The Bearish Tape Continues
by Jerome "Mel" Hickerson
The Monday night futures were volatile and down hard before moderating before the regular session opened. But the session opened with selling pressure and quickly gapped down, trading down to the low of the day just three minutes into the session. The SPX attempted a rally but made a double bottom just prior to 10:00 before bouncing quickly off support then chopping sideways with an upward bias painting the chart with the high of the day just before 1:00. The chart then painted a double top before selling hard into the close.
The rally attempt today was busted by a trifecta: Fears that Bernanke won’t be confirmed, Robert Prechter on CNBC during the close telling people it was time to get out of the market, and concerns about the Senate Banking Committee revealing plans to end banking activities that are producing profits for banks. This kind of news makes it difficult for the market to sustain any attempted bounce.
There isn’t much bullish that can be said about today’s session; the bears lost control of the tape for a couple of hours but seemed to easily regain control and run into the close. Looking at the daily chart is no consolation to the bulls, either. The most significant thing the bulls have going for them is that the critical support at the 1085-1090 area held again. But once again, the close is right near the support level and we’ve seen this market gap beyond resistance many times; gapping beyond support should not be a total surprise.
Looking at the attached chart we can easily see how many times this area has provided support since the October pullback. A failure at this level could quickly send the index to the 1050 area, and even beyond to the next major level of support at 1030. The bears are in control for now; but can they keep it?
As bearish as the tape is, we should keep in mind that rallies rarely die all at once; an attempt to rekindle the rally should still be anticipated. The oversold oscillators are about as far as they can go; that doesn’t mean the sell-off can’t continue but historically there is usually a snapper rally attempt at these levels. And no matter how bearish your bias, you have to be aware that until the 1085-1090 area is broken, no further technical damage has been done to the index.
For Wednesday, it’s a FOMC day. FED announcements are known to cause wild oscillations in the market; your guess is as good as mine as to which way the final move goes. But one more time, my money is on Thursday’s close being higher than Wednesday’s open. A move below 1085 that holds for more than ten minutes will cause me to take my money off the table.
Wednesday, January 27
Economics
10:00 New Home Sales 370k cons.
10:30 Crude Inventories
02:15 FOMC Rate Decision 0.25% cons.
Earnings
Before: ABT, ATI, BLK, BA, CAT, COP, EXP, GD, HSY, HES, ITW, MNI, NYB, PJC, PX, ROK, SAP, SII, SO, STJ, SWK, UAUA, WLP
After: AMLN, CTXS, CCI, ETFC, ETH, FLEX, GMCR, HBI, HXL, HOKU, MUR, NFLX, NE, NSC, OI, QCOM, JAVA, SYMC, TTEK
Auctions
01:00 5-Yr Note Auction
Speeches
10:00 Tim Geithner
09:00 Barack Obama
New home sales are expected to have risen in December to a 370,000 unit annual rate from a 355,000 unit annual rate in November. The report from the census bureau is due out shortly after the start of trading. The weekly crude oil inventories report from the government is due in the morning, while the Fed announcement is due in the afternoon. Apple will unveil its much-anticipated new Tablet computer in San Francisco in the afternoon. The World Economic Forum begins in Davos, Switzerland, and runs through Sunday. In the evening, the President gives the State of the Union address, starting at 9:00 p.m. ET.
SPX Summary for Tuesday, January 26, 2010
165 Advancers/329 Decliners
Today's SPX component winners and losers:
• Largest one day loser is X with -11.83%
• Largest three day loser is COF with -17.61%
• Largest five day loser is X with -24.24%
• Largest ten day loser is AA with -22.40%
• Largest one day winner is TLAB with 12.22%
• Largest three day winner is ISRG with 10.17%
• Largest five day winner is ZION with 12.43%
• Largest ten day winner is ZION with 15.57%
*** SPX Technical Summary ***
The greatest positive five day momentum component is ZION; the greatest negative five day momentum component is X. The average five day momentum of all 500 components is -4.81.
11.40% of the SPX components are giving a crossover Buy signal; 49.80% of the SPX components are giving a Sell signal. This is a 4.4 to 1 ratio of Sell signals over Buy signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 1 component.
• From Buy to Neutral: 32 components.
• From Neutral to Sell: 39 components.
• From Neutral to Buy: 2 components.
Mel’s Random Hits:
• Total tick for the day was +49,000; this reflects that most of the day was actually positive – except for the important parts, the open and the close.
• The day's range was 13.83 points.
• The day's volume was 85.6% of the average daily volume for the last year. Volume was 96.2% of the last 10 day average. The volume surged during the last hour’s sell off.
• 1% of the SPX stocks closed with two day RSI above 90. 4% closed with RSI above 80. 44% closed with RSI below 20 and 28% closed with RSI below 10. We last saw numbers like this in late July – except the numbers were reversed.
• 17% of the SPX are above their five day moving average, 13% are above their 10 day average, and 19% are above their 20 day moving average.
• 34% of the SPX stocks closed below their most recent previous lows.
• 12% of the SPX closed above their most recent previous high.
• 35.0% of stocks closed in the top half of the day's range. (65.0% closed in bottom half.)
• 29.6 of stocks closed in the bottom 20% of the day's range.
• 4.0% of stocks closed in the top 10% of the day's range. The above numbers look much the same as yesterday’s up day.
• 2.0% of stocks closed within 2% of their 52 week high. 13.8% of stocks closed within 5% of their 52 week high.
• 27.8% of stocks closed within 50% of their 52 week low. 8.2% of stocks closed within 25% of their 52 week low.
• 4.4% of stocks closed within ¼% of their high for the day.
• 18.2% of stocks closed within ¼% of their low for the day.
• 32.6% of the SPX closed up from the previous close; 50.0% closed higher than the open.
• Sectors weaker than the SPX for the day: Basic Materials, Financials, Energy, and Health Care.
• Sectors stronger than the SPX for the day: Consumer Staples, Consumer Discretionary, Industrials, Utilities, and Technology.
• The $SOX index strength was again stronger than the SPX today. This is one of the few remaining areas of “strength”.
• The 2 Day RSI of the SPX is 15. The Dow RSI is 15, NASDAQ is 12 and Russell 5. The three day average of all four of the indices is 11. October 29th the three day average was 10. September 3rd and June 18th are the only other occasions since the rally began that the numbers were in this range.
• Over the last five sessions, the average session closed 23% of the range above the low. This is the lowest five day average since February 2009.
• Today’s close was above Friday’s close. From a technical standpoint, it’s important to avoid closing below Friday’s close.
• 180 SPX components moved upward and 181 components downward during the after hours with 121 million shares traded.
Have a great Wednesday.
-----------
"Mel"
