Upbeat Economic Data, But Indices Sell Intraday
by Jerome "Mel" Hickerson
Market Recap:
Economic data out of China pushed Asian stocks up strongly as analysts now expect stimulus from the Chinese. In Europe, decent T-Bill auctions in Spain, Greece and the EFSF gave traders a reason to buy. The Empire Manufacturing Index for January was reported at 13.48, which was well above the consensus expectations for a reading of 10.47. Futures in the U.S. were pointing to a sharply higher open.
The holiday shortened week began with a significant gap higher but quickly put the high of the day on the chart during the first half hour of trading. From 10:00 am through 2:30 pm the SPX traded in a narrow three point range. But something changed for the final ninety minutes as the intraday range expanded to the downside and indices closed near the bottom of their intraday trading range.
Checking our Market Leaders Board shows that the Financials took a loss in today’s up market and the Russell 2000 small caps barely closed in positive ground. This strikes us as a bearish looking scenario.
SPX big winners were Sears Holding Corp (SHLD) 9.37%, Rowan Companies Inc (RDC) 5.79%, and Valero Energy Corp (VLO) 4.77%. SPX big losers were Carnival Corp (CCL) -15.88%, R.R. Donnelley & Sons Company (RRD) -15.55%, and Citigroup (C) -8.64%.
SPX five day big winners are Sears Holding Corp (SHLD) 23.78%, Borg Warner Inc (BWA) 14.28%, and Textron Inc (TXT) 13.63%. SPX five day big losers are Supervalu Inc (SVU) -17.28%, Cabot Oil & Gas Corp (COG) -16.7%, and R.R. Donnelley & Sons Company (RRD
New Ten Day Highs: MMM, ADBE, AES, AET, A, APD, AA, AGN, ALL, AXP, AMT, AMP, AMGN, APH, APOL, AMAT, ADM, ADSK, ADP, AZO, BLL, BAX, BBT, BDX, BA, BRK.B, CAM, COF, CAH, CAT, CELG, CF, CI, CINF, CSCO, CLX, CMCSA, CMA, CSC, CAG, SAI, CMI, CVS, DHR, DVA, DE, DELL, XRAY, DV, DO, DFS, DOV, DOW, DNB, DD, ROST, ETN, ECL, EP, EMR, ESV, EL, FAST, FII, FITB, FISV, FLIR, FLS, FLR, FMC, F, FRX, FCX, GD, GE, GIS, GPC, GILD, GWW, HOG, HAR, HRS, HIG, HAS, HCN, HD, HON, HSP, HUM, HBAN, ITW, IPG, IFF, IP, INTU, IVZ, JBL, JEC, JNS, JDSU, JCI, CLF, KEY, KIM, KFT, KR, LLL, LM, LUK, LXK, LTD, L, LOW, MAR, MKC, MWV, MOLX, MON, MUR, NOV, NYT, NWSA, NKE, NTRS, NOC, NVLS, NUE, ORLY, OXY, OMC, ORCL, OI, PCAR, PLL, PH, PAYX, PBCT, PKI, PFE, PCG, PXD, PBI, PCL, PNC, PPG, PX, PFG, PLD, PRU, PHM, QLGC, QCOM, PWR, RF, ROK, COL, RDC, SCHW, SEE, SHLD, SRE, SJM, LUV, SE, STJ, SBUX, STT, SRCL, SYMC, SYY, TXT, BK, TMO, TWC, TWX, TIE, TSS, UTX, UNH, QLD, UNM, USB, VLO, VNO, VMC, WPO, WM, WAT, WLP, WFC, WU, WY, GS
New Ten Day Lows: AVY, BMS, BIG, COG, CCL, CHK, CPWR, CNX, CEG, RRD, ETR, EXC, GME, LLTC, NBR, NVDA, PM, PEG, STR, RRC, SWN, SVU, TE, TSN, VXX, SH, AEM, WPI
Volume & Breadth Indicators
For the SPX Index there were 318 components advancing and 150 components declining. On the NYSE 3,133 issues were traded with 1,859 advancing issues and 1,166 retreating issues, a ratio of 1.59 to one advancing. There were 139 new highs and 23 new lows. The five day moving average of New Highs is 112 while the five day moving average of New Lows is 18 and the ten day moving average of Net Advancing is 527. The Net Advancing data indicates a bullish trend.
Advancing volume was higher at a ratio of 1.32 to one. The closing TRIN was 1.44 and the final tick was 347. The five day average of TRIN is 1.15 and the ten day average of TRIN is 1.06. The NYSE Composite Index gained 0.5% today while the SPX gained 0.35%.
For the NYSE, relative to the previous 30 session average, volume was -0.26% below the average. Of the last 15 sessions one session ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 21 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 102.1% of the average daily volume for the last year. Volume was 117.8% of the last 10 day average and 118.2% of the previous day’s volume.
Total tick for the day was 71,000 and the average tick for the day was 46. There were 38 ticks greater than 600 and 20 ticks more extreme than -600. There were 4 ticks greater than 1000 and no ticks more extreme than -1000.
The tick data today shows how the sentiment changed after the opening. While bears weren’t strong today, buyers simply disappeared after the gap opening.
The intraday volume pattern suggests that traders were not enthusiastic during the late afternoon decline. Bears would have liked to see a bit more volume during the selling selling. Checking the Nightly Breadth Indicators, the McClellan Oscillator is back to overbought.
Moving Average and Support/Resistance Indicators:
55% of the SPX are above their five day moving average, 70.6% are above their 10 day average, 77.4% are above their 20 day moving average, 75.2% are above their 50 day moving average, and 49.4% are above their 200 day moving average.
There was one significant moving average crossover today as the Russell Technology Index 20 DMA crossed above the 50 DMA. Our moving average Power Rating is 71 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Basic Materials -- Outperformed the SPX by +20%.
- Energy -- Outperformed the SPX by +34%.
- Industrials -- Outperformed the SPX by +14%.
- Technology -- Outperformed the SPX by +19%.
- Consumer Staples -- Outperformed the SPX by +8%.
- Health Care -- Outperformed the SPX by +27%.
Sectors weaker than the SPX for Tuesday:
- Financials -- Underperformed the SPX by -111%.
- Utilities -- Underperformed the SPX by -43%.
- Consumer Discretionary -- Underperformed the SPX by -8%.
In Late Trading:
221 SPX components moved upward and 147 components downward during the after hours with 206.9 million shares traded.
What We Learned from Tuesday's Action:
Tuesday was session 1 to close above the 5 DMA, session 18 to close above the 10 DMA, session 18 to close above the 20 DMA, and session 18 to close above the 50 DMA. This was also session 16 for the 5 DMA to close above the 20 DMA. One early sign of a sustainable rally or pullback is often a close above or below the 10 DMA. The SPX closed 7.99 points above the 10 DMA.
The SPX 5 DMA is 1292.56, 10 DMA is 1285.68, 20 DMA is 1266.09, 50 DMA is 1245.31, 100 DMA is 1218.8, and 200 DMA is 1257.73.
On Tuesday the SPX traded below the opening range but did not trade above the opening range. 63.6% of the SPX closed up from the previous close; 29.6% closed higher than the open. During Tuesday's session the SPX gained 3.44 points from open to close.
Note: The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be in charge for the day. If we break out of that trading range, it's telling us that new buying or selling is impacting traders' assessments of value. Looking back at today’s breakouts also helps us grasp sentiment going forward because when a clear trend is established it often carries through for several sessions.
Looking Ahead:
The Market Environment for Wednesday is -2. Greater than three is bullish and less than negative three is bearish. Based solely on the technicals, our bias is slightly bearish for Wednesday's session.
It was an interesting session. The news was good on all fronts: Economic growth in China, investor sentiment in Germany, a good Spanish debt auction, and the Empire State Manufacturing Survey was better than expected. Yet after the large gap upward this morning, the market showed no interest in going higher. This kind of market reaction in the face of good economic data is often the prelude to a market pullback.
Indices remain just below major resistance levels while significantly overbought with seasonality negative for the rest of the week. This is also a scenario that most often results in some kind of a market pullback. It remains to be seen whether the economic news can continue to come in stronger than expected and whether that can serve to keep a bid under the market.
Wednesday, January 18
Economics
07:00 MBA Mortgage Purchase Index
08:30 Producer Price Index – consensus 5.1%
08:30 PPI Ex Food & Energy – consensus 2.8%
09:00 Total Net TIC Flows – consensus $50.0B
09:00 Net Long-term TIC Flows – consensus $40.0B
09:15 Industrial Production – consensus 0.5%
09:15 Capacity Utilization – consensus 78.1%
10:00 NAHB Housing Market Index – consensus 22
11:30 U.S. to sell 4-week bills
09:30 GBP Jobless Claims Change
09:30 GBP ILO Unemployment Rate
21:45 NZD CPI
5:15am Germany to sell add’l EU4b 2-yr notes
5:30am Portugal to sell 91-, 182-, 336-day bills
Earnings
Before: APH, ASML, BK, SCHW, FAST, GS, MTG, NTRS, PNC, STT, USB, WNS
After: EGHT, CLC, CVBF, EBAY, FFIV, FUL, KMP, NWPX, NVEC, PLXS, SANM, ZZ, SLM, XLNX
The Empire State Manufacturing Survey was 13.48, better than the expected 10.50. On Wednesday we will get the PPI, industrial production and the home price index.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel
