marketspath

Morning Strength Fades

Posted by Gary Dean 09/09/11 @ 7:50 am
Written by Jerome Mel Hickerson

Both the Bank of England and the ECB left interest rates unchanged this morning as was expected. In addition, OECD said that global growth has ground to a halt and Morgan Stanley was out with a report suggesting that the G-7 will jointly intervene at this weekend's summit. Initial Claims for Unemployment Insurance for the week ending 9/3 rose by 2,000 to 414K, which was above the consensus estimate for 405K and last week�s revised total of 412K. Continuing Claims for the week ending 8/27 came in at 3.717M vs. 3.707M and last week�s 3.747M.

Thursday�s session began with a gap lower, quickly bounced five points before giving that back before 10:00 am. But then the SPX bounced in earnest, gaining about fifteen points to put the high of the day on the chart at 11:08 am. The rest of the session was choppy but consistently downward as the index closed near the lows of the session. Equities flirted with breakeven during the first half of the session, but optimism turned to pessimism as Fed Chairman Bernanke�s address to the Economics Club of Minnesota lacked further hints of QE3. Stocks worked a steady path lower in afternoon trading, with the Dow posting its fourth triple-digit drop in five sessions.

Looking at our Market Leaders board, all of our leaders closed lower today with the Financials and the Russell 2000 leading the way. Technology showed relative strength.

SPX big winners were Yahoo! Inc (YHOO) 6.12%, Valero Energy Corp (VLO) 4.01%, and Marathon Petroleum Corp (MPC) 3.98%. SPX big losers were Pall Corp (PLL) -10.95%, Gannett Co Inc (GCI) -6.52%, and Genworth Financial (GNW) -6.4%.

SPX five day big winners are Verisign Inc (VRSN) 8.86%, NVIDIA Corporation (NVDA) 6.54%, and Yahoo! Inc (YHOO) 6.1%. SPX five day big losers are Gannett Co Inc (GCI) -14.55%, Pall Corp (PLL) -13.89%, and Whirlpool Corp (WHR) -13.85%.

New Ten Day Highs: AMD, AGN, AXP, AIV, AZO, AVB, BXP, BMY, CELG, CNP, CEPH, CVX, CSCO, KO, CL, CAG, CEG, COST, CVS, ESV, EQT, EQR, FDO, GIS, HCN, HNZ, HES, JNPR, K, KFT, KR, LH, LLTC, MA, MJN, MU, NEM, NI, NVLS, PBCT, RL, PGN, PSA, QCOM, RRC, SWY, SNDK, SPG, SO, SBUX, SUN, TSO, VLO, VTR, VFC, VNO, WAG, WPI, AMZN

New Ten Day Lows: CMA, FSLR, FTR, GCI, PLL, PEP, JASO, WHR

<see leaders graphic>

Volume & Breadth Indicators

For the SPX Index there were 63 components advancing and 409 components declining. On the NYSE 3,111 issues were traded with 667 advancing issues and 2,361 retreating issues, a ratio of 3.54 to one declining. There were 33 new highs and 21 new lows. The five day moving average of New Highs is 23 while the five day moving average of New Lows is 59 and the ten day moving average of Net Advancing is 47.

Declining volume was higher at a ratio of 5.67 to one. The closing TRIN was 1.61 and the final tick was 267. The five day average of TRIN is 1.81 and the ten day average of TRIN is 1.26. The NYSE Composite Index lost -1.33% today while the SPX lost -1.07%.

For the NYSE, relative to the previous 30 session average, volume was -29.72% 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, 17 sessions ended on a positive tick, 7 of last 10. For the SPX, the day's volume was 126.3% of the average daily volume for the last year. Volume was 108.4% of the last 10 day average and 117.2% of the previous day�s volume.

The ten day average of Net Advancing is about as neutral as it gets. Breadth was quite negative today as would be expected on a day with a triple-digit Dow loss. But nothing stands out as anything other than typical consolidation after Wednesday�s large up move.

Total tick for the day was -147,000 and the average tick for the day was -95. There were 88 ticks greater than 600 and 211 ticks more extreme than -600. There were 4 ticks greater than 1000 and 50 ticks more extreme than -1000. The tick action suggests institutional distribution.

Our tick chart for Thursday shows that the sellers were in control. Bears owned the greater than 1000 ticks with an advantage of 46-to-1.

<see tick graphic>

Thursday�s volume was about the same as Wednesday�s. Looking at the intraday volume pattern, volume spiked near the close while the index was losing ground. Looking at our Nightly Breadth Indicators, our indicators have taken a turn south. The data tonight does not look good for the bulls at all. The ten day average of the McClellan Oscillator remains overbought despite the Dow having triple-digit losses four of the last five sessions.

<see volume graphic>

Moving Average and Support/Resistance Indicators:

51.4% of the SPX are above their five day moving average, 42.8% are above their 10 day average, 57.8% are above their 20 day moving average, 19.6% are above their 50 day moving average, and 22.2% are above their 200 day moving average.

We had two significant moving average crossovers Thursday as both the Financials and the SOX had their 5 DMA cross below their 20 DMA. Our moving average Power Rating is 24 of a possible 100.

<see averages graphic>

Sectors on the Move:

Sectors stronger than the SPX for Thursday:
- Technology -- Outperformed the SPX by +56%.
- Consumer Staples -- Outperformed the SPX by +80%.
- Utilities -- Outperformed the SPX by +100%.

Sectors weaker than the SPX for Thursday:
- Basic Materials -- Underperformed the SPX by -27%.
- Energy -- Underperformed the SPX by -11%.
- Financials -- Underperformed the SPX by -121%.
- Industrials -- Underperformed the SPX by -46%.
- Health Care -- Underperformed the SPX by -2%.
- Consumer Discretionary -- Underperformed the SPX by -30%.

In Late Trading:
147 SPX components moved upward and 133 components downward during the after hours with 248.3 million shares traded.

What We Learned from Thursday's Action:

Thursday was session 2 to close above the 5 DMA, session 1 to close below the 10 DMA, session 2 to close above the 20 DMA, and session 31 to close below the 50 DMA. This was also session 8 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 4.71 points below the 10 DMA.

The SPX 5 DMA is 1185.63, 10 DMA is 1190.61, 20 DMA is 1178.83, 50 DMA is 1246.44, 100 DMA is 1281.67, and 200 DMA is 1283.78.

Looking Ahead:

We should see plenty of action to close out the week. The direction will depend on how well President Obama soothes or worries traders. We expect that traders will be comforted by tonight�s speech. But technicals also support the thinking that we are in a short-term uptrend with a test of the 50 DMA likely ahead.

Friday, September 9

Economics
10:00 Wholesale Inventories
CNY Industrial Production
CNY Retail Sales
02:00 CNY CPI
05:00 JPY Consumer Confidence
06:00 EUR German CPI

Earnings
Before: KR, LULU, PNY

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

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"Mel"
http://melsinfo.com/