Tsunami!
by Jerome "Mel" Hickerson, MarketsPath.com
Today’s wild bearish session began after a volatile futures session with some mild selling pressure at the open. But the indices shook off that pressure and briefly moved into positive territory. Then news shook the market. Our government (not pointing fingers at anyone…) made some announcements that the market perceived negatively and not only did the early morning gains disappear, the entire 2009 gains when down as well. It was a tsunami taking the market downward.
There’s not much to be gained by a close examination of today’s session; bounces were weak (with the exception of a short-lived mid afternoon bounce) and the bears were like a tsunami that came wave after wave after wave. This was truly a massacre and a rare occasion for the bears to celebrate.
From a technical viewpoint, today made four visits to the area of support at the 50 DMA. As bearish and ugly as this was, this visit was expected (although not necessarily today) and no real technical damage has been done to the market. But the close was right on support so tomorrow’s open may well gap below the support level inflicting technical damage. This can not be ruled out.
For Friday, the bears must regain control quickly and push above 1123. A failure to hold above 1113 implies a visit to the 1107 area with the next level of significant support in the 1085 area. At this point, odds seem to favor the bears pushing to 1107. But the overnight news cycle and the futures manipulation can’t be dismissed easily.
Since the rally began last March, this is only the fifth occurrence of back-to-back 1% losing sessions. The other four occurrences split with what happened next; two rallied and two continued with the correction. But the last two occurrences are the two that corrected further so we might think a further correction is likely.
For Friday, the model is strongly suggesting a bounce, at least in the morning. In the last 12 months, the VIX has jumped 10% or more in a single day seven times; today it jumped 19%. The market bounced five of the seven earlier occurrences, with the two occasions of losses being -3 and -5 SPX. The two losing dates were both gaps; none of the seven dates gave ground during the session.
The seven dates are: 6/23, 8/18, 9/2, 10/2, 10/29, 11/2, and 11/30. The model suggests that the data on 10/29 most closely resembles the current data. The October 29th date also stands out because it was just days after a 52 week high for the SPX. That end of October time period had many other similarities such as earnings season and extremely volatile trading. The SPX bounced that time for 23 points before giving back 30 points on the 30th. A repeat of that scenario would please most traders here and would not surprise me.
Friday, January 22
Earnings
Before: APD, ACO, AVX, BBT, EXC, GE, HOG, HBAN, JCI, KMB, MCD, SLB, STI, WBS
SPX Summary for Thursday, January 21, 2010
66 Advancers/430 Decliners
Today's SPX component winners and losers:
• Largest one day loser is LM with -9.92%
• Largest three day loser is THC with -10.38%
• Largest five day loser is AKS with -15.63%
• Largest ten day loser is PCS with -19.57%
• Largest one day winner is EL with 9.30%
• Largest three day winner is ZION with 12.73%
• Largest five day winner is KEY with 12.48%
• Largest ten day winner is ZION with 22.12%
*** SPX Technical Summary ***
The lowest 14 day RSI component is EXPE; the highest 14 day RSI component is AOC. The average 14 day RSI of all 500 components is 59.
Yesterday's lowest RSI EXPE earned 0.32% today.
Yesterday's highest RSI ZION earned 2.40% today.
The greatest positive five day momentum component is KEY; the greatest negative five day momentum component is AKS. The average five day momentum of all 500 components is -2.39.
33.20% of the SPX components are giving a crossover Buy signal; 23.00% of the SPX components are giving a Sell signal. This is a 1.4 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 6 components.
• From Buy to Neutral: 55 components.
• From Neutral to Sell: 36 components.
• From Neutral to Buy: 9 components.
*** SPX Component Swing Trade Ideas ***
New Crossover Buy Signals:
AMT FIS APC HRS APA HPQ CFN ITT CNP LEG CTXS MAT COP NTRS
CVH POM DV RRC D SWY EIX SO EP VIA/B AAPL
New Crossover Sell Signals:
BMC COG DTV ERTS IVZ LIFE LLTC OI CRM VMC
High Positive Momentum:
KEY ZION STI SVU HUM CMA RF EL DRI MTB STZ CPWR
High Negative Momentum:
MMM AKS CLF S THC TSS MEE FCX CSX TIF AA
Mel’s Random Hits:
• Total tick for the day was -193,000. Breadth was positive from the open, briefly harshly negative until about 1:30, then briefly positive for about an hour before negativity returned into the close. The 90 minutes between 10:30 and noon were as negative as it gets.
• The day's range was 26.75 points. The increasing volatility is typical after a market top.
• The day's volume was 124.5% of the average daily volume for the last year. Volume was 148.1% of the last 10 day average. This was the highest volume since December 17th.
• 4% of the SPX stocks closed with two day RSI above 90. 7% closed with RSI above 80. 59% closed with RSI below 20 and 32% closed with RSI below 10. These numbers are typical of numbers calling for a bounce.
• 16% of the SPX are above their five day moving average, 21% are above their 10 day average, and 34% are above their 20 day moving average.
• 56% of the SPX stocks closed below their most recent previous lows.
• 9% of the SPX closed above their most recent previous high.
• 9.8% of stocks closed in the top half of the day's range. (90.2% closed in bottom half.)
• 55.2 of stocks closed in the bottom 20% of the day's range.
• 1.0% of stocks closed in the top 10% of the day's range.
• 4.0% of stocks closed within 2% of their 52 week high.
• 24.8% of stocks closed within 50% of their 52 week low.
• 1.0% of stocks closed within ¼% of their high for the day.
• 27.6% of stocks closed within ¼% of their low for the day.
• 13.6% of the SPX closed up from the previous close; 11.8% closed higher than the open.
• Sectors weaker than the SPX for the day: Basic Materials, Energy, Financials, and Industrials.
• Sectors stronger than the SPX for the day: Consumer Discretionary, Technology, Consumer Staples, Utilities, and Health Care.
• The $SOX index strength was stronger than the SPX again today for the third day.
• The 2 Day RSI of the SPX is 12. The Dow RSI is 10, NASDAQ is 17 and Russell 15.
• 180 SPX components moved upward and 227 components downward during the after hours with 125 million shares traded.
Have a great Friday!
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"Mel"
