The Fed Plays and the Market Dances
by Jerome "Mel" Hickerson
A combination of nervousness in front of the Fed meeting and trade data out of China that showing that demand may be slowing domestically gave markets pause this morning ahead of the open. The government reported U.S. Nonfarm Productivity in the second quarter fell by -0.9%, which was well below the consensus for +0.2% and Q1’s revised level of +3.9 (from +2.8%). This was the first drop in productivity since Q4 2008. As a result, futures were down significantly pointing to a weak open.
The session began with an eight point gap downward followed by a sharp move of another seven points down to quickly put the low of the day on the chart at 9:52. The SPX then traded for hours within a tight five point range waiting for the Fed statement.
At 2:15 the music played and the dance began. The SPX exploded upward, gave back the gains within minutes, rushed upward even higher, gave almost all those gains back, and then zigzagged once more into the close. The session closed just below the trading high of the day, but well below the previous day’s close.
Bears must be frustrated by this tape; the bulls fight back almost every day. It is a characteristic of bullish markets to put the low of the day on the chart early in the session and to trade higher near the close. The SPX appears to be losing steam but the bulls are not giving this up easily.
Our Nine Sectors Report shows three changes tonight; two positive and one negative. No trend change is apparent but we will step aside of our Sell signal tonight and move to Neutral. This is likely to be a very brief interlude with the Neutral signal but we want to see where things go on Wednesday; we prefer to trade what we see and right now we see sideways. Let me be clear and state this again: Data still suggests that we go lower soon, then higher. But other data is suggesting higher, lower, then higher. I prefer to turn the signal to Neutral for a day and let the market decide. An assault on 1131 seems possible here.
Our trade systems were mostly quiet prior to the Fed announcement and we are always cautious afterwards. But we did have a couple of successful scalps and we closed out a short-side swing from Friday. Posted above is also yesterday’s trade since we failed to post it last night.
Wednesday, August 11
Economics
08:30 Trade Balance
10:30 Crude Inventories
02:00 Treasury Budget
Australia Westpac Consumer Confidence
Great Britain Claimant Count Rate
Bank of England Quarterly Inflation
Canada International Merchandise Trade
Earnings
Before: AVT, CAE, CSC, EJ, IAG, M, MFB, SUP, SUSS
After: AAP, ANW, AMCN, ARCL, CSCO, CPA, EDMC, ENS, GIVN, IDSY, OMER, PAAS, SLW, SRC, TK, VIRL
Auction
01:00 10-Yr Note
The government reports on the U.S. trade deficit before the opening bell. Economists expect the trade gap widened slightly to $42.5 billion in July from $42.3 billion the month before. In the afternoon, the Treasury Department is slated to release its July budget numbers. Economists expect a deficit of $169 billion in the month after $180.7 billion shortfall in June. Cisco Systems reports quarterly results after the market closes.
Mel’s Missives from the Matrix:
- Total tick for the day was -27,000 and the average tick for the day was -17. There were 72 ticks greater than 600 and 64 ticks more extreme than -600. There were 11 ticks greater than 1000 and 7 ticks more extreme than -1000.
- The day's range was 15.58 points. The intraday trading range - 9:35 to the close - was 14.92. The 5 DMA of daily range is 11.89.
- Evidence of the intraday trend: At 10am volume was 93.28% of the 10 day average. By noon the volume was 83.05% of the 10 day average, and by 2pm volume was 84.79% of the 10 day average.
- The day's volume was 81.3% of the average daily volume for the last year. Volume was 105.4% of the last 10 day average and 130.8% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 2:15 and 2:30 when relative volume increased 227.6% while the SPX was rising 0.41%. The largest drop in relative volume came between 2:45 and 3:00 when relative volume dropped -136.7% while the SPX was dropping -0.14%.
- 5% of the SPX stocks closed with two day RSI above 90. 9% closed with RSI above 80. 29% closed with RSI below 20 and 12% closed with RSI below 10.
- 38% of the SPX are above their five day moving average, 54.6% are above their 10 day average, 67% are above their 20 day moving average, 68.4% are above their 50 day moving average, 51% are above their 100 day moving average, and 54.6% are above their 150 day moving average.
- 7% of the SPX closed above their most recent previous high.
- 49% of the SPX stocks closed below their most recent previous lows.
- 128 SPX issues advanced and 358 issues declined, a net SPX advance/decline of -230.
- Evidence of the intraday trend: At 10am, 28% of the SPX components were in the top half of the range. By noon, 50.4% were in the top half of the range, and by 2pm, 39.6% were in the top half of the range.
- 69.4% of stocks closed in the top half of the day's range. (30.4% closed in bottom half.)
- 2.8% of stocks closed in the top 10% of the day's range. 15.4% of stocks closed in the top 20% of the day's range.
- 2.2% of stocks closed in the bottom 10% of the day's range. 6.4% of stocks closed in the bottom 20% of the day's range.
- 11.4% of stocks closed within 2% of their 52 week high. 23% of stocks closed within 5% of their 52 week high.
- 81.4% of stocks closed within 50% of their 52 week low. 47.4% of stocks closed within 25% of their 52 week low.
- 4.4% of stocks closed within ¼% of their high for the day.
- 2.8% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 3.8% of the SPX components were up since the open. By noon, 13.2% were up since the open, and by 2pm, 11.2% were up since the open.
- 25.6% of the SPX closed up from the previous close; 60% closed higher than the open.
- Sectors stronger than the SPX for Tuesday:
- Consumer Staples -- Outperformed the SPX by +77%.
- Utilities -- Outperformed the SPX by +116%.
- Health Care -- Outperformed the SPX by +79%.
- Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -31%.
- Energy -- Underperformed the SPX by -25%.
- Financials -- Underperformed the SPX by -33%.
- Industrials -- Underperformed the SPX by -10%.
- Technology -- Underperformed the SPX by -41%.
- Consumer Discretionary -- Underperformed the SPX by -1%.
- The $SOX index strength was weaker relative to the SPX Tuesday by -2.08%.
- The XLF underperformed the SPX by -0.33% Tuesday.
- The 2 Day RSI of the SPX is 32. The Dow RSI is 31, the NASDAQ is 25 and the Russell is 24.
- Over the last four sessions, the average session closed 81.21% of the range above the low. Tuesday closed at 60.3% of the daily range.
- Upside momentum increased slightly Tuesday, from Monday’s 0.06 to today’s 0.1. The ratio of SPX components giving a crossover sell signal compared to buy signals decreased slightly to B 3.87 to 1.
- The ISEE Equity 10 day moving average Tuesday was 167.5. 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.
- 203 SPX components moved upward and 167 components downward during the after hours with 102 million shares traded.
Trade 'em well on Wednesday everyone!
-Mel
