The Struggle of XLF Versus SOX
by Jerome "Mel" Hickerson
Today’s session began with a pop and a drop, setting the high for the day at 17 minutes into the session and the low for (most of) the day at 10:41. The rest of the day was an epic struggle of XLF versus SOX, battling for influence over the direction of the market. XLF eventually won the battle today, tanking the market in the final hour.
The SPX painted the chart with a higher high and a lower low while the Dow painted daily bars with lower highs and lower lows. The financials once again struggled (stunk).
It was a dull boring day for most of the session with all the action packed into the first and last hour of trading. But that last hour was a doozy. The bears finally showed up and pushed the ball down field. Today’s close was spectacularly ugly and bearish but support at 1099 held at the close. The ball remains between the 20 yard lines until pushed under 1084 or above 1111. Getting too bearish here could be expensive.
The question now is whether the late session selloff was caused by a leak of tomorrow’s jobs numbers or whether the release tomorrow will reverse or add to the move. No way to be certain but my instinct tells me that someone leaked the numbers. A gap down at the open tomorrow after the jobs data seems likely, then possibly a gap fill.
For those looking to swing short, my slower swing methodology tends to push back the trigger each time that we close red. Many think this is the time to get short. I do not; I am anxious, but not anxious enough to put my money at risk here.
For those who missed the late day plunge today: A lost opportunity is easily made up; lost money, not so easy. Today’s plunge should excite even traders who missed it because it opens opportunities for Friday’s action. Volatility breeds more volatility. This last hour move was good news for traders.
For Friday, our model has generated a +1. This is a null signal and tells us little about tomorrow. But I look for a positive close to further frustrate bears tomorrow.
Friday, December 4
Economics
08:30 Nonfarm Payrolls -120k cons.
08:30 Unemployment Rate 10.2% cons.
08:30 Average Workweek 33.1 cons.
08:30 Hourly Earnings 0.2% cons.
10:00 Factory Orders 0.2% cons.
Earnings
Before : BIG, SIRO
Speeches
10:00 Charles Plosser
01:15 James Bullard
The November employment report from the Labor Department is the biggest economic report of the week. Employers are expected to have cut 114,000 jobs from their payrolls in the month after cutting 190,000 in the previous month. The unemployment rate, generated by a separate survey, is expected to hold steady at 10.2%, unchanged from October. The October factory orders report is due out after the start of trading. Orders are expected to have risen 0.1% after rising 0.9% in September.
Mel’s Random Hits:
• Total tick for today was -46,000. This is really a very moderate total for a 9 point SPX loss. Breadth was positive through 10:30, negative for an hour, then turned positive until a little after 2:00. The last two hours were not pretty.
• Today's range was 18.54 points. Much of that came in the last hour; all of the range came in the opening and closing hours.
• Today's volume was 84% of the average daily volume. Volume was heavy on the upswing in the morning and heavy on the sell off at the close.
• 13% of the SPX stocks closed with two day RSI above 90. 18% closed with RSI above 80. 26% closed with RSI below 20 and 8% closed with RSI below 10.
• 51% of the SPX are above their 10 day moving average and 52% are above their 20 day moving average.
• 48% of the SPX stocks closed below their most recent previous lows.
• 10% of the SPX closed above their most recent previous high.
• 9.4% of stocks closed in the top half of today's range. (90.6% closed in bottom half.)
• 70.6 of stocks closed in the bottom 20% of today's range.
• 0.6% of stocks closed in the top 10% of today's range.
• 14.8% of stocks closed within 2% of their 52 week high. That represents 50 SPX components dropping back away from their 52 week highs today.
• 23.8% of stocks closed within 50% of their 52 week low.
• 0.8% of stocks closed within ¼% of their high for today.
• 51.6% of stocks closed within ¼% of their low for today. We really closed near the lows for the day.
• 20.2% of the SPX closed up for today. I am surprised to see this number as high as it is.
• The 2 Day RSI of the SPX is 27. The Dow RSI is 23, NASDAQ is 50 and Russell 43. The NASDAQ and Russell had been lagging but have been the strongest for a couple days. This is how strong markets work, not weak markets. Weak markets are lead down my the weak sectors; strong markets keep switching roles
• Ever noticed how excited Bears get with a 10 point SPX move? I realize Bears have had little to thrill them for many months, but every down move gets them doing the “this it IT!” dance. Eventually, it may be. I just don’t think it’s here and now. The irony is that I don’t consider myself a Bull; I just trade whichever way the wind blows.
• Signs that the market is topping are visible everywhere I look. But there are also signs of strength in the mix; ignoring these isn’t wise. Signs of strength include rising breadth (after weeks of falling breadth) and the SOX index. The fact that the NASDAQ and RUT are not just rolling over is also a positive sign. We may continue to be trade within the range of 1084-1111 for some time yet.
• SPX components moved downward slightly during the after hours.
Have a great Friday!
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"Mel"
ETF’s we trade:
Ultra S&P500 ProShares (NYSE: SSO)
Ultra Dow30 ProShares (NYSE: DDM)
Ultra QQQ ProShares (NYSE: QLD)
PS UTLRSHRT QQQ (NYSE: QID)
UltraShort S&P500 ProShares (NYSE: SDS)
UltraShort Dow30 ProShares (NYSE: DXD)
PowerShares QQQ Trust (NASDAQ: QQQQ)
Direxion Daily Small Cp Bear 3X (NYSE:TZA)
Direxion Daily Small Cp Bull 3X (NYSE:TNA)
