Tug of War, Winner Yet to Be Determined
by Jerome "Mel" Hickerson
Leading up to the open, there was confirmation from the EU that there had been agreement on a plan for Greece. The government’s third and final revision of the nation’s fourth quarter GDP showed that the economy grew at an annualized rate of 5.6% in the fourth quarter, which was below the expectations for a growth rate of 5.9%, but still well above the 2.2% growth rate seen in the third quarter. Asian markets were higher while European markets were a little lower. Futures were pointing to a modestly higher open. During the session we got the news that the University of Michigan sentiment survey was 73.6, up from the last reading of 72.5.
The session opened with a gap up of about four points, continued upward for a few minutes, retreated, and then surged putting the high of the day on the chart at 10:32. The following hour was sideways but about 11:35 a wave of selling hit the tape taking the SPX to the low of that day at 1:09. The rest of the day was choppy retracement bringing the index just barely back into positive territory but still a couple points below the open. Friday was the third consecutive session to close below the open; a rare three day stretch in this market.
Reviewing the charts shows that the indices are retracing territory last seen in the early phases of the 2008 crash. As unbelievable as it is to the bears, another 70 SPX points puts the index back into pre-crash ground. Those who insist that this is a “bear market rally” are stubbornly persisting with a fallacy; no bear market rally in history has lasted more than six months and this rally is more than twice that length. No bear market rally has ever posted an entire month above the 10 month moving average; this rally passed that landmark in August and hasn’t looked back.
Nevertheless, looking at the charts in various timeframes reveals very different looking prospects. Let’s begin with the monthly chart and then drill downward. March opened the month at the low of the month and has moved steadily upward. The January and February bars on the chart aren’t the prettiest but there is still the stair-stepping pattern upward. Various chart indicators continue to give buy signals. The monthly chart continues to suggest higher in the months to come.
Drilling down to the weekly chart shows seven upward weeks coming off the February 5th bottom. A very clear stair-stepping pattern with many indicators on the chart continuing to give buy signals. The weekly chart also continues to suggest higher in the weeks to come.
The more interesting chart is the daily chart. March 17th, eight sessions ago, closed at 1166, right where we closed today. It may seem like a never-ending parade upward but that’s almost two weeks stuck in the same place. The last two sessions had their highs early in the session and then gave back most of the intraday gains. This is not the way a bullish market behaves; a bullish trend is characterized by weakness (if any) early in the session with a stampede of buyers buying the dip before the close. Many chart indicators began showing sell signals on the daily chart on March 19th and have remained in sell mode. The daily chart suggests some kind of imminent pullback.
Now let’s drill down even further. Frequent readers have probably noticed that I pay attention to the 5 and 20 moving averages; most often on the daily charts (I post the “crossover” stats every night.” But let’s take some time here to look at the 60 minute charts along with the 5 and 20 moving averages. One strong characteristic of any persistent rally is that few days manage to close with the 5 MA below the 20 MA on the 60 minute charts; this is because so many days in a persistent rally will close near the highs. Repeatedly closing with the 5 MA above the 20 MA is a feature of an up trending market while repeatedly closing with the 5 MA below the 20 is a characteristic of a down trending market.
On the attached charts (also attached to the charts is the Window to the Matrix stats that subscribers receive every night), first look at the late December and January display. December 31st had a late session 10 point sell off; it closed with the 5 MA below the 20 MA, as did January 12th and 15th. The last two of these proved to be early warnings that a pullback was near.
Now let’s look at the more recent March chart. The 19th closed with the 5 MA below the 20 MA as did Friday. Two of the last six sessions have managed the rare feat of closing with the short MA below the longer. This is often a warning sign that should not be ignored.
Trade Systems Update:
Our trade systems again had mixed but positive results Friday. We issued a scalp short alert at 10:38 just six minutes after the high of the day was put on the chart. But the bounce alert issued at 12:32 looked good for only about ten minutes. Two other alerts, scalp long at 1:25 and scalp short at 2:46 were moderately successful.
SPX Summary for Friday, March 26, 2010
For the week: 280 Advancers/212 Decliners
253 Advancers/231 Decliners
Today's SPX component winners and losers:
• Largest one day loser is WDC with -2.80%
• Largest three day loser is JBL with -10.78%
• Largest five day loser is GENZ with -10.76%
• Largest ten day loser is CNX with -21.67%
• Largest one day winner is RSH with 8.58%
• Largest three day winner is SLM with 8.25%
• Largest five day winner is LEN with 13.59%
• Largest ten day winner is TIE with 14.78%
*** SPX Technical Summary ***
The lowest 14 day RSI component is EQT; the highest 14 day RSI component is RX. The average 14 day RSI of all 500 components is 59.
The greatest positive five day momentum component is LEN; the greatest negative five day momentum component is GENZ. The average five day momentum of all 500 components is 0.57.
57.80% of the SPX components are giving a crossover Buy signal; 11.20% of the SPX components are giving a Sell signal. This is a 5.2 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 5 components.
• From Buy to Neutral: 46 components.
• From Neutral to Sell: 11 components.
• From Neutral to Buy: 21 components.
NYSE Summary
On the NYSE 3185 issues were traded with 1576 advancing issues and 1499 retreating issues, a ratio of 1.05 to 1 advancing. There were 168 new highs and 12 new lows. The three day total of new lows is 26. It last was greater than 25: October 28th, November 30th, January 27th, and February 5th.
Advancing volume was higher at a ratio of 1.47 to 1. The closing TRIN was 0.71 and the final tick was 108.
Evidence of trend:
Relative to the previous 30 session average, volume was -4.12% below the average. Of the last 15 sessions 3 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 26 sessions ended on a positive tick, 7 of last 10.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line increased from 203145 to 203222. This 0.04% increase came while the SPX was gaining 0.07%. The 10 day moving ratio of positive volume is 1.08 and the 10 day moving Advance/Decline ratio is 1.1. The 10 day moving ratio of positive volume has trended -0.05 over the last three days and the 10 day moving Advance/Decline ratio has trended -0.1 over the last three days.
The NYSE Composite Index gained 0.24% today.
Monday, March 29
Economic
08:30 Personal Income 0.1% cons.
08:30 Personal Spending 0.3% cons.
08:30 PCE Prices-Core 0.1% cons.
05:00 Germany CPI
05:00 EU Economic Sentiment
07:30 Japan Household Spending
07:30 Japan Unemployment Rate
07:30 Japan Industrial Production
Earnings
Before: APOL, NEOG
After: OXM
Auction
11:30 3-Month Auction
11:30 6-Month Auction
Mel’s Random Hits:
Total tick for the day was -61,000. There were 64 ticks greater than 600 and 115 ticks more extreme than -600. There were no ticks greater than 1000 and 12 ticks more extreme than -1000. The tick action suggests institutional distribution.
The day's range was 12.45 points. The 5 DMA of daily range is 11.49.
The range for the week was 27.81 points, 2.4%. From the previous Friday’s close, the SPX gained 6.69 points.
Evidence of the intraday trend: At 10am volume was 81.65% of the 10 day average. By noon the volume was 84.29% of the 10 day average, and by 2pm volume was 98.62% of the 10 day average.
The day's volume was 92% of the average daily volume for the last year. Volume was 95.2% of the last 10 day average and 79.5% of the previous day’s volume.
7% of the SPX stocks closed with two day RSI above 90. 14% closed with RSI above 80. 29% closed with RSI below 20 and 17% closed with RSI below 10.
39% of the SPX are above their five day moving average, 50.6% are above their 10 day average, and 71.4% are above their 20 day moving average.
5% of the SPX closed above their most recent previous high.
37% of the SPX stocks closed below their most recent previous lows.
253 SPX issues advanced and 231 issues declined, a net SPX advance/decline of 22.
Evidence of the intraday trend: At 10am, 46% of the SPX components were in the top half of the range. By noon, 52.2% were in the top half of the range, and by 2pm, 16.6% were in the top half of the range.
35.4% of stocks closed in the top half of the day's range. (64.6% closed in bottom half.)
4.6% of stocks closed in the top 10% of the day's range. 10.2% of stocks closed in the top 20% of the day's range.
5.6% of stocks closed in the bottom 10% of the day's range. 14.6% of stocks closed in the bottom 20% of the day's range.
20.6% of stocks closed within 2% of their 52 week high. 53.8% of stocks closed within 5% of their 52 week high.
40.2% of stocks closed within 50% of their 52 week low. 10% of stocks closed within 25% of their 52 week low.
8.6% of stocks closed within ¼% of their high for the day.
8.8% of stocks closed within ¼% of their low for the day.
Evidence of the intraday trend: At 10am, 66.4% of the SPX components were up since the open. By noon, 71.4% were up since the open, and by 2pm, 41% were up since the open.
52% of the SPX closed up from the previous close; 40.2% closed higher than the open.
Sectors stronger than the SPX for Friday:
- Basic Materials -- Outperformed the SPX by +67%.
- Utilities -- Outperformed the SPX by +13%.
- Consumer Discretionary -- Outperformed the SPX by +17%.
Sectors weaker than the SPX for Friday:
- Energy -- Underperformed the SPX by -11%.
- Financials -- Underperformed the SPX by -1%.
- Industrials -- Underperformed the SPX by -1%.
- Technology -- Underperformed the SPX by -46%.
- Consumer Staples -- Underperformed the SPX by -0%.
- Health Care -- Underperformed the SPX by -88%.
The $SOX index strength was weaker relative to the SPX Friday by -0.61%.
The XLF underperformed the SPX by -0.01% Friday.
The 2 Day RSI of the SPX is 35. The Dow RSI is 64, the NASDAQ is 30 and the Russell is 22.
Over the last four sessions, the average session closed 41.11% of the range above the low. Friday closed at 41.3% of the daily range.
Upside momentum increased Friday, from Thursday’s -0.27 to today’s 0.57. The ratio of SPX components giving a crossover buy signal compared to sell signals dropped to B 5.16 to 1.
The ISEE Equity 10 day moving average Friday was 193. The lowest 10 day average in the last 52 weeks was 141.5 on 06/29/09 and the highest 10 day average in the last 52 weeks was 207.3 on 01/19/10.
170 SPX components moved upward and 155 components downward during the after hours with 79 million shares traded.
Over the last year, the combined four week RSI of the SPX, DOW, NASDAQ and Russell has equaled 85 three times: week of May 11th, week of September 21st, and starting nest week. The week of May 11th lost 46 points and the week of September 21st lost 24 points.
Have a great weekend everyone!
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"Mel"
