Up, Up, and Up
by Jerome "Mel" Hickerson
There was no economic data released before the open this morning. During the session came reports on Existing Home Sales, the US House Price Index, and the Richmond Fed. News was quiet overnight with Asian markets mixed and European markets higher at our open. Futures were flat at the open.
The session opened with a little up move, quickly turned red, moved up again right at 10am, ticked red again briefly, and then popped higher just before 10:30. From then until just after 11:00 the market appeared to want lower, setting the low of the day at 11:04. The middle portion of the day was a triple wave ascent but at 3pm the indices exploded higher. There was a 20 minute period just before 3:30 that included some of the strongest action that I have seen in recent years. It was an astounding display of strength by what had appeared to be a tired market.
Breadth appears to be strengthening yet lagging the market slightly. Looking at the indices, I see an incredible mix of strengthening internals with heavily overbought oscillators. Usually when you see this, you bet on the side of the strengthening internals. When the market ignores overbought conditions and keeps going higher it’s often a sign of strength.
The current volume patterns – and I recognize that some traders completely disregard the volume patterns – make me really question this ramp upward. Experience tells me to suspect up moves on light volume. And the market breadth is just not the overwhelming breadth that usually accompanies a major breakout. When both volume and breadth are questionable, I have difficulty accepting that the breakout is going to hold.
One other thing to take notice of: Traders are becoming complacent. I pointed this out mid January and will point this out once again. When traders become complacent, they save the cost of hedging their positions with options. When a downturn comes, they are forced to liquidate sooner without the hedge, thus turning a small downturn into a larger downturn. Many traders are foregoing the hedge at this point. If the market receives a jolt of news that begins a downturn, many traders will exit sooner rather than later. Of course, the catalyst to get things started may not be forthcoming.
Every trader has to make decisions based on their own interpretation of events. My judgment is that we see a significant pullback starting soon; but I can’t deny that the continuous up and up and up is getting to me. The second half of this week is key; a continued ramp upward into Thursday and Friday would clearly overwhelm the bears.
SPX Summary for Tuesday, March 23, 2010
372 Advancers/119 Decliners
Today's SPX component winners and losers:
• Largest one day loser is NBR with -4.15%
• Largest three day loser is NBR with -6.00%
• Largest five day loser is NBR with -11.89%
• Largest ten day loser is CNX with -15.64%
• Largest one day winner is TIE with 9.62%
• Largest three day winner is TIE with 14.79%
• Largest five day winner is LSI with 15.42%
• Largest ten day winner is GME with 22.95%
*** SPX Technical Summary ***
The average 14 day RSI of all 500 components is 69.
The greatest positive five day momentum component is LSI; the greatest negative five day momentum component is NBR. The average five day momentum of all 500 components is 1.33.
74.60% of the SPX components are giving a crossover Buy signal; 5.60% of the SPX components are giving a Sell signal. This is a 13.3 to 1 ratio of Buy signals over Sell signals.
SPX component signal changes today (evidence of trend):
• From Sell to Neutral: 2 components.
• From Buy to Neutral: 22 components.
• From Neutral to Sell: 5 components.
• From Neutral to Buy: 12 components.
NYSE Summary
On the NYSE 3185 issues were traded with 2241 advancing issues and 835 retreating issues, a ratio of 2.68 to 1 advancing. There were 357 new highs and 6 new lows.
This is 24 new lows over the last three sessions. This is an expansion of the new lows seen: 10/27/09, 11/27/09, 01/26/10 and 02/25/10. Expanding numbers of new lows is usually an early warning signal that the market wants to go lower.
Advancing volume was higher at a ratio of 3.49 to 1. The closing TRIN was 0.77 and the final tick was -387.
The final tick was negative. This has been quite rare recently and most often occurs during weak markets. It can easily be an anomaly, but since it is rare it deserves being noted.
Evidence of trend:
Relative to the previous 30 session average, volume was -8.30% below the average. Of the last 15 sessions 2 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 28 sessions ended on a positive tick, 9 of last 10.
Remember: Breadth leads, indices follow. Today, the NYSE Advance/Decline line increased from 203261 to 204667. This 0.69% increase came while the SPX was gaining 0.71%. The 10 day moving ratio of positive volume is 1.3 and the 10 day moving Advance/Decline ratio is 1.37. The 10 day moving ratio of positive volume has trended 0.14 over the last three days and the 10 day moving Advance/Decline ratio has trended 0.13 over the last three days.
The NYSE Composite Index gained 0.81% today.
Wednesday, March 24
Economics
08:30 Durable Orders 0.5% cons.
08:30 Durable Orders ex-Auto 0.3% cons.
10:00 New Home Sales 315k cons.
10:30 Crude Inventories
04:00 Germany ifo Survery
05:00 Italy Unemployment Rate
Earnings
Before: CMC, GIS, LEN, RBN
After: CKR, PAYX, RHT
Auctions
01:00 5-Yr Note Auction
Speeches
10:45 Tom Hoenig
Events
HK, PDK, CLR at Howard Weil Energy Conference
PMTI at Oppenheimer & Co. Aesthetics 1-on-1 Conference
ICOP at RedChip Resources, LLC New York Equities Growth Conference
FTWR Investor Day
COP Analyst Meeting
Barclays Capital Global Healthcare Conference
BEZ, OLN, THMD, TREX at BB&T Capital Markets Commercial & Industrial Conference
CGI, IVC, JCOM, WOOF at Sidoti & Company Emerging Growth Institutional Investor Forum
Durable goods orders are expected to have risen 0.5% in February after rising 2.6% in the previous month. Durable goods excluding autos are expected to have risen 0.3% after falling 1% in January. February new home sales are expected to have risen to a 315,000 annualized unit rate from a 305,000 annualized unit rate in January. This report is due out shortly after the start of trade. The weekly crude oil supplies report is also due in the morning, but it is not typically a market mover.
Mel’s Random Hits:
• Total tick for the day was 294,000. There were 146 ticks greater than 600 and 16 ticks more extreme than -600. There were 12 ticks greater than 1000 and 0 ticks more extreme than -1000. The tick action suggests institutional accumulation.
• The day's range was 10.89 points. The 5 DMA of daily range is 11.58.
• Evidence of the intraday trend: At 10am volume was 78.86% of the 10 day average. By noon the volume was 89.11% of the 10 day average, and by 2pm volume was 87.25% of the 10 day average.
• The day's volume was 85.8% of the average daily volume for the last year. Volume was 88.8% of the last 10 day average and 102.6% of the previous day’s volume.
• 20% of the SPX stocks closed with two day RSI above 90. 38% closed with RSI above 80. 9% closed with RSI below 20 and 4% closed with RSI below 10.
• 72.8% of the SPX are above their five day moving average, 79% are above their 10 day average, and 89% are above their 20 day moving average.
• 54% of the SPX closed above their most recent previous high.
• 3% of the SPX stocks closed below their most recent previous lows.
• 372 SPX issues advanced and 119 issues declined, a net SPX advance/decline of 253.
• Evidence of the intraday trend: At 10am, 43.6% of the SPX components were in the top half of the range. By noon, 51.8% were in the top half of the range, and by 2pm, 48% were in the top half of the range.
• 83.8% of stocks closed in the top half of the day's range. (16.2% closed in bottom half.)
• 37.4% of stocks closed in the top 10% of the day's range. 59.8% of stocks closed in the top 20% of the day's range.
• 0.6% of stocks closed in the bottom 10% of the day's range. 1.8% of stocks closed in the bottom 20% of the day's range.
• 39.8% of stocks closed within 2% of their 52 week high. 61.2% of stocks closed within 5% of their 52 week high.
• 35.8% of stocks closed within 50% of their 52 week low. 8.4% of stocks closed within 25% of their 52 week low.
• 49% of stocks closed within ¼% of their high for the day.
• 1.4% of stocks closed within ¼% of their low for the day.
• Evidence of the intraday trend: At 10am, 43% of the SPX components were up since the open. By noon, 48.8% were up since the open, and by 2pm, 48.4% were up since the open.
• 75.2% of the SPX closed up from the previous close; 71.2% closed higher than the open.
• Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +56%.
- Industrials -- Outperformed the SPX by +41%.
- Technology -- Outperformed the SPX by +24%.
- Consumer Staples -- Outperformed the SPX by +0%.
• Sectors weaker than the SPX for Tuesday:
- Energy -- Underperformed the SPX by -42%.
- Financials -- Underperformed the SPX by -2%.
- Utilities -- Underperformed the SPX by -31%.
- Health Care -- Underperformed the SPX by -22%.
- Consumer Discretionary -- Underperformed the SPX by -32%.
• The $SOX index strength was stronger relative to the SPX Tuesday by 1.55%.
• The XLF underperformed the SPX by -0.02% Tuesday.
• The 2 Day RSI of the SPX is 83. The Dow RSI is 88, the NASDAQ is 80 and the Russell is 75.
• Over the last four sessions, the average session closed 71.27% of the range above the low. Tuesday closed at 94.9% of the daily range.
• Upside momentum increased Tuesday, from Monday’s 0.67 to today’s 1.33. The ratio of SPX components giving a crossover buy signal compared to sell signals also jumped to B 13.32 to 1.
• The ISEE Equity 10 day moving average Tuesday was 198.4. 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.
• 171 SPX components moved upward and 160 components downward during the after hours with 89 million shares traded.
Good trading on Wednesday 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)
