The 50 DMA/200 DMA Crossover Approaches
by Jerome "Mel" Hickerson
This morning's economic data was a bit disappointing. Personal Incomes rose by +0.4% in May, which was a tenth below the consensus expectations for an increase of +0.5%. April’s reading was revised lower to +0.4% from +0.5%. Personal Spending for the month rose by +0.2, a tenth ahead of the expectations of +0.1%. On the inflation front, the PCE Core rose by +1.9 over the past year while the PCE Deflator was up +0.2 in April. The Chicago Fed reported that their National Activity Index came in at +0.21 in May, which was below the estimates for a reading of +0.32 and the revised April reading of +0.25. Futures were flat at the open.
The week began with a four point up move that quickly faded, setting the low of the session at 9:56. The SPX quickly snapped back and set the high of the day at 11:42. The rest of the session was like a drunken man stumbling around and bouncing off the walls at 1080 and at 1074.5; the day closed right on that lower boundary. It was an unimpressive day for both bulls and bears but I give the nod to the bears because the market is oversold yet finds it impossible to sustain any upward momentum.
Looking ahead, some kind of oversold bounce is always possible. But I exited my swing long (TNA) with a fair profit today because I think it’s more dangerous to be long than the reward is worth. What I am seeing doesn’t suggest being aggressively long, especially with a 3X ETF.
Let’s spend some time this evening discussing moving average crossovers. I’ve done well swing trading based on moving average crossovers, especially the short-term averages. But there’s a major technical event imminent that you are certain to hear a lot about: “The Death Cross”. This event occurs when the 50 DMA moves below the 200 DMA. The opposite event, the 50 DMA moving above the 200 DMA is known as the “The Golden Cross.”
I am tracking several moving averages for my trading purposes: The Dow, the NYSE Composite, the Russell 1000 Technology Index, the Russell 2000, the SPX, and the XLF. This array provides a broad spectrum and should give good advance notice of market moves.
I am specifically watching for the 5 DMA crossing the 20 DMA, the 20 DMA crossing the 50 DMA, the 20 DMA crossing the 100 DMA, and the 50 DMA crossing the 200 DMA.
I have enhanced the moving averages portion of the nightly report to always make mention when any of the six indices mentioned above crossover any of the moving averages mentioned; these will be shown in red font just below the moving averages section. Trading opposite of these crossovers is contra-trend and doing it consistently will provide you with many sleepless nights.
Now let’s discuss this Death Cross and Golden Cross a bit further since you will no doubt here much about this when the SPX 50 DMA crosses down under the 200 DMA. I am sure than many analysts will get excited, but let’s examine whether this event is really worth getting excited about. Keep in mind that the broadest index that I follow, the NYSE Composite Index, has already had the “Death Cross” crossover on June 22nd.
I’ve gone through the last 30 years of SPX data and found 27 crossovers since 1980, 14 Golden Crosses and 13 (soon to be 14) Death Crosses. It’s obvious from this examination of the data that this technical event is worthy of notice; money can be made.
But what I found is that 12 of the 14 Golden Crosses were money makers and only three of 13 Death Crosses were money makers. Of course, two of those three were quite good. But the average net loss for the SPX on the 13 Death Crosses was only ½%. Not exactly exciting when considering that the average length of hold was 159 trading sessions.
I’ve attached a chart of the data for your examination. Tomorrow I plan to review the first several days after each of the Death Crosses; it may be possible that there is a quick reaction worthy of trading when this event occurs, as it is likely to later this week or next week.
Day Trade Systems Update: (Signals today)
* SSO at: 10:04
* GDX at: 11:13
* SDS at: 11:56
* 1/2 GDX at: 12:15
* SSO at: 12:55
We were again focused on ProShares Ultra S&P500 ETF (SSO), ProShares Ultrashort S&P500 ETF (SDS), and Market Vectors Gold Miners (GDX) today. It was a profitable day but the morning was easier than the afternoon and the 11 point range always makes for tight trading.
SPX Summary for Monday, June 28, 2010
201 Advancers/283 Decliners
Today's SPX component winners and losers:
- Largest one day loser is ODP with -7.41%
- Largest three day loser is ODP with -13.09%
- Largest five day loser is ODP with -16.83%
- Largest ten day loser is ODP with -22.59%
- Largest one day winner is TLAB with 8.48%
- Largest three day winner is MI with 9.60%
- Largest five day winner is DFS with 5.63%
- Largest ten day winner is SUN with 15.75%
*** SPX Technical Summary ***
The lowest 14 day RSI component is DHR; the highest 14 day RSI component is BDK. The average 14 day RSI of all 500 components is 56.
The greatest positive five day momentum component is DFS; the greatest negative five day momentum component is ODP. The average five day momentum of all 500 components is -3.66.
6.00% of the SPX components are giving a crossover Buy signal; 21.80% of the SPX components are giving a Sell signal. This is a 3.6 to 1 ratio of Sell signals over Buy signals.
SPX component signal changes today (evidence of trend):
- From Sell to Neutral: 3 components.
- From Buy to Neutral: 31 components.
- From Neutral to Sell: 14 components.
- From Neutral to Buy: 1 component.
Movement continues toward the Sell side.
The moving averages: SPX NYA
Close 1074.57 6736.60
9 EMA 1077.40 Rising 6767.78 Rising
5 DMA 1082.47 Falling 6787.95 Falling
10 DMA 1098.89 Falling 6885.49 Falling
20 DMA 1088.10 Falling 6795.04 Falling
50 DMA 1125.60 Falling 7041.23 Falling
100 DMA 1133.08 Falling 7159.63 Falling
200 DMA 1112.20 Rising 7125.60 Falling
10 Wk MA 1103.94 Falling
SPX 5 DMA crossed below 20 DMA
NYA 5 DMA crossed below 20 DMA
TECH 5 DMA crossed below 20 DMA
XLF 5 DMA crossed below 20 DMA
NYSE Summary
On the NYSE 3203 issues were traded with 1441 advancing issues and 1657 retreating issues, a ratio of 1.15 to 1 declining. There were 51 new highs and 42 new lows.
Declining volume was higher at a ratio of 1.47 to 1. The closing TRIN was 1.28 and the final tick was 185.
We did at least see a final tick that was positive.
Evidence of trend:
Relative to the previous 30 session average, volume was -37.28% below the average. Of the last 15 sessions 4 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 16 sessions ended on a positive tick, 7 of last 10.
The 5 day moving average of New Highs is 51 while the 5 day moving average of new lows is 40 and the 10 day moving average of Net Advancing is -99.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line decreased from 203245 to 203029. This -0.11% decrease came while the SPX was losing -0.2%. The 10 day moving ratio of positive volume is 0.9 and the 10 day moving Advance/Decline ratio is 0.94. The 10 day moving ratio of positive volume has trended 0.07 over the last three days and the 10 day moving Advance/Decline ratio has trended -0.06 over the last three days.
The NYSE Composite Index lost -0.4% today.
NYSE Statistics:
Absolute Breadth Index: 44.28 down from previous day of 48.45
Cumulative Volume Index: 41,775.69 down from previous day of 42,636.41
High Low Logic Index: 0.70 up from previous day of 0.58
McClellan Oscillator: (32.38) down from previous day of (8.50)
McClellan 10 DMA: 81.25 down from previous day of 101.59
McClellan Summation Index: (999.94) down from previous day of (967.56)
% Stocks Above 200 DMA: 49.67 down from previous day of 50.84
% Stocks Above 40 DMA: 40.31 down from previous day of 40.68
New High / New Low Ratio: 57.00 up from previous day of 44.44
26wk New High/Low Ratio: 52.19 up from previous day of 34.39
13wk New High/Low Ratio: 49.40 up from previous day of 28.15
4wk New High/Low Ratio: 66.09 up from previous day of 45.54
Cumulative 4-Week New Hi-Low: 439,393 up from previous day of 439,249
Nasdaq Adv/Decline: 1,375 down from previous day of 1,394
Russell 1000 Advance/ Decline Line: 2,267 down from previous day of 2,284
Russell 2000 Advance/ Decline Line: (1,967) down from previous day of (1,945)
Notes:
Absolute Breadth Index: Low numbers suggest a topping process and high numbers suggest a bottoming process.
Cumulative Volume Index: If this begins to trend down while the averages are trending up, it is a bearish sign. If this begins to trend up while the averages are trending down, it is a bullish sign.
High Low Logic Index: High readings are bearish; low readings are bullish.
McClellan Oscillator: -100 is oversold and +100 is overbought. Also watch for crosses above and below zero.
McClellan Summation Index: Interpreted as bullish or bearish when it crosses over the zero line.
Cumulative 4-Week New Hi-Low: The difference between the number of issues reaching new highs (during a 4-week period) and the number of issues reaching new lows (during the same 4-week period).
Tuesday, June 29
Economics
09:00 Case-Shiller 20 city index 3.5% cons.
10:00 Consumer Confidence 62.0 cons.
03:50 German Unemployment Rate
04:00 European Union M3 Money Supply
05:00 European EC Economic Sentiment
08:30 Canadian GDP
Earnings
Before: NONE
After: EXFO, GIS, ZZ, WOR
The Case-Shiller 20-city home index is expected to have risen 3.4% in April after rising 2.3% in March. Also Tuesday, the Conference Board releases its consumer confidence index, which is expected to have fallen to 62 in June from 63.3 in May.
Mel’s Missives from the Matrix:
- Total tick for the day was 78,000 and the average tick for the day was 50. There were 159 ticks greater than 600 and 89 ticks more extreme than -600. There were 14 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 11.15 points. The intraday trading range - 9:35 to the close - was 11.02. The 5 DMA of daily range is 15.12.
- Evidence of the intraday trend: At 10am volume was 86.9% of the 10 day average. By noon the volume was 95.57% of the 10 day average, and by 2pm volume was 97.37% of the 10 day average.
- The day's volume was 78.3% of the average daily volume for the last year. Volume was 91.5% of the last 10 day average and 83% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 2:30 and 2:45 when relative volume increased 31.6% while the SPX was rising 0.18%. The largest drop in relative volume came between 12:45 and 1:00 when relative volume dropped -24.4% while the SPX was rising 0.12%.
- 2% of the SPX stocks closed with two day RSI above 90. 6% closed with RSI above 80. 27% closed with RSI below 20 and 15% closed with RSI below 10.
- 29.4% of the SPX are above their five day moving average, 11.2% are above their 10 day average, 34.4% are above their 20 day moving average, 20% are above their 50 day moving average, 27.8% are above their 100 day moving average, and 37.4% are above their 150 day moving average.
- 12% of the SPX closed above their most recent previous high.
- 14% of the SPX stocks closed below their most recent previous lows.
- 201 SPX issues advanced and 283 issues declined, a net SPX advance/decline of -82.
- Evidence of the intraday trend: At 10am, 11.4% of the SPX components were in the top half of the range. By noon, 66.2% were in the top half of the range, and by 2pm, 47.8% were in the top half of the range.
- 40% of stocks closed in the top half of the day's range. (59.8% closed in bottom half.)
- 1.8% of stocks closed in the top 10% of the day's range. 8% of stocks closed in the top 20% of the day's range.
- 18.8% of stocks closed in the bottom 10% of the day's range. 29.8% of stocks closed in the bottom 20% of the day's range.
- 2.2% of stocks closed within 2% of their 52 week high. 9.4% of stocks closed within 5% of their 52 week high.
- 66.8% of stocks closed within 50% of their 52 week low. 35.2% of stocks closed within 25% of their 52 week low.
- 3.6% of stocks closed within ¼% of their high for the day.
- 18.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 20.8% of the SPX components were up since the open. By noon, 57.4% were up since the open, and by 2pm, 48.6% were up since the open.
- 43.2% of the SPX closed up from the previous close; 34.8% closed higher than the open.
- Sectors stronger than the SPX for Monday:
- Technology -- Outperformed the SPX by +38%.
- Consumer Staples -- Outperformed the SPX by +129%.
- Utilities -- Outperformed the SPX by +87%.
- Health Care -- Outperformed the SPX by +4%.
- Sectors weaker than the SPX for Monday:
- Basic Materials -- Underperformed the SPX by -112%.
- Energy -- Underperformed the SPX by -117%.
- Financials -- Underperformed the SPX by -78%.
- Industrials -- Underperformed the SPX by -48%.
- Consumer Discretionary -- Underperformed the SPX by -53%.
- The $SOX index strength was stronger relative to the SPX Monday by 0.78%.
- The XLF underperformed the SPX by -0.78% Monday.
- The 2 Day RSI of the SPX is 16. The Dow RSI is 2, the NASDAQ is 17 and the Russell is 44.
- Over the last four sessions, the average session closed 35.59% of the range above the low. Monday closed at 26.2% of the daily range.
- Upside momentum was flat Monday, from Friday’s -3.68 to today’s -3.66. The ratio of SPX components giving a crossover sell signal compared to buy signals moved further to the sell side to S 3.63 to 1.
- The ISEE Equity 10 day moving average Monday was 152.8. The lowest 10 day average in the last 52 weeks was 136.6 on 06/14/10and the highest 10 day average in the last 52 weeks was 249.3 on 04/15/10.
- 145 SPX components moved upward and 248 components downward during the after hours with 202 million shares traded.
Trade 'em well on Tuesday everyone!
-Mel
