Markets Gyrate on Fears of French Downgrade

by an AdviceTrade.com publication

Market Recap: Overseas markets followed Wall Street higher and with the exception of Spain and Italy, European markets were also higher. Rates fell at Italy's latest T-Bill auction but the French felt the need to hold emergency meetings about the economy and talk about meeting austerity targets. Here in the U.S. the futures were pointing to a lower open as fear mounts that France is about to undergo a downgrade. The mid-week session began with a large gap lower as the markets continued their yo-yo act up and down. The SPX traded lower over the opening hour and then stabilized, trading generally higher for the next three hours. But the final two hours belonged to the bears as the index retreated twenty-five points and closed at the lows of the day. Looking at our Market Leaders board… again, what a difference a day makes. All of our leaders closed lower with the Financials leading the way. Technology and the SOX got off with the least damage. SPX big winners were Polo Ralph Lauren Corp (RL) 4.21%, Metropcs Communications Inc (PCS) 2.52%, and Memc Electronic Material (WFR) 1.9%. SPX big losers were Computer Sciences Corp (CSC) -12.3%, Regions Financial Corp (RF) -11.9%, and Suntrust Banks Inc (STI) -11.77%. SPX five day big winners are Motorola Mobility Holdings Inc (MMI) 3.64%, National Semiconductor (NSM) .08%, and Cephalon Inc (CEPH) -.76%. SPX five day big losers are Pulte Homes Inc (PHM) -29.8%, Bank Of America Corp (BAC) -29.04%, and E Trade Financial Corp (ETFC) -28.17%. New Ten Day Highs: AEM New Ten Day Lows: MMM, ADBE, AMD, AFL, A, AIG, AMGN, ADP, BBT, BA, BSX, BF/B, CPB, CCL, CELG, CHRW, CME, CMA, CSC, GLW, COST, XRAY, EK, ERTS, FII, FDX, FITB, FHN, GCI, GILD, HAR, HON, HSP, HCBK, HBAN, IBM, INTU, IVZ, ITT, KEY, KFT, LH, LEN, LIFE, LMT, LOW, MTB, MAR, MET, MWW, MCO, MS, NWL, NTRS, NOC, OI, PEP, PBI, PNC, PHM, DGX, RTN, RF, COL, SCHW, SNA, STJ, SPLS, HOT, STT, SYK, STI, BK, TWC, UNH, DYN, KBH, USB, VAR, WMT, DIS, WFC, GS Volume & Breadth Indicators For the SPX Index there were 17 components advancing and 459 components declining. On the NYSE 3,090 issues were traded with 780 advancing issues and 2,273 retreating issues, a ratio of 2.91 to one declining. There were 3 new highs and 227 new lows. The five day moving average of New Highs is 5 while the five day moving average of New Lows is 702 and the ten day moving average of Net Advancing is -894. The Net Advancing data indicates a bearish trend. Declining volume was higher at a ratio of 15.32 to one. The closing TRIN was 5.11 and the final tick was 153. The five day average of TRIN is 2.25 and the ten day average of TRIN is 2.08. The NYSE Composite Index lost -4.41% today while the SPX lost -4.62%. For the NYSE, relative to the previous 30 session average, volume was 80.26% 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, 2 of last 10. For the SPX, the day's volume was 127.3% of the average daily volume for the last year. Volume was 99.8% of the last 10 day average and 94.7% of the previous day’s volume. One thing jumps out tonight: Market breadth was not as horrible today as the indices would suggest. The ten day average of Net Advancing actually increased today and the broad NYSE Composite Index outperformed the SPX. Total tick for the day was 221,000 and the average tick for the day was 142. There were 325 ticks greater than 600 and 110 ticks more extreme than -600. There were 110 ticks greater than 1000 and 12 ticks more extreme than -1000. The tick action suggests institutional accumulation. Our tick chart for Wednesday leaves us speechless. This is the most bizarre tick data we have seen. There is no way you could look at this data and guess that the market ended the day down more than 500 points. Bulls were in total control of the extreme ticks. Some institutions were obviously in accumulation mode today. Wednesday’s volume was again very heavy. Looking at the intraday volume pattern we can see the volume spike that came along with the mid-afternoon rally. Looking at our Nightly Breadth Indicators things remain mixed tonight as the wild choppy trade back and forth shows in the indicators. The McClellan Oscillator remains very oversold. Moving Average and Support/Resistance Indicators: 13.8% of the SPX are above their five day moving average, 3.2% are above their 10 day average, 1.6% are above their 20 day moving average, 3.8% are above their 50 day moving average, and 11.2% are above their 200 day moving average. We had no significant moving average crossovers Wednesday as the back and forth continues. Our moving average Power Rating is 10 of a possible 100. Sectors on the Move: Sectors stronger than the SPX for Wednesday: - Basic Materials -- Outperformed the SPX by +80%. - Energy -- Outperformed the SPX by +75%. - Technology -- Outperformed the SPX by +45%. - Consumer Staples -- Outperformed the SPX by +52%. - Utilities -- Outperformed the SPX by +252%. - Health Care -- Outperformed the SPX by +30%. Sectors weaker than the SPX for Wednesday: - Financials -- Underperformed the SPX by -291%. - Industrials -- Underperformed the SPX by -66%. - Consumer Discretionary -- Underperformed the SPX by -2%. Looking Ahead In this environment, it’s dangerous to be thinking long. But there are several factors that have us thinking a bottom is forming. One item that grabbed our attention today was the tick action. This was so bizarre for a huge down day it strongly suggests that institutions were buying this dip. I prefer to be on the side with the money guys. Another thing is that the SPX is sitting on a significant support level where bounces have been seen before. This 1120-1125 level makes good sense for a significant bounce. The clincher for us is the Advance/Decline line. The A/D has begun to outperform the major indices and this is usually a good signal to start the process of layering in long side. In Late Trading: 338 SPX components moved upward and 58 components downward during the after hours with 200.4 million shares traded. Thursday, August 11 Economics 08:30 Initial Claims 08:30 Continuing Claims 08:30 Trade Balance 01:30 AUD Employment Change 01:30 AUD Unemployment Rate 08:00 EUR ECB Publishes August Monthly Report Earnings Before: ADES, BGG, BR, CHLN, EJ, RDEN, ELMG, FXCM, KSS, MPEL, CHUX, RGLD, SLE, HEAT, SODA, SNSS, ELOS, TK, THI, WEN After: AMCN, ANAC, AMAP, BYI, BODY, EPAY, EAT, DAR, DV, ELX, AG, GRM, HOKU, ISS, MCP, JWN, NVDA, RRGB, RENN Trader will get the Labor Department's weekly jobless claims report and U.S. trade balance figures at 8:30 am. The number of people filing for unemployment benefits is expected to climb to 409,000 and economists expect the U.S. will post a $48 billion trade deficit for June. Thank you for reading. Think on it, trade on it, and be well. -Mel

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