| US Stock Service Daily Hotline 6 May 2013 By John Gray |
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- Stocks surged to the upside Friday with nearly all averages up 1% for the second day in a row. For the entire week the averages rallied up to 3%. Friday's close included new record highs for nearly all indexes and some breaks above ‘even number' levels for the S&P 500 and DJ Industrials. The NYSE advance occurred on higher volume, suggesting large traders were adding to their holdings.
- Higher levels were also shown for all index charts. They moved above prior 2013 tops to new highs. Those breakouts above resistance clear the way for more gains. Indicator charts also showed gains and confirming bullish signals. They remain below prior 2013 peaks and need to end their negative patterns of lower highs on successive rallies.
- There were two strong technical data points Friday. The 59 new stock buy signals were the most since 3-Jan when that count was 62. It was 128 on 2-Jan so the reading could increase further but that was a clear sign that demand to own shares was increasing. The number of new 52-wk stock highs also reached the highest for 2013, signaling that participation was expanding. Both suggest the highs for the current move have not occurred.
- There was one force driving stocks up Friday – the positive surprise for the April monthly employment report. In addition to exceeding all forecasts for the latest month the prior two-months of data was revised sharply higher. That suggests companies have finally reached the point where increased output needs more workers and that cost cutting efficiencies are no longer enough. That adds conviction to the perception that the US holds amongst the best potential of any major world economy. That means the US will continue to attract buying from overseas, particularly from Europe where the outlook remains poor.
- Friday's advance was driven by the surprising jobs data but that didn't make the positive chart action any less meaningful. In addition to the index strength further bullish indicator signals were presented. That says the recent divergences should end with the broad stock action catching up to the averages and higher markets over the coming weeks. We could also see an increase in optimism and another surge in the number of bullish advisors that would point to a near fully invested stance. At that point risk would increase but it is still most likely a few weeks away.
- Large Caps 95% invested, Mid Caps 90% and Small Caps 90%.
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| Close | Volume | 1-Day Change | P&F Signals | Support | |||||
| Signal | Trend | Start Date | Trend Reversal | ||||||
| DJ Industrials | 14,974 | 119.9m | +142.38 | +1.0% | Bull | Up | 2 Jan 2013 | 14,400.00 | 14382.1/14434.4 |
| S&P 500 Index | 1,614.42 | 519.3m | +16.83 | +1.1% | Bull | Up | 2 Jan 2013 | 1,530.00 | 1485.01/1536.03 |
| NASDAQ Comp. | 3,378.63 | 389.2m | +38.01 | +1.1% | Bull | Up | 30 Apr 2013 | 3,140.00 | 3105.37/3154.96 |
| NASDAQ 100 | 2,944.59 | 153.3m | +33.46 | +1.1% | Bull | Up | 30 Apr 2013 | 2,720.00 | 2689.83/2730.97 |
| S&P Midcap 400 | 1,165.07 | 93.8m | +14.64 | +1.3% | Bull | Up | 23 Apr 2013 | 1,135.00 | |
| Russell 2000 Index | 954.42 | 234.8m | +14.57 | +1.6% | Bull | Up | 23 Apr 2013 | 920.00 | |
| Closing prices through Friday May 3, 2013 | |||||||||
After strong gains Thursday nearly all index charts were rallying and the additional advance that ended the week did add to the upside action. The averages rallied 1% for the second day, and all charts moved higher. The S&P 500 closed above 1600 for the first time ever and the DJ I broke 15,000 before pulling back toward the close. Gains also continued for the NASDAQ markets as technology shares again attracted attention.
Friday's chart moves up to new highs for nearly all indexes ended a week where most showed double tops. That period allow for consolidation. Both NASDAQ charts were the first to show breakouts above prior tops but they were joined with that status Friday by every other index chart, except the AMEX Comp. While not at a high, that resource oriented average did move above five prior chart highs that were clear resistance. All index charts are bullish.
Chart Activity - Sector Indexes
The DJ Transports rallied 2% Friday, hitting 6250 intraday. That moved its chart back to a buy signal and also equaled the two record highs from March. Overall a case could still be made that a top is forming there. The S&P 500 sectors were also active to end the week. New highs were shown for the Transport, Consumer Discretionary and Financial charts and the Industrials equaled their last peak. The Energy Index moved up to a buy alert, already holding a low pole. The Biotech BTK also set a new high while the Consumer CMR and Cyclical CYC charts equaled their highs. All three tech indexes advanced with a new buy for the High Tech MSH, joining the signals for the other two.
Chart Activity - Commodities
Spot gold ended with a small gain but its intraday Friday high reversed the chart back up to X $1480. That is just below its buy stop and the chart already shows a bullish low pole formation. Its April low was $1330. Both gold index charts had small further up changes and continue to work on new bases just above lows. The HUI ended just below a new trading signal. The Precious Metals bullish % chart holds at O 0% but there have been two recent gold stock buy signals so a bullish upturn is now close. There were six gold stock selling climaxes two weeks ago and another last week.
Crude oil closed up $1.62 at $95.61 but intraday it traded above $96. The chart did move through its buy stop at X $95, fulfilling the forecast of its low pole formation recovery from its recent low of O $86. That was a $10 drop to just above prior bottoms around $85. Resistance is overhead at $98. The Oil XOI shifted to a buy signal and ended at a high since 2007. The Oil Service OSX chart also moved to a buy and equaled its Feb high.
| % 10 Week | Close | 1-Day Change | P&F Trends | ||
| Signal | Status | Date Changed | |||
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| NYSE | 72.2 | +6.88 | Bull | Confirmed | 3 May 2013 |
| Nasdaq Composite | 62.36 | +7.95 | Bull | Confirmed | 2 May 2013 |
| S&P 500 | 85.2 | +10.20 | Bull | Confirmed | 3 May 2013 |
| Nasdaq 100 | 79 | +7.00 | Bull | Confirmed | 3 May 2013 |
| Option Stocks | 74 | +9.65 | Bull | Confirmed | 2 May 2013 |
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| % 30 Week | Close | 1-Day Change | P&F Trends | ||
| Signal | Status | Date Changed | |||
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| NYSE | 76.33 | +3.90 | Bull | Confirmed | 3 May 2013 |
| Nasdaq Composite | 65.19 | +4.20 | Bear | Correction | 3 May 2013 |
| S&P 500 | 89.2 | +3.40 | Bull | Confirmed | 23 Apr 2013 |
| Nasdaq 100 | 81 | +3.00 | Bull | Confirmed | 22 Apr 2013 |
| Option Stocks | 78.55 | +4.36 | Bull | Confirmed | 3 May 2013 |
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| Bullish % | Close | 1-Day Change | P&F Trends | ||
| Signal | Status | Date Changed | |||
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| NYSE | 69.34 | +1.57 | Bear | Alert | 17 Apr 2013 |
| Nasdaq Composite | 61.85 | +0.65 | Bull | Confirmed | 2 Jan 2013 |
| S&P 500 | 79 | +1.80 | Bull | Top | 17 Apr 2013 |
| Nasdaq 100 | 73 | n/c | Bull | Top | 25 Feb 2013 |
| Option Stocks | 70.19 | +1.39 | Bear | Alert | 19 Apr 2013 |
Friday ended with most averages up more than 1% again and very strong advance-decline data. That produced even stronger readings for the daily moving average breadth indicators than the prior day and up changes for nearly all charts. The remaining three % 10-wk MAs reversed back up one-day after the other two. All exceeded their Tuesday, 30-Apr, highs and the resistance downtrend lines at the same levels. Those were from the 2013 peaks in Jan and Mar. That starts to end the negative pattern of lower highs compared to the indexes, and increases the near term potential.
Medium-term:
Four of the % 30wk MAs charts moved up, including three new reversals. All again point higher. The NYSE hit its third straight top at X 76% and the NASDAQ its second peak at X 62%. Clearing that resistance will also strengthen their projections for the next few weeks. We still note that these charts show tops forming over the first four months of this year, just as they did over the same period of 2012. They remain below earlier 2013 highs suggesting that process is near its end. They point to lower markets over the next month or two. The path in either direction is rarely a straight line.
Long-term:
Friday had more new stock buy signals (59) in weeks, boosting the NYSE bullish % value 1.57%. That was not enough to reverse that chart up (72.0%) but it did suggest that move could occur. The S&P 500 also ended within 3% of its upturn while the NASDAQ Comp still holds at the same level as its year ago top levels.
Current outlook:
The new index highs Friday were accompanied by further short term indicator strength which has a bit more to go before prior top levels are reached. Most moving average breadth charts are also again overbought so their advances should slow and new tops should form. The overall action showed renewed bullish status but the rally is also mature.Stock selection remains the key as rotation is underway and some areas show definite weakness.
| Close | Change | Chart Direction | Chart Status | Chart Action | |
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| Short term Composite Indicator | 74.1 | +18.90 | Rising | Bullish | Reversal Up |
| NYSE High-Low Index | 93.76 | +1.28 | Rising | Bullish | None |
| Nasdaq High-Low Index | 82.39 | +3.38 | Rising | Bullish | Higher |
| NYSE On Balance Volume (by DJIA) | 260,800 | +717.00 | Rising | Bullish | Higher |
| NYSE On Balance Volume (by breadth) | 506,363 | +716.00 | Rising | Bullish | Higher |
| Nasdaq on Balance Volume by Composite | 427.13 | +1.73 | Rising | Bullish | Higher |
| Nasdaq on Balance Volume by Breadth | 26.08 | +1.73 | Rising | Caution | Higher |
| NYSE Cumulative Advance/Decline | 363,462 | +1386.00 | Rising | Bullish | Higher |
| NYSE Money Flow Index | 36,114.3 | (weekly) | Rising | Bullish | None |
- Stocks staged their second straight session with more than 1% gains Friday, lifting more indicators charts. Bullish status is again near universal with a modest divergence from the broad NASDAQ. However trading is also back up at the areas of oscillating chart highs so the advance could be due for a new consolidating pause.
- The daily short term composite chart reversed up and jumped back into overbought territory, ending at X 74%. It remains below its last two highs at X 78% (Apr) and X 84% (Mar) and thus is not yet confirming the index highs. Similar chart action is shown on most % 10-wk MA charts.
- Positive value changes continued for the daily high low ratio indicators, with one chart higher. Both are bull confirmed and overbought. The NYSE holds at its last top at X 92% and just missed exceeding it on Friday. That should occur today. The NASDAQ chart strengthened with a low pole signal. On Friday both exchanges had the most daily stocks in 2013. The NYSE had the highest count (483) since 26-Apr-10 when there were 674.
- Again the four daily on-balance-volume charts advanced. Three OBVs show buy signals with trading at highs. The NASDAQ breadth chart shows a high pole formation so its status diverges. It would shift positive if readings are up today and Tuesday.
- The medium-term daily NYSE cumulative advance-decline line chart set another new high and that NASDAQ chart ended ‘89' below an 18-month high.
- The weekly long-term composite chart edged higher and remains bullish. The prior week saw it shift back to bullish after a more than 50% retracement of its last decline. That points to an upcoming buy signal before trading returns to the lows. The value was +113.5, up from +94.0 a week ago.
The sector sum value was +21.5, up from +19.0 on Thursday. The P&F chart would reverse at +22.0. The sector sum short term status is determined by its chart direction, along with the direction of the groups' cumulative advance decline line and the last three day's direction of the NYSE bullish %. The latter two elements have already occurred. The long term sector sum status shifted bullish after a P&F chart buy signal on 8-Jan, with a sell stop at -7.0. It also now shows a high formation retreat from its 2013 high. That says a sell will occur before that level is seen again and an upturn would boost the stop.
The Bell Curve has 15 of 47 groups below 60%. 18 groups are overbought, up 2 from the recent low. Steel/Iron and Precious Metals are the only areas now oversold, and the latter had its second stock buy signal, moving its reading to 3.33%. It needs 6% to reverse up from its current position at O 0%. That would be bullish for those stocks.
Sector Bullish% P&F Charts Higher:
|
Sector |
Bullish % |
Comment |
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Autos & Parts |
78% |
Reversed to bull confirmed. |
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Buildings |
74% |
Holds bull confirmed. Now overbought. |
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Oil Service |
48% |
Reversed to bull confirmed. |
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Restaurants |
80% |
Holds bull confirmed. |
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Retailing |
72% |
Holds bull confirmed. |
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Short term P&F chart status |
Neutral |
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Value |
+21.5 |
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Change yesterday |
+2.5 |
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Last reversal |
21-Feb down to +42.0. |
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Short term stop |
+22.0 |
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Long Term P&F chart status |
Bullish |
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Last long term signal |
P&F chart Buy at +29.0 on 8-Jan |
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Long term P&F stop loss |
Potential bearish at -7.0 |
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Last major resistance (& date) |
+45.0 (Feb 12 highs) |
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Last major support (& date) |
-46.5 (Sep 11 lows) |
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Total number of sectors |
47 |
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Last signal UP; # of rising groups |
25 |
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Trigger for bearish status |
22 |
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Sector charts overbought |
18 |
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Sectors charts oversold |
2 |
Stock Action
The NYSE bullish % value was up 1.59% Friday, its 9th gain over the last 10 sessions. It was also the largest positive change since early January. The reading ended at 69.34%. The chart fell to O 66% on 22-Apr and is within 3% of X 72%, the reading it needs to reverse back up. Like the S&P 500 bullish %, the NYSE chart is retreating after recent highs equaled the same peaks as in 2012.
Daily stock P&F chart activity increased to slightly below average levels, with 545 stocks moving on their P&F charts. There were 390 changes the prior session. Volume was up 5.7% for the NYSE but down 1.0% for the NASDAQ. That higher NYSE activity was another bullish sign.
The Oil Service Bullish % rallied 3.92% on Friday to reverse up the chart. The status is now "bull confirmed" and with trading just beneath 50%, it is very positive as it offers ample upside potential. Watch for a continuation higher to the 68% level, the top of the 2012 range.
Buy signals on Friday were Noble Corp (NE), Helmerich & Payne (HP), FMC Technologies (FTI) and Dril-Quip (DRQ). All these stocks have decent charts. DRQ is particularly favorable as it reasserts its long-term uptrend. Clearing the March high of $88.12, which is expected soon, would carry the share to a record high.
Industry Breadth
Types of Breadth Indicator
Bullish % or % Bull Trends – every point & figure stock chart has either a buy or a sell signal. This is a major advantage to technical analysis and is entirely mechanical. The bullish % is the number of stocks on “buy” signals compared to the total for the groups. When most stocks are on sell signals, the bullish % is low. It is a positive sign when the bull % begins to improve. It is negative when the bull % turns down from highs. We also consider whether the P&F chart is in an up or down column. If the bullish % is on a P&F buy signal and in an up column, it is long term and short term bullish. If the P&F chart is on a buy signal and in a down column, it is long term bullish, but short term bearish. If the P&F chart is on a sell signal and in a down column, it is long and short term bearish. If the P&F chart is on a sell signal and in an up column, it is long term bearish, but short term bullish.
% 10 Week Moving Averages – this indicator reflects the percentage of individual shares in a group above their own 10 week moving average. The fewer the number of component stocks per sector or market, the more volatile the indicator. It uses overbought (70% & higher) and oversold (30% & lower) as target levels for rallies and declines. Reversals from overbought or oversold that break those levels are strong calls for action, with a stronger indication if a p&f signal is shown.
% 30 Week Moving Averages – this indicator calculates the percentage of stocks in a given area that are above their own 30 week moving average. This gives an indication of medium to longer term overbought (above 68%) or oversold (below 32%) conditions, and always trails the % 10-wk MA in movement. Like the 10-week, the best action is when the indicator moves up from below 30% as this is a longer term sign that the market is ready to begin a sustainable advance. Conversely, the market becomes bearish when it moves down below 70%, signalling that the market is ready for a significant down move.
% Relative Strength – this indicator measures the % of stocks with positive relative strength against the S&P500 index i.e. the number of shares that are in outperforming trends
NYSE OBV (by DJIA): Updated daily; cumulative total of NYSE volume using the DJIA Close (positive or negative) to determine whether to add or subtract that day’s volume.
NYSE & NASDAQ OBV (by breadth): Updated daily; cumulative total of NYSE & NASDAQ volume using the day’s breadth reading (positive or negative) to determine whether to add or subtract that day’s volume.
NASDAQ OBV (by Composite): Updated daily; cumulative total of NASDAQ volume using the day’s NASDAQ Composite close (positive or negative) to determine whether to add or subtract that day’s volume.
NYSE 10 day Up/Down Volume: Updated daily; a 10-day moving average of NYSE upside volume divided by the total upside and downside volume.
NYSE Money-Flow: Updated weekly; money moving into or out of stocks, based upon dollar value of shares traded on the upside and the downside, weighted to most recent action.
NYSE, NASDAQ & ASE High Low: Updated daily; a ratio of the number of NYSE, NASDAQ & ASE stocks showing new 52-week highs divided by the sum of the total new highs and new lows, smoothed using a 10-day moving average.
US ADVANCE/DECLINE INDICATORS
INVESTORS INTELLIGENCE’S PROPRIETARY COMPOSITE INDICATORS
The II Sector Sum Indicator: this is a proprietary indicator that scores the daily status of 45 Broad Industry Bullish % charts, each designated a possible value of -1 to +1. The ranking depends on chart status (+1 bull confirm or correction; +0.5 bull alert; 0 bull top; -0.5 bear alert; -1 bear confirm or correction). The sum is plotted on a 1-pt/box p&f chart. It generates early warnings of trend change from extreme readings. While on a buy or sell from extremes, reversals up or down will confirm short term potential moves in the opposite direction, already signalled by the short term composite.
The II Long Term Composite Indicator: this is a proprietary indicator generated from the scores awarded to over forty indicators. These indicators have been selected across a wide range of disciplines covering index trends, breadth, sentiment, money-flow and financial/economic factors. The scores awarded to each indicator are weighted to create an indicator that generates signals at market extremes i.e. buy signals at market bottoms and sell signals at market tops. It became apparent to us that we needed to apply more emphasis on leading indicators and therefore weightings are dependent on each indicator’s predictive value rather than its trend following capability.
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