Market Recap:
 
Stocks were weak around the globe again Friday morning on continued worries about funding problems for European banks as well as growth expectations. Citi cut growth estimates for U.S. GDP as well as their projected EPS for the S&P 500. The economic calendar was quiet Friday with nothing scheduled for release. Read More
 
Friday’s session began with a gap lower but quickly attempted to bounce before retesting the lows during the opening half hour. But then the SPX rallied in earnest, gaining twenty-three points in about a half hour to put the high of the day on the chart just before the end of the first hour of trading. But from there, bulls were done for the day as the index worked consistently lower the rest of the day.
 
Looking at our Market Leaders board, all of our leaders followed Thursday’s pummeling by adding more losses on Friday. Technology and the Financials were leading lower while the SPX managed the lightest losses.
 
SPX big winners were Intuit Inc (INTU) 7.94%, Netapp Inc (NTAP) 7.31%, and Autonation Inc (AN) 4.07%. SPX big losers were Hewlett-Packard Co (HPQ) -27.97%, Autodesk Inc (ADSK) -11.36%, and Regions Financial Corp (RF) -8.11%.
 
SPX five day big winners are Motorola Mobility Holdings Inc (MMI) 54.72%, The Lorillard Group (LO) 6.89%, and Sprint Nextel Corp (S) 6.87%. SPX five day big losers are Hewlett-Packard Co (HPQ) -29.12%, Teradata Corporation (TDC) -21.4%, and Autodesk Inc (ADSK) -19.77%.
 
New Ten Day Highs: MO, AZO, GME, HNZ, INTU, LO, MCD, NEM, ORLY, PM, RAI, VXX, AEM, WMT
 
New Ten Day Lows: MMM, ANF, AFL, A, APD, AKS, AKAM, AA, ALTR, AMP, AMAT, ADSK, BHI, BBT, CA, CCL, CAT, CBG, CME, CTXS, COH, CTSH, CMA, SAI, CMI, DVA, DF, XRAY, DVN, DV, DOV, DOW, DNB, ETFC, EMN, ETN, EBAY, EFX, EXPE, EXPD, ESRX, FII, FDX, FITB, FHN, FSLR, FISV, FLIR, FLS, FMC, FRX, GD, GR, GT, HAL, HOG, HPQ, HSP, HST, HCBK, HBAN, ITW, INTC, IBM, IFF, IVZ, ITT, JBL, JEC, JNS, JCI, JNPR, KEY, KLAC, LLL, LH, LEN, LXK, LIFE, LNC, MTB, M, MAR, MAS, MDP, MET, MCHP, MU, MSFT, MWW, MCO, NBR, NYT, JWN, NSC, NTRS, NOC, NVLS, NUE, NVDA, NYX, ODP, OMC, OI, PCAR, PAYX, JCP, PBCT, PKI, PNC, PPG, PRU, PHM, QLGC, QCOM, RHT, RF, RHI, ROK, R, SWY, CRM, SNDK, CVG, SLB, SCHW, SEE, SHLD, SHW, SJM, SNA, LUV, HOT, STT, SYK, STI, SYMC, SYY, TROW, TDC, TER, TXN, TXT, BK, TIF, TWX, X, QLD, DYN, KBH, MBI, USB, WAT, WDC, WU, WY, AMZN, GOOG
 
<see attached graphic>
 
Market Recap – Weekly Review:

The SPX lost 55.28 points during the week. The range for the week was 86.42 points, 7.33%. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 11. Pullbacks often occur as this RSI reaches 80 and bounces near 20.

Total tick for the week was 229,000 (Monday’s tick was 332,000). On the NYSE, the advance/decline line decreased during the week by -2,641 and the 10 day average of Net Advancing increased from -374 to -101. There were 44 New Highs and 522 New Lows.

Volume & Breadth Indicators
 
For the SPX Index there were 70 components advancing and 403 components declining. On the NYSE 3,106 issues were traded with 725 advancing issues and 2,304 retreating issues, a ratio of 3.18 to one declining. There were 7 new highs and 279 new lows. The five day moving average of New Highs is 9 while the five day moving average of New Lows is 104 and the ten day moving average of Net Advancing is -101.
 
Declining volume was higher at a ratio of 5.57 to one. The closing TRIN was 1.78 and the final tick was 251. The five day average of TRIN is 1.39 and the ten day average of TRIN is 1.52. The NYSE Composite Index lost -1.55% today while the SPX lost -1.53%.
 
For the NYSE, relative to the previous 30 session average, volume was 19.41% above the average. Of the last 15 sessions 12 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 12 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 124.9% of the average daily volume for the last year. Volume was 107.2% of the last 10 day average.
 
Not nearly so negative breadth as Thursday’s numbers, but Friday should have seen a sustained bounce rather than the failed bounce.
 
Total tick for the day was -75,000 and the average tick for the day was -48. There were 134 ticks greater than 600 and 165 ticks more extreme than -600. There were 28 ticks greater than 1000 and 13 ticks more extreme than -1000.
 
Our tick chart for Friday shows that the bears were in full control after the opening hour. It is disconcerting for bulls to see the early morning high followed by a close at the lows; this is a pattern of weak markets.
 
<see attached graphic>
 
Friday’s volume was much heavier than Thursday’s but much of this can be attributed to options expiration. Looking at the intraday volume pattern we see that volume spiked on the early morning rally and disappeared late in the day. Looking at our Nightly Breadth Indicators things are quite mixed and not nearly as negative as might be expected. The McClellan Oscillator is oversold but not terribly extreme.
 
<see attached graphic>
 
Moving Average and Support/Resistance Indicators:
 
2.8% of the SPX are above their five day moving average, 9.4% are above their 10 day average, 3.8% are above their 20 day moving average, 3.2% are above their 50 day moving average, and 9.4% are above their 200 day moving average.
 
We had no significant moving average crossovers Friday. Our moving average Power Rating is 2 of a possible 100.
 
<see attached graphic>
 
Sectors on the Move:
 
Sectors stronger than the SPX for Friday:
- Consumer Staples -- Outperformed the SPX by +98%.
- Utilities -- Outperformed the SPX by +71%.
- Health Care -- Outperformed the SPX by +119%.
- Consumer Discretionary -- Outperformed the SPX by +7%.
 
Sectors weaker than the SPX for Friday:
- Basic Materials -- Underperformed the SPX by -7%.
- Energy -- Underperformed the SPX by -28%.
- Financials -- Underperformed the SPX by -60%.
- Industrials -- Underperformed the SPX by -13%.
- Technology -- Underperformed the SPX by -109%.
 
In Late Trading:
303 SPX components moved upward and 157 components downward during the after hours with 286.4 million shares traded.
 
What We Learned from Friday's Action:
 
Friday was session 2 to close below the 5 DMA, session 2 to close below the 10 DMA, session 18 to close below the 20 DMA, and session 18 to close below the 50 DMA. This was also session 17 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 38.43 points below the 10 DMA.
 
The SPX 5 DMA is 1171.07, 10 DMA is 1161.96, 20 DMA is 1219.38, 50 DMA is 1271.54, 100 DMA is 1300.33, and 200 DMA is 1285.25.
 
Looking Ahead:

The failure to sustain the early morning bounce on Friday does nothing to improve the chances for a sustained bounce in the upcoming week. The SPX seems destined to test the prior closing lows just below 1120, and possibly the intraday lows near 1100. The Advance/Decline Line also continues to hold above those lows but several indices (notably, the NASDAQ) have violated those lows. There is hope for the bulls but it is tenuous here at best. Technicals are weakening.

Sector rotation during the week was bearish.

<see attached graphic>

Date/Time Release/Consensus

Week of August 22 - August 26 Overview
Date/Time Release/Consensus
08/23/11 10:00 New Home Sales/310K
08/24/11 7:00 MBA Mortgage Index/NA
08/24/11 8:30 Durable Orders/0.02
08/24/11 8:30 Durable Orders -ex Transporation/-0.004
08/24/11 10:00 FHFA Housing Price Index/NA
08/24/11 10:30 Crude Inventories/NA
08/25/11 8:30 Initial Claims/400K
08/25/11 8:30 Continuing Claims/3700K
08/26/11 8:30 GDP - Second Estimate/0.011
08/26/11 8:30 GDP Deflator - Second Estimate/0.023
08/26/11 9:55 Michigan Sentiment - Final/55.4

Monday, August 22

Economics
No significant U.S. reports scheduled
No major global reports scheduled

Earnings
Before: NM, STP, ZA
After: FMCN, PWRD
 
Thank you for reading. Think on it, trade on it, and be well.
 
-Mel
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