Technical Damage Mounts as Dow Clings to 10K
by Jerome "Mel" Hickerson
With no economic news before the open gloom-and-doom appeared to be the mood of the market as bond yields were plunging to new lows. Futures were down significantly pointing to a difficult open.
The Tuesday session began with a twelve point gap downward. There was little follow through before the Existing Homes Sales report and the Richmond Fed Index at 10am. But existing home sales plummeted more than 27% in July and the SPX plummeted as well when the news hit. But the low of the day was on the chart just two minutes later began to struggle back. Twelve points were recovered before the intraday trading high was on the chart at 11:43. The following couple of hours were sluggish with a downward bias but about 2pm shoppers came buying the dip and the index tried to rally but the final half hour was a selling spree and the SPX closed off the lows but only at about one third of the daily range.
There's not much bullish that can be said of today's session. But I will point out that this could have easily been a -30 day rather than -15; the market actually held up rather well in the light of plenty of dismal news. But it is obvious that the index has a destiny to test that 1010 low, and soon rather than later. Of course, the market rarely moves in a straight line so there are likely to be bounces along the path.
The Nine Sectors Report tonight shows two moves, one negative and one positive. So there is no hint of any kind of trend change within this report. The SPX is certainly oversold at this point. But it's important to remember that oversold does not equate to a buy signal. The largest market moves come at the extremes of overbought and oversold. But we should also take note of the fact that oversold conditions often are briefer than overbought conditions, which can last for weeks.
In regards to the oversold conditions, one statistic that stands out this evening: The percentage of the SPX above their 20 DMA has dropped below 10%. The chart above shows arrows to indicate the last several occurrences of the 20 DMA percentages dropping to 10%; an oversold bounce often follows.
Another item worthy of notice this evening is the large number of indices with their 20 DMA crossing below their 50 DMA. This is certainly a bearish technical event. We last saw several of these indices with this 20 below 50 DMA crossover on May 20th. What stands out for me is that on May 20th the SPX was at 1107, 55 points higher than we are now. This clearly illustrates the strength of the downtrend that the market is in.
I feel somewhat obligated to post these trades each night; to leave them out on an evening when I don't have anything to constructive to say about them feels dishonest. I'll leave it at this: We're frustrated.
Wednesday, August 25
Economics
08:30 Durable Orders 3.4% cons.
08:30 Durable Orders ex. Transportation -0.7% cons.
10:00 New Home Sales 338k cons.
10:30 Crude Inventories
Australia Conference Board Leading Index
German IFO Business Climate
German IFO Business Current Assessment
German IFO Business Expectations
Earnings
Before: AEO, BWS, CWTR, ISLE, ITRN, OSIS, PERY, SYNO, TOL
After: CYBX, GES, HAIN, HEI, JDSU, JAS, KONG, SMTC, SCVL, SIGM, TIVO
Auction
1:00 5-Yr Note Auction
The Commerce Department reports data on durable goods. Recovering after the recession, orders rallied more than 20% between March 2009 and April 2010. But the measure has posted back-to-back declines for the last two months. Economists are forecasting a 3.4% increase for July. They're also waiting for the latest figures on new home sales, which are expected to show a slight uptick to 338,000 in July, up from 330,000 the month before.
Mel’s Missives from the Matrix:
- Total tick for the day was -10,000 and the average tick for the day was -6. There were 126 ticks greater than 600 and 100 ticks more extreme than -600. There were 17 ticks greater than 1000 and 3 ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 16.52 points. The intraday trading range - 9:35 to the close - was 12.75. The 5 DMA of daily range is 16.13.
- Evidence of the intraday trend: At 10am volume was 100.35% of the 10 day average. By noon the volume was 121.45% of the 10 day average, and by 2pm volume was 120.56% of the 10 day average.
- The day's volume was 91.6% of the average daily volume for the last year. Volume was 115.9% of the last 10 day average and 137.2% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 10:00 and 10:15 when relative volume increased 72.9% while the SPX was dropping -0.18%. The largest drop in relative volume came between 12:30 and 12:45 when relative volume dropped -52.2% while the SPX was rising 0.01%.
- 1% of the SPX stocks closed with two day RSI above 90. 2% closed with RSI above 80. 75% closed with RSI below 20 and 56% closed with RSI below 10.
- 10.4% of the SPX are above their five day moving average, 14% are above their 10 day average, 9.6% are above their 20 day moving average, 25.6% are above their 50 day moving average, 23.6% are above their 100 day moving average, and 29.2% are above their 150 day moving average.
- 1% of the SPX closed above their most recent previous high.
- 77% of the SPX stocks closed below their most recent previous lows.
- 70 SPX issues advanced and 417 issues declined, a net SPX advance/decline of -347.
- Evidence of the intraday trend: At 10am, 32.2% of the SPX components were in the top half of the range. By noon, 74% were in the top half of the range, and by 2pm, 39.4% were in the top half of the range.
- 39.6% of stocks closed in the top half of the day's range. (60.2% closed in bottom half.)
- 1.6% of stocks closed in the top 10% of the day's range. 6.4% of stocks closed in the top 20% of the day's range.
- 14.8% of stocks closed in the bottom 10% of the day's range. 27.8% of stocks closed in the bottom 20% of the day's range.
- 4.4% of stocks closed within 2% of their 52 week high. 11.2% of stocks closed within 5% of their 52 week high.
- 88.6% of stocks closed within 50% of their 52 week low. 65.8% of stocks closed within 25% of their 52 week low.
- 2.2% of stocks closed within ¼% of their high for the day.
- 17.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 4.8% of the SPX components were up since the open. By noon, 17.4% were up since the open, and by 2pm, 10.6% were up since the open.
- 14.6% of the SPX closed up from the previous close; 37% closed higher than the open.
- Sectors stronger than the SPX for Tuesday:
- Technology -- Outperformed the SPX by +8%.
- Consumer Staples -- Outperformed the SPX by +97%.
- Utilities -- Outperformed the SPX by +163%.
- Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -96%.
- Energy -- Underperformed the SPX by -11%.
- Financials -- Underperformed the SPX by -31%.
- Industrials -- Underperformed the SPX by -62%.
- Health Care -- Underperformed the SPX by -72%.
- Consumer Discretionary -- Underperformed the SPX by -26%.
- The $SOX index strength was weaker relative to the SPX Tuesday by -0.22%.
- The XLF underperformed the SPX by -0.31% Tuesday.
- The 2 Day RSI of the SPX is 2. The Dow RSI is 2, the NASDAQ is 3 and the Russell is 3.
- Over the last four sessions, the average session closed 30.64% of the range above the low. Tuesday closed at 35.6% of the daily range.
- Upside momentum moved lower Tuesday, from Monday’s -0.77 to today’s -3.77. The ratio of SPX components giving a crossover sell signal compared to buy signals also moved lower to S 6.6 to 1.
- The ISEE Equity 10 day moving average Tuesday was 178.9. 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.
- 141 SPX components moved upward and 226 components downward during the after hours with 131 million shares traded.
Trade 'em well on Wednesday everyone!
-Mel
