.7 million shares traded per day ($226.6 million each stock) and declining issues (101) averaged 7.6 million shares traded per day ($239.7 million each stock.)
For the week, the NASADQ 100 advancing issues (82) averaged 9.3 million shares traded ($354. million each stock) each day and declining (18) issues averaged 4.4 million shares traded ($371.9 million each stock each day.)
Volume & Breadth Indicators
For the SPX Index there were 218 components advancing and 247 components declining. On the NYSE 3,124 issues were traded with 1,745 advancing issues and 1,261 retreating issues, a ratio of 1.38 to one advancing. There were 126 new highs and 14 new lows. The five day moving average of New Highs is 135 while the five day moving average of New Lows is 20 and the ten day moving average of Net Advancing is 620. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 1.28 to one. The closing TRIN was 1.1 and the final tick was 726. The five day average of TRIN is 1.14 and the ten day average of TRIN is 1.06. The NYSE Composite Index gained 0.13% today while the SPX gained 0.07%.
For the NYSE, relative to the previous 30 session average, volume was 14.27% above the average. Of the last 15 sessions 2 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, 8 of last 10. For the SPX, the day's volume was 91.7% of the average daily volume for the last year. Volume was 97.7% of the last 10 day average and 90.3% of the previous day’s volume.
Total tick for the day was 90,000 and the average tick for the day was 58. There were 12 ticks greater than 600 and 2 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000. The low number of extreme ticks suggests a topping pattern.
The tick data today shows extremely mild and unusual numbers but the buyers ruled again.
The intraday volume pattern shows the typical option expiration heavy volume at the open followed by very low volume. The Nightly Breadth Indicators continue to be very overbought.
Moving Average and Support/Resistance Indicators:
74.8% of the SPX are above their five day moving average, 78.8% are above their 10 day average, 82.2% are above their 20 day moving average, 83.6% are above their 50 day moving average, and 57.8% are above their 200 day moving average.
There were three significant moving average crossovers Friday as Emerging Markets 20 DMA crossed above the 100 DMA, and Germany’s 20 DMA crossed above bother the 50 DMA and the 100 DMA. Our moving average Power Rating is 86 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Friday:
- Financials -- Outperformed the SPX by +65%.
- Consumer Staples -- Outperformed the SPX by +28%.
- Utilities -- Outperformed the SPX by +8%.
- Health Care -- Outperformed the SPX by +5%.
Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -50%.
- Energy -- Underperformed the SPX by -9%.
- Industrials -- Underperformed the SPX by -64%.
- Technology -- Underperformed the SPX by -2%.
- Consumer Discretionary -- Underperformed the SPX by -93%.
In Late Trading:
231 SPX components moved upward and 124 components downward during the after hours with 168.4 million shares traded.
What We Learned from Friday's Action:
Friday was session 4 to close above the 5 DMA, session 21 to close above the 10 DMA, session 21 to close above the 20 DMA, and session 21 to close above the 50 DMA. This was also session 19 for the 5 DMA to close above the 20 DMA. One early sign of a sustainable rally or pullback is often a close above or below the 10 DMA. The SPX closed 19.46 points above the 10 DMA.
The SPX 5 DMA is 1304.13, 10 DMA is 1295.92, 20 DMA is 1279.67, 50 DMA is 1248.56, 100 DMA is 1223.04, and 200 DMA is 1257.43.
On Friday the SPX traded both below and above the opening range. 44.8% of the SPX closed up from the previous close; 48.8% closed higher than the open. During Friday's session the SPX gained .89 points from open to close. The daily bar painted an Inside day. The session was an NR7 day (Narrowest Range last 7 days).
Note: The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be in charge for the day. If we break out of that trading range, it's telling us that new buying or selling is impacting traders' assessments of value. Looking back at today’s breakouts also helps us grasp sentiment going forward because when a clear trend is established it often carries through for several sessions.
The Market Environment for Monday is -6. Greater than three is bullish and less than negative three is bearish. Based solely on the technicals, we are bearish for Monday's session. Mel's 10 Day Oscillator is 71 (below 35 is oversold and above 65 is overbought.)
Reviewing our SPX sectors chart, there aren’t a lot of changes this week and almost all of the changes came within the Energy sector and the Consumer Staples sector.
For Basic Materials, 28 components advanced during the week and two declined. 30.3% components have their 50 DMA above their 200 DMA (down from 33.3% last week.)
For Energy, 30 components advanced during the week and 21 declined. 45.9% components have their 50 DMA above their 200 DMA (up from 40.5% last week.) The 20 DMA crossed above the 50 DMA this week.
For Financials, 67 components advanced during the week and 14 declined. 23.5% components have their 50 DMA above their 200 DMA (up from 21.0% last week.)
For Industrials, 53 components advanced during the week and 8 declined. 34.4% components have their 50 DMA above their 200 DMA (up from 29.5% last week.)
The risk sectors of the SPX had a strong week, no doubt. But after eight weeks of a strong rally (about 40 sessions) these sectors still have a long way to go in order to move their 50 DMA above their 200 DMA. We will continue to have strong doubts about the staying power of this rally while all four of the risk sectors have their 50 DMA below the 200 DMA.
Looking ahead to next week, earnings season will kick into high gear, with a lot of big names reporting. We also have the GDP numbers from the US and the UK. The event that the market will focus on the most, however, is the FOMC decision on Wednesday. In Europe, the pace for debt auctions will be pretty quiet, with nothing standing out while in Japan, the Bank of Japan will consider letting the yen be devalued with their rate decision on Tuesday.
While we have been short term overbought, the longer term 4-week RSI has also now reached an overbought status. The last time this occurred was the end of October and the resulting pullback was 125 SPX points by late November.
We’re not suggesting that a pullback here must be similar but we do believe we see something of a pullback begin unless we have entered a time period similar to December 2010 when momentum carried the equities higher and disregarded all overbought conditions for weeks. We simply do not find many periods of such momentum while the 50 DMA is below the 200 DMA so we do not anticipate such a period here but we must recognize that it is possible, especially in light of the strong market breadth.
Week of January 23 - January 27 Overview
01/25/12 7:00 MBA Mortgage Index/NA
01/25/12 10:00 Pending Home Sales/-0.03
01/25/12 10:00 FHFA Housing Price Index/NA
01/25/12 10:30 Crude Inventories/NA
01/25/12 12:30 FOMC Rate Decision/0.0025
01/26/12 8:30 Initial Claims/375K
01/26/12 8:30 Continuing Claims/3550K
01/26/12 8:30 Durable Orders/0.02
01/26/12 8:30 Durable Orders -ex Auto/0.007
01/26/12 10:00 New Home Sales/322K
01/26/12 10:00 Leading Indicators/0.007
01/27/12 8:30 GDP-Adv./0.031
01/27/12 8:30 Chain Deflator-Adv./0.015
01/27/12 9:55 Michigan Sentiment - Final/74.2
Monday, January 23
No major reports scheduled
11:00 Fed to purchase $1.5b-$2b in 10 to 20-year notes
11:30 US to sell $29b in 3-month, $27b 6-month bills
00:30 AUD Producer Price Index
13:30 CAD Leading Indicators
15:00 EUR Euro-Zone Consumer Confidence
5:15 Germany to sell EU3b 12-month bills
Before: ACAT, BOH, HAL, PETS, STBA, TWIN
After: ALB, BBCN, CATY, CR, CSX, DHT, ELS, FNB, JJSF, KSU, PKG, PLXT, PLCM, STM, TXN, TUES, VMW, VLTR, WDC, WIBC, ZION
Existing home sales were 4.61 million, less than the consensus 4.65 million. We will get no significant economic data on Monday, but next week, we do have a lot of earnings reports including those from Apple, McDonald's, Caterpillar, and Ford.
Thank you for reading. Think on it, trade on it, and be well.
Personal Note: There will be no report Monday evening.