Topping or Bullish Consolidation?
by Jerome "Mel" Hickerson
Hello once again from the foggy snowy confines of Ohio. It was raining as I left Miami this morning but it was warm rain. The weekend weather in the Miami area was everything Florida loves to claim; it was low 80s and sunny yesterday as we were in Everglades National Park enjoying the wildlife and the weather.
This week began with the usual Sunday night/Monday morning pre-session pump in the futures. The regular session responded with a quick move upward at the open. But this Monday was a bit different than most recent Mondays. The high of the day was set at 9:31 as the SPX quickly rejected the high and moved down setting the low of the day at 10:09 before spending most of the rest of the session trying to work slowly back upward. But as soon as the high of the day came within sight again, the index once again sold off.
It was another low volume, low range, low volatility session, typical of topping patterns. We painted an inside day, a doji, and a very narrow range day. All of this is typical of a topping pattern. While bulls will claim that it is also typical of bullish consolidation; I am unconvinced due to the intraday action of setting the high so early in the day and having the late day sell off.
Even though everything appears to be typical of a topping pattern, we’ve also seen these patterns continue to power upward a few points a day for several days. So, this is a typical “seller beware” pattern.
One item of warning to bears: Until today, the market breadth during this upswing has been stunning. Today’s breadth was mildly negative, but we have to be alert to the heavy positive breadth and watch carefully for the possibility that this ramp upward continues longer than anticipated.
Our model continues to call for a pullback but I have to admit that I see the numbers moderating as the market essentially moved sideways today. Tuesday’s session has more economic news on the agenda; Monday had none. Therefore, we’d expect more volatility. But another doji within a slightly larger trading range would not be too surprising.
SPX Summary for Monday, February 22, 2010
205 Advancers/285 Decliners
Today's SPX component winners and losers:
• Largest one day loser is HRB with -4.59%
• Largest three day loser is FSLR with -9.13%
• Largest five day loser is NBR with -4.41%
• Largest ten day loser is DF with -16.28%
• Largest one day winner is MIL with 22.48%
• Largest three day winner is MIL with 24.72%
• Largest five day winner is SII with 28.00%
• Largest ten day winner is SII with 35.32%
*** SPX Technical Summary ***
The lowest 14 day RSI component is DNB; the highest 14 day RSI component is ARG. The average 14 day RSI of all 500 components is 56.
The greatest positive five day momentum component is SII; the greatest negative five day momentum component is NBR. The average five day momentum of all 500 components is 3.48.
53.40% of the SPX components are giving a crossover Buy signal; 5.60% of the SPX components are giving a Sell signal. This is a 9.5 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 15 components.
• From Buy to Neutral: 6 components.
• From Neutral to Sell: 0 components.
• From Neutral to Buy: 61 components.
Tuesday, February 23
Economics
09:00 Case-Shiller 20-city Index: -3.0% consensus
10:00 Consumer Confidence: 56.5 consensus
Earnings
Before: CRDN, DSX, HD, HURN, EXPD, LIZ, M, MVL, ODP, RDN, HK, SHLD, TGT, THC, WAB, WPI,
After: BMRN, BCSI, DWA, HTZ, PZZA, STEC, VOLC,
Events
5:00 James Bullard
Auctions
11:30 4-week bill auction
1:00 2-yr note auction
A key measure of the housing market is expected to show prices fell for the second month in a row, following a period of seven months of rising prices. The S&P/Case-Shiller 20-city home price index is expected to have fallen 3.1% in December versus a year ago after falling 5.3% in November. The Consumer Confidence index is expected to have fallen to 55 in February from 55.9 in January. Home Depot is due to report results in the morning. The home improvement retailer is expected to have earned 16 cents per share versus 19 cents a year ago. Target is expected to have earned $1.16 per share versus 81 cents a year ago. In Washington, the House Financial Services Committee holds a hearing on whether more financial stimulus is needed. Also, the Federal Deposit Insurance Corporation (FDIC) releases quarterly financial industry earnings as well as the bank problem list, identifying vulnerable banks.
Mel’s Random Hits:
• The day's range was 6.91 points.
• The day's volume was 70.47% of the average daily volume for the last year. Volume was 80.67% of the last 10 day. This was the lowest volume since December 31st.
• 25% of the SPX stocks closed with two day RSI above 90. 36% closed with RSI above 80. 9% closed with RSI below 20 and 3% closed with RSI below 10.
• 69.2% of the SPX are above their five day moving average, 89.0% are above their 10 day average, and 80.4% are above their 20 day moving average. Note that most SPX stocks have a falling five day MA and a rising 20 day MA.
• 16% of the SPX stocks closed below their most recent previous lows.
• 23% of the SPX closed above their most recent previous high.
• 34.6% of stocks closed in the top half of the day's range. (65.4% closed in bottom half.)
• 26.0% of stocks closed in the bottom 20% of the day's range.
• 3.0% of stocks closed in the top 10% of the day's range.
• 12.0% of stocks closed within 2% of their 52 week high. 31.2% of stocks closed within 5% of their 52 week high.
• 26.8% of stocks closed within 50% of their 52 week low. 8.0% of stocks closed within 25% of their 52 week low.
• 5.4% of stocks closed within ¼% of their high for the day.
• 18.0% of stocks closed within ¼% of their low for the day.
• 41.6% of the SPX closed up from the previous close; 29.0% closed higher than the open.
• Sectors weaker than the SPX for the day: Energy, Basic Materials, Technology, and Utilities.
• Sectors stronger than the SPX for the day: Consumer Staples, Financials, Consumer Discretionary, Health Care, and Industrials.
• The $SOX index strength was weaker again than the SPX today.
• The 2 Day RSI of the SPX is 65. The Dow RSI is 58, NASDAQ is 75 and Russell 99.
• Over the last four sessions, the average session closed 68% of the range above the low.
• Upside momentum stalled today from Friday’s 3.49 to today’s 3.48. The ratio of SPX components giving a crossover buy signal compared to sell signals has jumped dramatically to 9.5 to 1.
• 184 SPX components moved upward and 140 components downward during the after hours with 100 million shares traded. Volume was light.
Have a great Tuesday everyone.
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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)
