The Wax Museum Returns to Wall and Broad
by Jerome "Mel" Hickerson
There was no economic data to move the markets Friday morning and the overnight futures were calm ahead of option expirations. Futures were pointing to a flat open. Overseas markets were rather flat as well.
So it should be no surprise that the Friday options expiration session opened flat. After about 15 minutes, the SPX moved down a little – all moves were little on this day – and put the low of the day on the chart at 9:59. The index then switched gears and moved upward for an hour to put the high of the day on the chart at 11:08. The rest of a very dull day was sideways choppy trade with a slight downward bias.
Stepping back and reviewing the weekly data, we see that the SPX had the lowest volume since the week of April 5th. The weekly trading range was the smallest since April 19th. The index has gained more than 52 points in the last two weeks.
Over the last nine sessions, three closed red: -6.31, -1.97, and -0.55. The action has been very mild for the bears as the euro had been strengthening and holding its gains.
We’re also seeing the intraday trading range shrink. The seven point range Friday was smallest trading range since April 15th. Small trading range is a characteristic of a top formation; but we have seen that tops can take a long time to build. The trading range in December was below ten points for a few weeks as the top was building. We also saw the late March and April range hover around ten points per day for weeks as the top was building. But as traders, we should at least take notice when the trading range falls as we need to be ready for the eventual range expansion that comes with downward spikes in the SPX.
Friday’s action was certainly not what I had expected. 20% of the daily volume came during the opening minutes; volume disappeared the rest of the session. The wax museum returned to Wall and Broad; everything looked lively but nothing was moving. Was this a one day performance for the wax museum or a long-term engagement?
One oddity within the data surfaced early in the day on Friday and persisted throughout the entire day without any effect. Early on I noticed that eight, and at times all nine, of the SPX sectors were lagging (eight sectors closed relatively worse than the index). This is uncommon and usually results in the index being dragged down. So I was more bearish biased in my trading than customary. This didn’t prove particularly helpful.
As we look ahead to next week, one bit of data stands out in my mind. The week after June options expiration has been negative for the last seven years.
This market remains in “weak” hands. Breadth is moderately strong but volume is weak. We have seen this low volume upside and strong volume downside for months. Some people say, “But look at the price!” I do. And I see the SPX right where we began the year. A lot of noise but the movement is a wash.
A market that oscillates frantically every time the news blows is not a healthy market. Remember last summer when bad news would hit the market and it simply shrugged it off and kept moving higher? Bad news was simply “less bad”. When I see that this year, then I’ll know that the weak hands have given control back to strength. Until then, be ready for anything.
Day Trade Systems Update: (Signals today)
* GDX Short at: 10:01
* SDS at: 10:41
* GDX Short at: 10:46
* GDX Short at: 12:34
* SDS at: 1:46
* GDX Short at: 2:37
* SDS at: 2:46
This was a very forgettable session that produced little opportunity for profitable trading. SPX double ETFs ProShares Ultra S&P500 ETF (SSO) and ProShares Ultrashort S&P500 ETF (SDS) had ranges around 40 cents for the entire session, top to bottom, and a typical move was about 15 cents. Even Market Vectors Gold Miners (GDX) moved only about 60 cents (GDX often trades in a $1.50 range.) So Friday required precision timing and luck; if you were aiming for 15 cents on a move you likely got stopped out with less unless your entry nailed the exact bottom. So our trade systems struggled; we managed a few pennies gain that basically covered expenses.
In spite of the small intraday trading range each day this week (average of 13 point range each day), we closed out a decent week. But there is room for improvement without touching the software. The human interface (me) between the software and the traders has plenty of room for improvement. I oftentimes act as a final filter, choosing which signals to trade and which to disregard. This can be a hit and miss proposition and I have plenty of room to improve.
SPX Summary for Friday, June 18, 2010
242 Advancers/245 Decliners
417 Advancers/73 Decliners for the week
Today's SPX component winners and losers:
- Largest one day loser is HCP with -4.75%
- Largest three day loser is ODP with -8.02%
- Largest five day loser is DHR with -48.13%
- Largest ten day loser is DHR with -47.66%
- Largest one day winner is TSO with 3.71%
- Largest three day winner is MTB with 14.27%
- Largest five day winner is MTB with 16.06%
- Largest ten day winner is GCI with 21.41%
*** 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 MTB; the greatest negative five day momentum component is DHR. The average five day momentum of all 500 components is 2.43.
58.80% of the SPX components are giving a crossover Buy signal; 2.20% of the SPX components are giving a Sell signal. This is a 26.7 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
- From Sell to Neutral: 3 components.
- From Buy to Neutral: 3 components.
- From Neutral to Sell: 2 components.
- From Neutral to Buy: 38 components.
Movement remains to the Buy side. But we are reaching an extreme that often precedes a pullback.
The moving averages:
Close 1117.51
9 EMA 1116.75 Rising
5 DMA 1110.59 Rising
10 DMA 1089.96 Rising
20 DMA 1086.61 Rising
50 DMA 1139.14 Falling
100 DMA 1133.28 Rising
200 DMA 1110.16 Rising
10 Wk MA 1129.79 Rising
Note that the moving averages are mostly rising again.
NYSE Summary
On the NYSE 3196 issues were traded with 1714 advancing issues and 1365 retreating issues, a ratio of 1.26 to 1 advancing. There were 60 new highs and 14 new lows.
Advancing volume was higher at a ratio of 1.26 to 1. The closing TRIN was 0.99 and the final tick was 162.
Evidence of trend:
Relative to the previous 30 session average, volume was 15.21% above 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, 17 sessions ended on a positive tick, 10 of last 10.
The final tick being positive or negative is a stat worth watching if you swing trade. I find that heavy buying or heavy selling right at the close is often an interesting way to measure trader sentiment.
The 5 day moving average of New Highs is 46 while the 5 day moving average of new lows is 12 and the 10 day moving average of Net Advancing is 577. The Net Advancing data indicates a bullish trend.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line increased from 205650 to 205999. This 0.17% increase came while the SPX was gaining 0.13%. The 10 day moving ratio of positive volume is 1.41 and the 10 day moving Advance/Decline ratio is 1.46. The 10 day moving ratio of positive volume has trended 0.25 over the last three days and the 10 day moving Advance/Decline ratio has trended 0.19 over the last three days.
The NYSE Composite Index gained 0.09% today.
NYSE Statistics:
Absolute Breadth Index: 58.71 down from previous day of 59.68
Cumulative Volume Index: 49,948.36 up from previous day of 48,997.09
High Low Logic Index: 0.39 up from previous day of 0.36
McClellan Oscillator: 178.94 down from previous day of 185.53
McClellan 10 DMA: 85.17 up from previous day of 56.21
McClellan Summation Index: (964.41) up from previous day of (1,143.35)
% Stocks Above 200 DMA: 60.41 up from previous day of 59.93
% Stocks Above 40 DMA: 49.60 up from previous day of 44.96
New High / New Low Ratio: 78.21 down from previous day of 87.88
26wk New High/Low Ratio: 72.92 down from previous day of 78.69
13wk New High/Low Ratio: 72.01 down from previous day of 74.57
4wk New High/Low Ratio: 91.17 up from previous day of 91.15
Cumulative 4-Week New Hi-Low: 437,921 up from previous day of 437,194
Nasdaq Adv/Decline: 1,503 up from previous day of 1,495
Russell 1000 Advance/ Decline Line: 2,468 down from previous day of 2,470
Russell 2000 Advance/ Decline Line: (1,812) up from previous day of (1,819)
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).
I suspect that many readers overlook the above numbers each night, so today I’ll take a moment to point out a couple of things.
- Notice that the Cumulative Volume Index, while up from Thursday, is down 2,000 since Tuesday while the index has been creeping higher. This is not a bullish sign.
- The McClellan Summation Index has not yet turned positive; it’s not really very bullish until it does.
- The Russell 1000 advance/decline line fell on Friday. Since Tuesday, the Russell 2000 advance/decline has moved down a net of 23.
Mel’s Missives from the Matrix:
- Total tick for the day was 105,000 and the average tick for the day was 68. There were 91 ticks greater than 600 and 42 ticks more extreme than -600. There were 1 ticks greater than 1000 and no ticks more extreme than -1000. The tick action suggests institutional accumulation.
- The day's range was 7.08 points. The intraday trading range - 9:35to the close - was 7.08. The 5 DMA of daily range is 13.73.
- Evidence of the intraday trend: At 10am volume was 169.39% of the 10 day average. By noon the volume was 104.88% of the 10 day average, and by 2pm volume was 94.31% of the 10 day average.
- The day's volume was 91.2% of the average daily volume for the last year. Volume was 88.3% of the last 10 day average and 102.9% of the previous day’s volume.
- Evidence of the intraday trend: The largest increase in relative volume came between 2:45 and 3:00 when relative volume increased 49.4% while the SPX was rising 0.04%. The largest drop in relative volume came between 9:45 and 10:00 when relative volume dropped -157.4% while the SPX was dropping -0.24%.
- 19% of the SPX stocks closed with two day RSI above 90. 30% closed with RSI above 80. 12% closed with RSI below 20 and 3% closed with RSI below 10.
- 66.6% of the SPX are above their five day moving average, 89% are above their 10 day average, 82.6% are above their 20 day moving average, 41.8% are above their 50 day moving average, and 48% are above their 100 day moving average.
- 21% of the SPX closed above their most recent previous high.
- 12% of the SPX stocks closed below their most recent previous lows.
- 242 SPX issues advanced and 245 issues declined, a net SPX advance/decline of -3.
- Evidence of the intraday trend: At 10am, 14.2% of the SPX components were in the top half of the range. By noon, 51.2% were in the top half of the range, and by 2pm, 35.2% were in the top half of the range.
- 42.6% of stocks closed in the top half of the day's range. (57.2% closed in bottom half.)
- 7.4% of stocks closed in the top 10% of the day's range. 16% of stocks closed in the top 20% of the day's range.
- 9.2% of stocks closed in the bottom 10% of the day's range. 21% of stocks closed in the bottom 20% of the day's range.
- 8.8% of stocks closed within 2% of their 52 week high. 20% of stocks closed within 5% of their 52 week high.
- 60.2% of stocks closed within 50% of their 52 week low. 27.8% of stocks closed within 25% of their 52 week low.
- 13.4% of stocks closed within ¼% of their high for the day.
- 15.2% of stocks closed within ¼% of their low for the day.
- Evidence of the intraday trend: At 10am, 26.6% of the SPX components were up since the open. By noon, 54% were up since the open, and by 2pm, 43.4% were up since the open.
- 47.2% of the SPX closed up from the previous close; 40% closed higher than the open.
- Sectors stronger than the SPX for Friday:
- Financials -- Outperformed the SPX by +8%.
- Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -31%.
- Energy -- Underperformed the SPX by -5%.
- Industrials -- Underperformed the SPX by -22%.
- Technology -- Underperformed the SPX by -48%.
- Consumer Staples -- Underperformed the SPX by -120%.
- Utilities -- Underperformed the SPX by -108%.
- Health Care -- Underperformed the SPX by -116%.
- Consumer Discretionary -- Underperformed the SPX by -76%.
- The $SOX index strength was weaker relative to the SPX Friday by -0.44%.
- The XLF outperformed the SPX by 0.08% Friday.
- The 2 Day RSI of the SPX is 93. The Dow RSI is 96, the NASDAQ is 97 and the Russell is 81.
- Over the last four sessions, the average session closed 74.76% of the range above the low. Friday closed at 48.4% of the daily range.
- Upside momentum moved slightly downward Friday, from Thursday’s 2.89 to today’s 2.43. The ratio of SPX components giving a crossover sell signal compared to buy signals moved positively to B 26.73 to 1.
- The ISEE Equity 10 day moving average Friday was 145. 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.
- 201 SPX components moved upward and 177 components downward during the after hours with 224 million shares traded.
- The last three sessions (and four of the last five) have been dojis with less than two points gained or lost. The last similar three day stretch was between Christmas and New Years, something less uncommon during holiday periods. The last such three day stretch that wasn’t during a holiday period was March 26th, 2007(followed by a couple of down days). Before that, late February 2007 had a stretch of four-of-five such days, immediately followed by a -50 point day. As I scan the Matrix data, it appears at a quick glance that such tiny days clustered together frequently lead to market weakness.
Have a great weekend everyone!
-Mel
