Worries over Greece Seemed to Fade after Late Morning
Market Recap:
U.S. stock index futures pointed to a lower open Tuesday amid growing political turmoil in Greece. Worries about Greece dragged on futures after the mainstream conservatives failed to form a coalition government in the wake of Sunday’s elections. That gives the Left Coalition party, which opposes the country's EU/IMF bailout, an opportunity to form a government.
The Tuesday session began with a gap lower and continued relentlessly lower until 11:14 am when the low of day was put on the chart. The next couple of hours drifted sideways with a slight upward bias but the upward momentum accelerated late in the afternoon as the indices closed near the highs of the day.
Our Market Leaders Board shows all of our leaders closing lower today with the Financials and the NYSE Composite Index faring the worst and the Russell 2000 almost breaking even. It is frequently a bearish sign when the Composite Index is the weakest leader.
SPX big winners were Cognizant Tech Sol Cp A (CTSH) 6.96%, Tyson Foods Inc (TSN) 3.33%, and Dean Foods Company (DF) 3.26%. SPX big losers were Fossil Inc (FOSL) -51.%, Dun & Bradstreet Corp (DNB) -14.7%, and Frontier Communications Corp (FTR) -9.72%.
SPX five day big winners are TripAdvisor (TRIP) 12.78%, Scripps Networks Interactive, Inc. (SNI) 7.11%, and Whole Foods Market Inc (WFM) 5.02%. SPX five day big losers are Fossil Inc (FOSL) -41.29%, Frontier Communications Corp (FTR) -19.31%, and Cognizant Tech Sol Cp A (CTSH) -17.83%.
New Ten Day Highs: BCR, XEL, DF, HNZ, HSY, MKC, SHW, TSN, SH, VNO, DIS
New Ten Day Lows: MMM, ANF, ADBE, AMD, AES, AET, URBN, AKS, AKAM, AA, ATI, ALTR, AEP, AMP, ABC, APH, APC, ADI, APA, APOL, AMAT, AIZ, ADSK, AVY, BHI, BLL, BBT, BBBY, BMS, BBY, BMC, BMY, BRCM, CAM, COF, CCL, CAT, CBG, CBS, CF, CHK, CVX, CME, CSCO, COH, CMA, CPWR, CAG, STZ, SAI, COST, CMI, DHR, DVA, DE, DELL, DNR, XRAY, DVN, DO, DTV, RRD, DOV, DOW, DTE, DNB, ETFC, EMN, ETN, EMC, EMR, ESV, ETR, EOG, EL, XOM, FAST, FIS, FSLR, FISV, FLIR, FLS, FLR, FMC, FTI, F, BEN, FCX, FTR, GME, GE, GILD, GR, GT, HAL, HAR, HIG, HES, HPQ, HD, HON, HSP, HST, INTC, IFF, IGT, IP, INTU, ISRG, IVZ, ITT, JBL, JEC, JDSU, JPM, JNPR, CLF, KLAC, KR, LH, LM, LEG, LUK, LXK, LIFE, LLTC, LMT, LOW, LSI, M, MRO, MAR, MA, MCD, MCK, MWV, WFR, PCS, MCHP, MU, MSFT, MOLX, TAP, MON, MWW, MCO, MS, MUR, MYL, NBR, NDAQ, NOV, NTAP, NEM, NBL, JWN, NOC, NVLS, NUE, NVDA, OXY, ODP, ORCL, OI, PCAR, PLL, PH, PAYX, BTU, JCP, PBCT, PXD, PBI, PCL, RL, PCP, PFG, PRU, QCOM, DGX, RSH, RHT, RSG, COL, RDC, R, SWY, CRM, SNDK, SLB, SCHW, SEE, SIAL, SLM, SJM, SE, STJ, SWK, SPLS, SBUX, HOT, STT, SRCL, SVU, SYMC, TROW, TGT, TE, TLAB, THC, TER, TSO, TXN, TXT, BK, TIF, TWC, TWX, TIE, TSS, X, UTX, QLD, JASO, UNM, VLO, VRSN, VFC, WAG, WPO, WM, WU, WY, WHR, C, GS, ICE
Volume & Breadth Indicators
For the SPX Index there were 152 components advancing and 339 components declining. On the NYSE 3,139 issues were traded with 1,192 advancing issues and 1,829 retreating issues, a ratio of 1.53 to one declining. There were 58 new highs and 77 new lows. The five day moving average of New Highs is 81 while the five day moving average of New Lows is 49 and the ten day moving average of Net Advancing is 52.
Declining volume was higher at a ratio of 2.65 to one. The closing TRIN was 1.98 and the final tick was -104. The five day average of TRIN is 1.7 and the ten day average of TRIN is 1.4. The NYSE Composite Index lost -0.77% today while the SPX lost -0.43%.
For the NYSE, relative to the previous 30 session average, volume was 12.43% above the average. Of the last 15 sessions 7 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 17 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 96.5% of the average daily volume for the last year. Volume was 105.2% of the last 10 day average and 112.4% of the previous day’s volume.
Looking at the NYSE 15-second tick data, the total tick for the day was 6,000 and the average tick for the day was 4. There were 83 ticks greater than 600 and 56 ticks more extreme than -600. There were 8 ticks greater than 1000 and 3 ticks more extreme than -1000. The tick action suggests institutional accumulation.
Moving Average and Support/Resistance Indicators:
16.4% of the SPX are above their five day moving average, 18.4% are above their 10 day average, 31.4% are above their 20 day moving average, 33.4% are above their 50 day moving average, and 65.6% are above their 200 day moving average.
There were several significant moving average crossovers today as the SPX, the NYSE Composite Index, the Russell 2000 small caps, the Financials, and China all had their 5 DMA cross below the 20 DMA. This looks bearish looking ahead. Our moving average Power Rating is 40 of a possible 100.
Sectors on the Move:
Sectors stronger than the SPX for Tuesday:
- Energy -- Outperformed the SPX by +11%.
- Industrials -- Outperformed the SPX by +13%.
- Technology -- Outperformed the SPX by +7%.
- Consumer Staples -- Outperformed the SPX by +24%.
- Utilities -- Outperformed the SPX by +60%.
- Health Care -- Outperformed the SPX by +40%.
Sectors weaker than the SPX for Tuesday:
- Basic Materials -- Underperformed the SPX by -5%.
- Financials -- Underperformed the SPX by -20%.
- Consumer Discretionary -- Underperformed the SPX by -80%.
Checking the sectors of the SPX tonight: (The sector Buy and Sell signals come from a mechanical trend trading system; there will be some whipsaw but the signal will never be on the wrong side for long.)
The Basic Materials sector advancing issues (7) totaled 149,541 shares traded (21,363 average per stock) and declining issues (22) totaled 1,115,099 shares traded (50,686 average per stock.) 4 components are on an uptrend (no new uptrends today) and 26 components are on a downtrend (1 new downtrends today.) There were 1 New Highs and 1 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -1.02% below the 20-Day average.
The Energy sector advancing issues (12) totaled 787,004 shares traded (65,584 average per stock) and declining issues (32) totaled 2,228,138 shares traded (69,629 average per stock.) 8 components are on an uptrend (no new uptrends today) and 36 components are on a downtrend (1 new downtrends today.) There were no New Highs and 2 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.68% below the 20-Day average.
The Financials sector advancing issues (13) totaled 491,240 shares traded (37,788 average per stock) and declining issues (65) totaled 5,711,174 shares traded (87,864 average per stock.) 24 components are on an uptrend (no new uptrends today) and 57 components are on a downtrend (10 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.46% below the 20-Day average.
The Industrials sector advancing issues (17) totaled 441,728 shares traded (25,984 average per stock) and declining issues (43) totaled 1,589,532 shares traded (36,966 average per stock.) 14 components are on an uptrend (2 new uptrends today) and 47 components are on a downtrend (3 new downtrends today.) There were no New Highs and 2 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.45% below the 20-Day average.
The four 'risk sectors' totaled 49 advancing issues and 162 declining issues today with 2 new uptrends and 15 new downtrends. 23.1% of Risk Sector components are uptrending.
The Technology sector advancing issues (20) totaled 1,640,481 shares traded (82,024 average per stock) and declining issues (57) totaled 6,043,603 shares traded (106,028 average per stock.) 8 components are on an uptrend (1 new uptrends today) and 71 components are on a downtrend (5 new downtrends today.) There were no New Highs and 5 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed -.89% below the 20-Day average.
The Consumer Staples sector advancing issues (18) totaled 748,907 shares traded (41,606 average per stock) and declining issues (23) totaled 1,072,404 shares traded (46,626 average per stock.) 22 components are on an uptrend (2 new uptrends today) and 19 components are on a downtrend (1 new downtrends today.) There were 2 New Highs and no New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed .5% above the 20-Day average.
The Utilities sector advancing issues (21) totaled 502,287 shares traded (23,918 average per stock) and declining issues (9) totaled 337,703 shares traded (37,523 average per stock.) 24 components are on an uptrend (3 new uptrends today) and 8 components are on a downtrend (1 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed above the daily pivot. The sector 5-Day average closed 1.41% above the 20-Day average.
The Health Care sector advancing issues (32) totaled 1,141,742 shares traded (35,679 average per stock) and declining issues (19) totaled 907,356 shares traded (47,756 average per stock.) 16 components are on an uptrend (2 new uptrends today) and 35 components are on a downtrend (2 new downtrends today.) There were no New Highs and no New Lows. The sector is on a Buy signal and closed below the daily pivot. The sector 5-Day average closed .1% above the 20-Day average.
The Consumer Discretionary sector advancing issues (12) totaled 773,905 shares traded (64,492 average per stock) and declining issues (69) totaled 3,796,626 shares traded (55,024 average per stock.) 18 components are on an uptrend (1 new uptrends today) and 63 components are on a downtrend (10 new downtrends today.) There were no New Highs and 2 New Lows. The sector is on a Sell signal and closed below the daily pivot. The sector 5-Day average closed .66% above the 20-Day average.
Based on the SPX sector data, we are on a Sell for the SPX and the Russell 2000.
What We Learned from Tuesday's Action:
Tuesday was session 4 to close below the 5 DMA, session 3 to close below the 10 DMA, session 3 to close below the 20 DMA, and session 3 to close below the 50 DMA. This was also session 1 for the 5 DMA to close below 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 25.69 points below the 10 DMA.
The SPX 5 DMA is 1379.26, 10 DMA is 1389.41, 20 DMA is 1383.02, 50 DMA is 1386.63, 100 DMA is 1345.48, and 200 DMA is 1276.76.
On Tuesday the SPX traded both below and above the opening range. 32.4% of the SPX closed up from the previous close; 59.8% closed higher than the open. During Tuesday's session the SPX lost -5.44 points from open to close. The SPX intraday trading range was 17.99 points. The 5-Day average intraday trading range is 13.61 points, the 10-Day average is 12.35 points, and the 20-Day average is 12. points. The trading range is expanding. The 5-Day SPX gain is -2.99%, the 10-Day gain is -0.60%, and the 15-Day gain is -1.95%.
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 +1. Greater than three is bullish and less than negative three is bearish. The short-term trend appears to be sideways. Mel's 10 Day Oscillator is 29 (below 35 is oversold and above 65 is overbought.) Based solely on the technicals, our bias is slightly bullish for Wednesday's session.
Today pretty much went like we expected yesterday to go. The morning presented an opportunity to scale out of some short positions and the afternoon provided a significant bounce. But where from here?
Our data continues to suggest that this is simply an oversold bounce. But it is important to recognize that the Russell 2000 bounce from the same levels today as it did in early March and mid April. Almost 10% of the Russell components have been down five consecutive days, making a bounce seem even more likely.
The bounce from this support level seems likely to carry the index higher for a couple of days before we return to test the lows. But we're just not sold on the risk/reward of taking a long side position here. The data is suggesting to simply be patient and short the bounce.
SPX levels to watch include 1385; a close above is bullish and a close below is bearish. For the Russell 2000, keep an eye on the 807 level.
Wednesday, May 9
Economics
07:00 MBA Mortgage Purchase Index
10:00 Wholesale Inventories
1:00 US to sell $24b 10-year notes
05:00 JPY Leading Index
06:00 EUR German Trade Balance
23:50 JPY Trade Balance – Yen
10:30 Germany to sell EU5b in 5-yr notes
10:30 U.K to sell GBP2b 4.5% 30-year bonds
Earnings
Before:
Agrium (AGU) EPS $1.01, revs $2.96B
Dean Foods (DF) EPS 21c, revs $3.11B
Macy’s (M) EPS 39c, revs $6.12B
Tim Horton’s (THI) EPS 60c, revs $703.83M
After:
Cisco (CSCO) EPS 47c, revs $11.56B
News Corp (NWSA) EPS 31c, revs $8.25B
Priceline (PCLN) EPS $3.96, revs $1.04B
Tesla Motors (TSLA) EPS -69c, revs $31.86M
Wynn Resorts (WYNN) EPS $1.40, revs $1.34B
There were no important economic releases on Tuesday. On Wednesday we will get oil inventories.
Good trading!
Thank you for reading. Think on it, trade on it, and be well.
-Mel