marketspath

Volatile Session Closes Near Where it Opened

Posted by Gary Dean 09/01/11 @ 10:00 a.m.
Written by Mel

08/31/11 Market Recap:

As the open approached, it appeared that traders were still focused on the idea that the Fed will take stimulative action. Foreign markets were higher and the futures in the U.S. were pointing to strength. The ADP report showed that private sector jobs rose by 91K jobs during the month, which was below the consensus expectations for a gain of about 100K and also below July's 109K level (revised down from 114K). However, this was not the disaster that some had feared. In addition, Challenger reported that there were 51K layoffs planned in the month, which was below last month's level of 66.4K.

Wednesday’s session began with a significant gap upward. The SPX worked higher until putting the high of the day on the chart at 10:19 am. The middle portion of the day traded mostly lower, sharply lower at times. But the index rallied in the closing hour to erase a lot of the negativity from the chart appearance. This session looked like a reversal until that late day rally.

Looking at our Market Leaders board, we have mixed results today as the Russell 2000 and the SOX both closed lower. Technology was also weak. The Financials had the strongest session today.

SPX big winners were E Trade Financial Corp (ETFC) 7.31%, Sprint Nextel Corp (S) 5.82%, and Family Dollar Stores Inc (FDO) 4.53%. SPX big losers were Monster Worldwide Inc (MWW) -4.74%, Juniper Networks (JNPR) -4.07%, and AT&T Inc (T) -3.82%.

SPX five day big winners are Pulte Homes Inc (PHM) 27.66%, Monster Worldwide Inc (MWW) 24.87%, and JDS Uniphase Corp (JDSU) 19.54%. SPX five day big losers are AT&T Inc (T) -3.23%, Hormel Foods Corp (HRL) -2.92%, and Home Depot Inc (HD) -2.88%.

New Ten Day Highs: MMM, ABT, ADBE, AMD, AET, AFL, A, APD, ARG, AKS, AA, ATI, AGN, ALL, MO, AEE, AEP, AXP, AIG, AMT, AMP, ABC, AMGN, APH, APC, ADI, AIV, ADM, AIZ, T, ADP, AZO, AVB, AVY, AVP, BLL, BCR, BAX, BBT, BDX, BMS, BBY, BIG, BIIB, XL, HRB, BMC, BA, BSX, BMY, BRCM, BF/B, BRK.B, CA, COG, CAM, CPB, COF, CAH, CCL, CAT, CBS, CELG, CNP, CTL, CHRW, CHK, CVX, CME, XEL, CI, CINF, CTAS, CTXS, CMS, COH, KO, CCE, CTSH, CL, CMCSA, CMA, CSC, CPWR, CAG, COP, CNX, CEG, SAI, COST, CVH, CMI, CVS, DHR, DRI, DE, DELL, DNR, XRAY, DO, DTV, RRD, DOV, DPS, DTE, DUK, DD, ROST, ETFC, ETN, EBAY, ECL, EIX, EMR, ESV, ETR, EQT, EFX, EL, EXPE, EXPD, XOM, FDO, FAST, FII, FITB, FE, FISV, FLIR, FLS, FLR, FMC, FTI, FO, BEN, FCX, FTR, GME, GCI, GPS, GD, GIS, GPC, GNW, GILD, GR, GWW, HOG, HAR, HRS, HAS, HCP, HCN, HNZ, HSY, HON, DHI, HSP, HUM, ITW, IBM, IFF, IP, INTU, ISRG, IVZ, IRM, ITT, JBL, JEC, JNS, JDSU, JNJ, CLF, K, KMB, KIM, KLAC, KFT, KR, LLL, LM, LEG, LEN, LUK, LXK, LIFE, LLY, LTD, LLTC, LMT, L, M, MAR, MMC, MAS, MAT, MJN, MKC, MHP, MCK, MHS, MDT, WFR, MRK, PCS, MSFT, MOLX, MWW, MUR, MYL, NDAQ, NSM, NYT, NWL, NEM, NWSA, NI, JWN, NU, NTRS, NOC, NUE, NVDA, ORLY, ORCL, OI, PCAR, PLL, PH, BTU, PBCT, POM, PKI, PFE, PCG, PNW, PBI, PCL, PNC, RL, PPG, PPL, PX, PCP, PFG, PG, PGN, PGR, PEG, QLGC, QCOM, PWR, DGX, STR, RSH, RRC, RTN, RHT, RSG, RAI, RHI, ROK, COL, RDC, R, SNDK, SCG, CVG, SCHW, SRE, SHW, SIAL, SNA, SO, LUV, SE, S, STJ, SWK, HOT, STT, SRCL, SYK, SUN, STI, SVU, SYMC, TROW, TE, THC, TER, TSO, BK, TMO, TIF, TWC, TWX, TIE, TMK, TSS, UNP, UPS, X, UTX, UNH, QLD, DYN, MBI, UNM, USB, VLO, VTR, VRSN, VZ, VFC, VIA/B, VNO, VMC, DIS, WAT, WPI, WLP, WFC, WY, WHR, AMZN, AAPL, GOOG, ICE

New Ten Day Lows: SH

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Volume & Breadth Indicators

For the SPX Index there were 358 components advancing and 113 components declining. On the NYSE 3,147 issues were traded with 1,994 advancing issues and 1,069 retreating issues, a ratio of 1.87 to one advancing. There were 43 new highs and 6 new lows. The five day moving average of New Highs is 28 while the five day moving average of New Lows is 35 and the ten day moving average of Net Advancing is 339. The Net Advancing data indicates a bullish trend.

Advancing volume was higher at a ratio of 2.58 to one. The closing TRIN was 0.75 and the final tick was 596. The five day average of TRIN is .71 and the ten day average of TRIN is 1.03. The NYSE Composite Index gained 0.86% today while the SPX gained 0.49%.

For the NYSE, relative to the previous 30 session average, volume was -4.64% below the average. Of the last 15 sessions 4 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 16 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 110.4% of the average daily volume for the last year. Volume was 96.1% of the last 10 day average and 100.3% of the previous day’s volume.

Market breadth continues to be absolutely stunning. New Highs are beginning to join in as well. Notice also that the NYSE Composite Index significantly outperformed the SPX today. Today’s chart bar looks suspiciously like a topping pattern but market breadth says we go higher.

Total tick for the day was 116,000 and the average tick for the day was 75. There were 180 ticks greater than 600 and 80 ticks more extreme than -600. There were 27 ticks greater than 1000 and 3 ticks more extreme than -1000. The tick action suggests institutional accumulation.

Our tick chart for Wednesday again shows more strength than the indices revealed. This strongly suggests that institutions were accumulating with every dip.

<see tick image>

Wednesday’s volume was very similar to Tuesday’s. Looking at the intraday volume pattern, we really don’t see anything of significance from today’s volume pattern. Looking at our Nightly Breadth Indicators things are even more bullish looking but the McClellan Oscillator has moved even higher into extreme overbought territory, reaching the highest level since July 5th. The market posted an import top just two days after that.

<see volume image>

Moving Average and Support/Resistance Indicators:

94.8% of the SPX are above their five day moving average, 98.4% are above their 10 day average, 92.2% are above their 20 day moving average, 24.2% are above their 50 day moving average, and 27.2% are above their 200 day moving average.

We had three significant moving average crossovers Wednesday as the Russell Technology Index, Emerging Markets, and China all had their 5 DMA cross above the 20 DMA. So we now see more green creeping into the left of our chart while all the short term averages continue to rise. Our moving average Power Rating is 31 of a possible 100.

<see averages image>

Sectors on the Move:

Sectors stronger than the SPX for Wednesday:
- Energy -- Outperformed the SPX by +27%.
- Financials -- Outperformed the SPX by +73%.
- Industrials -- Outperformed the SPX by +21%.
- Utilities -- Outperformed the SPX by +18%.
- Health Care -- Outperformed the SPX by +22%.

Sectors weaker than the SPX for Wednesday:
- Basic Materials -- Underperformed the SPX by -22%.
- Technology -- Underperformed the SPX by -71%.
- Consumer Staples -- Underperformed the SPX by -15%.
- Consumer Discretionary -- Underperformed the SPX by -2%.

In Late Trading:
240 SPX components moved upward and 110 components downward during the after hours with 233.8 million shares traded.

What We Learned from Wednesday's Action:

Wednesday was session 7 to close above the 5 DMA, session 4 to close above the 10 DMA, session 3 to close above the 20 DMA, and session 26 to close below the 50 DMA. This was also session 3 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 48.3 points above the 10 DMA.

The SPX 5 DMA is 1195.59, 10 DMA is 1170.59, 20 DMA is 1173.04, 50 DMA is 1256.19, 100 DMA is 1288.26, and 200 DMA is 1283.9.

Looking Ahead:

Well, here we are at SPX 1220. This level of resistance has been our target since the 1120 level held. There are some signs of market exhaustion. But the Advance/Decline Line continues to bullishly outperform the SPX. While odds increase of a down day with each up day that we have, any sustained decline is unlikely as long as market breadth is surging.

We recommend caution here, both sides. A dip, soon, seems likely, followed by more work to the upside.

Checking seasonality, we see that the August which just closed was only slightly worse than August 2010. September comes in with a negative bias over the last ten years but the first few days of the month have a slightly positive bias.

<see AD image>
<see seasonality image>

Thursday, September 1

Economics
08:30 Initial Claims
08:30 Continuing Claims
08:30 Productivity-Rev.
08:30 Unit Labor Costs – Rev.
10:00 ISM Index
10:00 Construction Spending
3:00 Auto Sales
3:00 Truck Sales
01:00 CNY Private Manufacturing
01:30 AUD Private Capital Expenditure
05:45 CHF GDP
06:00 EUR German GDP
07:15 CHF Retail Sales
07:55 EUR German PMI

Earnings
Before: CHRS, CIEN, MPR, MEI, MOV, SCMR, UTIW
After: CHINA, ESL, FNSR, FLOW, HRB, MITL, ZQK, SEAC, ULTA

The Labor Department's closely-watched weekly initial jobless claims data comes out at 8:30 am, with economists expecting claims to drop slightly to a reading of 408,000 claims from last week's 417,000 claims. Traders will get the Institute for Supply Management's August manufacturing index, as well as construction spending figures from the Commerce Department. Economists expect the August ISM index will fall to a reading of 47 from last month's 48.5, while construction spending figures are expected to increase 0.1%, down slightly from last month's 0.2% increase.

Thank you for reading. Think on it, trade on it, and be well.

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