The "Santa Rally" Completion
by Jerome "Mel" Hickerson, MarketsPath.com
The new year looks a lot like the old year. Another late day pump to close the day. Another 52 week high and another closing high. Another day closing at the high of the day. Another sub seven point trading range.
The session opened with absolutely no pressure from the futures. The index chopped sideways until 10:00, then dipped abruptly to set the low of the day at 10:00 before quickly bouncing to set the morning high at a new high for the year at 10:45. From there until 2:20 the index did a slow motion downward creep before bouncing near the earlier low of the session. Then, into the close, the bulls took control. The high of the day and the latest high for the year were put on the charts at 3:42 and the index managed to close just a tenth of a point off the high.
It was a bullish close, no way to avoid seeing that. The financials led the way today; this has got to be seen as bullish. The XLF has managed to climb back on top of a rising 50 day moving average. This is forcing me to take another look at my longer time viewpoint of where the SPX is headed; but I have not – yet – drawn any new conclusions. The XLF is still 5.5% below its 52 week high while the SPX is setting new highs; history is unequivocal that this leads to a lower SPX sooner rather than later. So somewhere in the not distant future, the SPX seems very likely to retrace.
But shorter term, we are likely to be driven by two economic news events: The FOMC minutes tomorrow and the jobs numbers on Friday. I don’t think the FOMC minutes will do much more than rock the market momentarily but the jobs number on Friday can have an impact for a day or two. There are many expecting this jobs number to be quite good (I am among them) but that also sets up the potential for a disappointment or for a “sell the news” event. The rally early this week may well have baked into the market all the good news already.
Seasonality has now expired on the upside as well. Today ended the “Santa Rally” timeframe. The SPX gained 1.29% during the “Santa Rally” this year. This is about the mid range for the 60 years since 1950; drawing conclusions about January from this is pretty iffy. More reliable predictions can be made from the first six sessions of January than from the Santa Rally when the Santa Rally results in a meager gain. But it also rules out the ability to make negative predictions; January has a positive bias (62% positive) - but this falls to 50% if the Santa period is negative.
In spite of the positive January bias, the next several sessions have a very mixed seasonal result with three of the next four being negative.
For Wednesday, our model is suggesting a struggle for the SPX. Lacking any news driven rally, odds appear good that the SPX will begin some sort of pullback. A morning gap upward will have “fade me” written all over it.
Wednesday, January 6
Economics
07:30 Challenger Job Cut
08:15 ADP Employment Report -75k cons.
10:00 ISM Services 50.5 cons.
Earnings
Before: AYI, FDO, MON, RBN, RPM, UNF, WOR
After: BBY, BLUD, RECN, RT, SMSC
Mel’s Random Hits:
• Total tick for the day was +214,000. The opening 30 minutes was negative, turned positive for an hour, then negative again for 30 minutes. The afternoon was positive with the exception of an hour from 1:30 through 2:30. Large lots were all on the sell side until the final hour; during the final hour the large lots were entirely on the buy side.
• The day's range was 6.97 points.
• The day's volume was 44.81% of the average daily volume for the last year. At least, this is the volume number reported by the exchanges for the total SPX. My data counts the 500 components and totals them; my total significantly differs from the exchange total count; more than a billion shares different. Since I take the exchange data and add the 500 components I don’t know how this can happen; this is the first time I have seen this happen. Personally, I believe their total is wrong and that my total is correct. My total shows that the volume was 141% of the last 10 day average. Volume was slow at the open but accelerated the entire day.
• 24% of the SPX stocks closed with two day RSI above 90. 43% closed with RSI above 80. 16% closed with RSI below 20 and 11% closed with RSI below 10. These are mildly overbought numbers with plenty of room to go higher.
• 66% of the SPX are above their five day moving average, 66% are above their 10 day average, and 77% are above their 20 day moving average.
• 19% of the SPX stocks closed below their most recent previous lows.
• 39% of the SPX closed above their most recent previous high.
• 62.8% of stocks closed in the top half of the day's range. (37.2% closed in bottom half.)
• 8.0% of stocks closed in the bottom 20% of the day's range.
• 23.0% of stocks closed in the top 10% of the day's range.
• 26.2% of stocks closed within 2% of their 52 week high.
• 24.6% of stocks closed within 50% of their 52 week low.
• 24.8% of stocks closed within ¼% of their high for the day.
• 4.0% of stocks closed within ¼% of their low for the day.
• 52.8% of the SPX closed up from the previous close; 53.6% closed higher than the open.
• Sectors weaker than the SPX for the day: Technology, Consumer Staples, Utilities, and Health Care
• Sectors stronger than the SPX for the day: Energy, Industrials, Basic Materials, Financials, and Consumer Discretionary
• The $SOX index strength was weaker than the SPX today.
• The 2 Day RSI of the SPX is 82. The Dow RSI is 65, NASDAQ is 80 and Russell 77.
• Last night’s report: “So stats suggest that tomorrow will also be a positive day.” We managed a positive close today although it seemed in doubt much of the day.
• From the weekend report: “We have once again triggered the "Tuesday's close should be higher than Monday's open" signal. This signal was quite effective.
• SPX components moved upward very slightly during the after hours with more than 70 million shares traded.
Have a great Wednesday!
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"Mel"
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