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US Stock Service
Daily Hotline
 
9 April 2014    By John Gray
Market Action
  • The stock market rose modestly on Tuesday as the NASDAQ led a bounce for the major averages. That was a positive sign as the NASDAQ has suffered the most over the last two weeks as traders took many prior high flying stocks down more than 10%. The index itself retreated more than 6% while the NYSE averages remained barely a few percent below their highs.
  • While the three-day sell off halted, the rebound was only modest and failed to include important confirming elements. Volume fell across the board showing institutional investors were not yet ready to bet on a new bottom. Additionally none of our oscillating indictor charts managed to reverse up. At least some of their declines held at the same levels as their last chart lows.
  • Another signal for caution was yesterday's strength for utility stocks which pushed the DJ U to a record close. Those shares are usually bought when investors are worried about market volatility. They offer big dividends regardless of how the economy is doing. The utility sector is up 10.5% so far this year, by far the strongest of the S&P 500 groups.
  • We see the chance for some further near term market gains but would consider that only in the context of overall top forming trading that may be nearing its final stage. Indicator upturns could occur shortly to signal that action but the recent index highs are major overhead resistance. The medium term indicators are weakening and we counted 174 stocks hitting their sell stops the last three sessions. That total is far above any recent upside breakout reading to show building pressure to end longs.
  • Sentiment showed increased optimism with the S&P 500 and DJ I highs last week. That is another troubling sign.
Market Drivers
  • Earnings season began with a whimper. Alcoa beat profit forecasts but revenue was below estimates. Those results were similar to many other releases last year, with cost-cutting efficiencies increasing earrings but little sign of higher demand that would require major new hiring. On Friday financial giants Wells Fargo and JPMorgan Chase will release their important results. The recently lowered expectations also meant ‘beats' are possible although obviously not projected.
  • There were no data releases Tuesday but the release of the FOMC minutes will get scrutiny today. While economic expansion is expected this year investors are unclear as to the potential strength and how it will impact inflation and hiring. There are some whispers that the slow current pace of growth will continue but some price pressure will also occur. We are unfortunately old enough to recall that action from the late 1970's when it was described as ‘stagflation'.
Technical Outlook
  • The halt of the market's slide yesterday included barely any positive elements but at least the downside momentum appeared over for the very near term. Some short term indicators charts found support at their last lows but upturns failed to occur. That would have signaled immediate upside potential. That could still occur today, particularly if the Fed comments show a positive spin. However the plethora of new stock sell signals and NASDAQ indicator breakdowns to lower lows suggest another retreat will follow any rebounds. We see a chance for the long awaited 10% correction. Follow the oscillating charts and remain cautious.
Portfolios
  • Large Caps 30% invested, Mid Caps 20% and Small Caps 15%.
  • Bear Portfolio is 55% short.
 Indicators
Short Term Medium Term
II Short Term Composite Indicator
25.9% (+1.80%)
Bull Correction
NYSE %10 Week Moving Average
55.75% (+4.97)
Bear Alert
II Short Term Sector Sum
-20.50    (-2.00)
Bearish
New P&F Signals: US Breakouts
Close 1-Day Change
Bulls 13 +2
Bears 30 -71
NYSE Bullish % Indicator
63.15% (-0.55%)
Bull Correction
NYSE %30 Week Moving Average
67.86% (+3.60)
Bear Alert
II Long Term Composite Indicator
+135.50     (weekly)
Bullish
  • The short term oscillating charts were steady after recent sharp drops. The short term composite and the NYSE % 10-wk MA equaled there last lows.
  •  The stock breakout difference narrowed but remained negative for the third session. That completed the short term bearish status shift for the sector sum.

  • The weekly money flow indicator reversed down. The move ended just above its stoploss.
  • Other charts were mostly steady with two NASDAQ focused indicators slightly lower.
Index Trends
  Close Volume 1-Day Change P&F Signals Support
Signal Trend Start Date Trend Reversal
DJ Industrials 16,256.1 116.6m +10.27 +0.1% Bull Down 3 Apr 2014 16,000.00 15340.7/16006.6
S&P 500 Index 1,851.96 658.3m +6.92 +0.4% Bear Down 8 Apr 2014 1,900.00 1737.92/1824.58
NASDAQ Comp. 4,112.99 652.4m +33.23 +0.8% Bear Up 4 Apr 2014 4,300.00 3855.07/3968.19
NASDAQ 100 3,538.23 246.3m +30.47 +0.9% Bear Down 24 Mar 2014 3,680.00 3318.39/3418.88
S&P Midcap 400 1,351.81 146.1m +7.86 +0.6% Bear Down 7 Apr 2014 1,400.00
Russell 2000 Index 1,144.24 352.7m +8.46 +0.7% Bear Down 24 Mar 2014 1,195.00
Closing prices through Tuesday April 8, 2014
Chart Activity - Broad Index Moves 


Tuesday's open showed some further selling but trading quickly regrouped with most indexes positive the rest of the session. Most of the day showed sideways action with the two recently worst performers showing the best recoveries. The NADAQ Comp finished up 0.81% and the Russell 2000 gained 0.74%, with each closing close to session highs. The S&P 500 managed a 0.38% advance while the DJ I was barely positive, up just 10 points or 0.06%. It was down 65 pts at its low. Breadth was positive but lower volume signaled large traders were still on the sidelines.

The chart activity was limited after all indexes tumbled over the prior three sessions. The morning low for the DJ I dropped its long and short term charts to O 16,200. The short term DJ I ended just above its stoploss, with its major support line below there at O 16,050. The other activity was higher, with reversals up on the NASDAQ Comp and S&P Small-Cap charts. Both hold trading sells after breaks of recent lows. The NASDAQ Comp had a 6% move from highs to recent lows.

Chart Activity - Sector Indexes 

The sector chart activity was subdued. The unchanged DJ Utility index closed at a new high.  Amongst the S&P 500 groups there was a reversal down on the Industrial chart and a lower low for Health Care. The Biotech BTK also showed a lower low while the Drug DRG a double bottom. The Cyclical CYC (high pole) also moved down but the Semiconductor SOX (sell) reversed up.

Chart Activity - Commodites 

Spot gold rallied $11 to $1308 and its high reversed its chart up to X $1310. It holds a bearish high pole formation with the stop loss now at O $1270. It is down from a recent peak at X $1390. The two gold indexes [XAU & HUI] show new potential. The XAU followed the HUI yesterday with a trading buy signal. On 22-January the Precious Metals bullish % reversed up from O 8%. It moved up to X 52% on 14-Mar. On 26-Mar it reversed down, shifting to bull correction status.

Crude oil had a $2 gain that reversed its chart up to X $102. A move to X $103 would be bullish, aborting the current high pole formation. The energy index [OSX & XOI] charts set new highs Friday and now show small downturns.


Index Breadth

% 10 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 55.75 +4.97 Bear Alert 4 Apr 2014
Nasdaq Composite 41.47 +4.11 Bear Confirmed 4 Apr 2014
S&P 500 55.8 +2.60 Bear Confirmed 7 Apr 2014
Nasdaq 100 31 +6.00 Bear Confirmed 3 Apr 2014
Option Stocks 51.6 +6.69 Bear Confirmed 7 Apr 2014
% 30 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 67.86 +3.60 Bear Alert 7 Apr 2014
Nasdaq Composite 58.08 +2.89 Bear Confirmed 4 Apr 2014
S&P 500 77.6 +2.20 Bull Top 7 Apr 2014
Nasdaq 100 59 +2.00 Bear Confirmed 4 Apr 2014
Option Stocks 68.28 +3.29 Bear Confirmed 7 Apr 2014
Bullish % Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 63.15 -0.55 Bear Correction 4 Mar 2014
Nasdaq Composite 56.98 -0.36 Bull Correction 7 Apr 2014
S&P 500 68.8 -1.20 Bull Confirmed 24 Feb 2014
Nasdaq 100 44 -2.00 Bear Confirmed 13 Mar 2014
Option Stocks 64.11 -1.07 Bear Correction 4 Mar 2014
Breadth Indicators oscillate between overbought highs, at 70% and above, and oversold lows, at 30% or lower.
The % 10-week moving average is short term, % 30-week moving average intermediate, and the bullish %s are longer term.

Short-term:

The market rose modestly Tuesday with indexes all higher and two stocks up for each decline. That produced positive changes for all daily moving average breadth values, ending three days of general declines. There were no chart moves and no reversals up. The unchanged short term %10-wk MA charts show the NASDAQ indicators below their last lows and the NASDAQ 100 oversold for the first time since Nov-12. The NADAQ Comp finished near its Feb-14 low. The S&P 500 shifted to bear confirmed as it just exceeded its 25-Mar low while the NYSE equaled its O 52% level from that session. Oscillating charts often pause to regroup around the midpoint and the NYSE chart rallied from there two weeks ago.

Medium-term:

The steady % 30-wk MA charts show the NYSE and S&P 500 both equaling their last late March lows. Both NASDAQ charts broke below there, pointing to drops to around 50% where oscillating charts often pause to regroup. The medium deterioration is a negative sign for upcoming months although short term rebounds can occur along the way. The NYSE and S&P 500 charts are both retreating from moves that equaled their highs. We noted that as showing increased risk.


Long-term:

While Tuesday's finish was clearly positive the daily breakout data could only narrow the very negative buy-sell ratio from Monday to 13 buys and 30 sells. That was still weak and also the third straight loss for the NYSE bullish %, shifting its momentum to the downside. All of the bullish % values were lower with another decline for the NASDAQ 100 chart. It shows a low since Jul-12. The unchanged NASDAQ Comp ended less than 1% above its potential bear confirmed shift. The NYSE would turn down at O 58% after just missing an advance to X 66% last week.

Current outlook:

Moving averages indicators stabilized Tuesday after broad chart declines the prior three sessions. Those showed the NYSE focused charts down to support from at their recent late March lows but deeper breakdowns for the NASDAQ indicators.  Rebounds are possible just as followed those last lows but we expect they would occur in the context of overall top forming action. Last week's index highs were not confirmed and we see only modest potential for a trading rebound. We would sell into any strength. If the % 30-wk MA breakdowns expand just a bit more a deeper market retreat would be projected. The latest weakness on the slow moving bullish % charts suggests that could occur.




 

Indicators

Close Change Chart Direction Chart Status Chart Action
Short term Composite Indicator 25.9 +1.80 Falling Bearish None
NYSE High-Low Index 83.1 -1.48 Rising Bullish None
Nasdaq High-Low Index 58.59 -2.94 Falling Bearish Lower
NYSE On Balance Volume (by DJIA) 266,314 +748.00 Falling Caution None
NYSE On Balance Volume (by breadth) 526,139 +749.00 Falling Caution None
Nasdaq on Balance Volume by Composite 473.14 +2.18 Falling Caution None
Nasdaq on Balance Volume by Breadth 45.63 +2.18 Falling Caution None
NYSE Cumulative Advance/Decline 389,350 +1128.00 Rising Bullish None
NYSE Money Flow Index 42,825 -2588.42 Falling Caution Reversal Down

  • The selloff halted yesterday but one up day after multiple consecutive negative sessions rarely causes reversals on the indicator charts. Yesterday we noted an initial oversold reading that says a trading bottom could be close if the pullback was another small correction. A rebound attempt could be developing.
  • The daily short term composite chart held its double bottom at O 26%, slightly oversold and holding at the support line from the lower, earlier 2014 bottoms. A reversal up would confirm a rally effort but from this level it would not be strong and likely only similar to the recent upmove which conked out at prior index highs.
  • The only daily indicator move was a small down move on the medium term daily NASDAQ high low chart. New lows again exceeded highs there although the spread narrowed. It has support at O 54%, the level of its trendline and Feb low. The NYSE chart is bullish and overbought but its reading is starting to deteriorate. At present it is a few sessions from a downturn.
  • The weekly money flow (computed after Tuesday's close) reading reversed the chart down, equaling the last two lows for a sell alert warning.

 

Industry Bullish %s and Sector Sum

Daily Industry Groups Bullish %s: Monday's horrible breakout reading moderated but remained negative, with 13 new buy signals and 30 new sells. The three-day total of 174 stocks hitting their stops was far above the 112 combined buy signals shown over the five positive readings that ended 3-Apr. The activity amongst the 46 industry sectors slowed but remained negative with two charts up and seven down, including another reversal and drop out of overbought territory. The two significant negative status shifts lowered the sector sum value and chart. It equaled its February low. Its status shifted short term bearish.


The sum chart holds long term bearish
status from its shift on 27-January. It still holds a low pole retracement of its decline but would abort that with any new decline. Wall Street ended just above the 68% level that would cause that drop.

The sector sum value was -20.5, down from -18.5. The Bell Curve is again heading to the classic pattern that is typical at the end of a market correction. It was last shown around 6-February. Last week the majority of groups were between 50% and 70%.  

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 on the NYSE bullish %. The first two elements turned negative 24-Mar but it wasn't until 8-Apr that the NYSE bullish % showed the confirmed three down days. The short term status is bearish.


Sector Bullish% P&F Charts Higher:

Sector

Bullish %

Comment

Asia/Pacific

56%

Holds bull confirmed.

Latn America

46%

Holds bull alert.

 

 Sector Bullish% P&F Charts Lower:

Sector

Bullish %

Comment

Aeropsace/Airlines

66%

Fell to bear confirmed.

Buildings

60%

Holds bear confirmed.  

Forest Prdts/paper

52%

Holds bear confirmed.

Internet 

20%

Holds bear confirmed.

Leisure

54%

Holds bear confirmed.

Semiconductors

68%

Reversed to bear alert. Left overbought.

Wall Street

70%

Holds bull top.



Sector Sum Indicator:


Short term P&F chart status

 

Bearish

Value

    -20.5

Change yesterday

      -3.0

Last reversal

24-Mar down to -1.0

Short term stop

    -17.0

Long Term P&F chart status

Bearish

Last long term signal

P&F chart Sell + 10.0 on 27-Jan

Long term P&F stop loss

Potential bullish at +3.0.

Last major resistance (& date)

+45.0 (Feb 12 highs)

Last major support (& date)

-46.5 (Sep 11 lows)

 

 

Sector P&F chart direction:

  

Total number of sectors

46

Last signal Down # of rising groups

16

Trigger for bullish status   

19

Sector charts overbought

 6

Sectors charts oversold

1

 

 

 

 

 

 

Stock Action

The NYSE bullish % fell 0.55% yesterday, it third loss in a row. That shifts it momentum to the downside. It closed at 63.15%. The chart remains at X 64 but missed a move up Friday that would have strengthened its chart with a low pole formation.

Trading activity ended at below average levels with 396 stocks moving on their P&F charts. Volume fell 2.3% for the NYSE and 14.1% for the NASDAQ. That lower activity sapped some of the strength away from the index gains.

 

Sector Action

The Semiconductor Bullish % lost 1.59% on Tuesday and that was enough to reverse the chart down from overbought, activating a new negative status of "bear alert". The chart has turned down from the level of previous peaks and they proved to be important exit windows.

Sell signals yesterday were CVD Equipment (CVV) and Rubicon Technology (RBCN). RBCN is the weaker of the two as it is poised to reassert its long-term downtrend. Breaking $10 would provide confirmation of that, with a test then expected of the February 2013 low of $4.83.

 

 

 

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