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US Stock Service
Daily Hotline
 
17 September 2014    By John Gray
Market Action
  • Note John Gray is away for the remainder of the week so commentary will be lighter than normal. Regular service to resume on Monday.
  • Stocks opened weak Tuesday but then recovered over the remainder of the session, with the S&P 500 gaining 0.7%. The DOW was up 0.6% and that was enough to recoup the past six weak sessions, an impressive comeback. The NASDAQ 100 was the strongest area, gaining 0.9%.
  • Semiconductors were the standout performer on the session and below we highlight the index and also the breadth chart for the industry.
  • Volume on the NYSE was higher by 13% compared to Monday's session and that is nice to see given the weak technicals of the past few weeks.
Market Drivers
  • The FOMC announcement this afternoon at 2pm is the big news event of the day and will likely cause volatility on its release; little should be expected until then. 
Technical Outlook
  • Follow-through is now imperative. Should yesterday's rally be fully retraced then it would suggest the correction was not over, with equities embarking on another leg lower. 
Portfolios
  • Large Caps 60% invested, Mid Caps 40% and Small Caps 25%.
  • Bear Portfolio is 40% short.
 Indicators
Short Term Medium Term
II Short Term Composite Indicator
15.5% (+1.70%)
Bearish
NYSE %10 Week Moving Average
44.14% (+6.10)
Bull Correction
II Short Term Sector Sum
-18% (n/c)
Bullish
New P&F Signals: US Breakouts
Close 1-Day Change
Bulls 5 +3
Bears 14 -20
NYSE Bullish % Indicator
59.57% (-0.24%)
Bearish
NYSE %30 Week Moving Average
54.91% (+3.92)
Bearish
II Long Term Composite Indicator
30.5% (-70.50)
Bearish

Short-term breadth indicators turned up yesterday, The short-term-composite remains in a downtrend but is effectively oversold and at trendline support.

No change to these indicators as yet. They remain weak. One strong up day is not enough, follow-through is necessary.

Index Trends
  Close Volume 1-Day Change P&F Signals Support
Signal Trend Start Date Trend Reversal
DJ Industrials 17,132 71.7m +100.83 +0.6% Bull Up 3 Apr 2014 16,300.00 16312.7/16937.7
S&P 500 Index 1,998.98 434.2m +14.85 +0.7% Bull Down 22 Apr 2014 1,900.00 1944.69/1904.78
NASDAQ Comp. 4,552.76 465.7m +33.86 +0.7% Bull Down 18 Aug 2014 4,320.00 4284.53
NASDAQ 100 4,067.27 170.6m +37.39 +0.9% Bull Down 13 Aug 2014 3,840.00 3751.69/3837.16
S&P Midcap 400 1,423.84 94.5m +7.97 +0.6% Bull Down 14 Aug 2014 1,370.00
Russell 2000 Index 1,150.97 242.6m +4.45 +0.4% Bull Down 15 Aug 2014 1,125.00
Closing prices through Tuesday September 16, 2014



Chart Activity - Broad Index Moves 

All indexes showed gains yesterday, largely erasing the losses from Monday. The S&P 500 has bounced off its 20-day exponential moving average, potentially similar to the reassertions seen May through to July. The recovery by the 14-day RSI off neutral is encouraging and the slack is there to allow the index to push to new all-time highs.

 

 

Chart Activity - Sector Indexes 

The PHLX Semiconductor Index (SOX) was one of the stronger areas yesterday, rising by 1.7%. That was enough to reverse the chart up and increase the year-to-date gain to an impressive 20.2%. The uptrend is attempting to resume.

 

 

Chart Activity - Gold & Crude Oil

Crude Oil had a rare positive session yesterday, adding $1.96. That reversed the chart up from the $90 support shelf. Potential for a range trade here, returning to the $107 region. The strength in oil buoyed the energy sector.

 

 

Index Breadth

% 10 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 44.14 +6.10 Bull Correction 4 Sep 2014
Nasdaq Composite 44.72 +0.46 Bull Correction 9 Sep 2014
S&P 500 61.57 +9.05 Bull Confirmed 16 Sep 2014
Nasdaq 100 63.64 +9.09 Bear Correction 16 Sep 2014
Option Stocks 51.48 +5.03 Bull Correction 9 Sep 2014
% 30 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 54.91 +3.92 Bear Confirmed 9 Sep 2014
Nasdaq Composite 50.46 +0.92 Bull Correction 15 Sep 2014
S&P 500 74.25 +5.64 Bull Top 9 Sep 2014
Nasdaq 100 75.76 +2.02 Bull Top 9 Sep 2014
Option Stocks 59.66 +2.86 Bear Confirmed 12 Sep 2014
Bullish % Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 59.57 -0.24 Bear Confirmed 1 Aug 2014
Nasdaq Composite 53.98 -0.20 Bear Confirmed 1 Aug 2014
S&P 500 69.22 -0.40 Bear Alert 6 Aug 2014
Nasdaq 100 70.71 -1.01 Bull Confirmed 22 Aug 2014
Option Stocks 61.9 -0.49 Bear Alert 31 Jul 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 S&P 500 and NASDAQ 100 10-week moving averages both turned up with yesterday's rally. They have the potential to return towards the 80% level should equities now follow-through on yesterday's move.

 

 

Medium-term:

There was no movement on the 30-week moving averages yesterday, although all showed positive value gains. A couple more sessions like that will reverse some of these indicators up and that would be encouraging.

 

Long-term:

All bullish % charts were weak again yesterday. These charts are typically slow to move.

 

Current outlook:

Short-term the situation is improving, if that can continue over the rest of the week, medium-term indicators will also improve. A market recovery is being attempted but overall we need to see where we are at the end of the week before making any bold predictions for the weeks ahead.

 

Indicators

Close Change Chart Direction
Short term Composite Indicator 15.5 +1.70 Falling
NYSE High-Low Index 60.58 -5.53 Falling
Nasdaq High-Low Index 53.25 -5.47 Falling
NYSE On Balance Volume (by DJIA) 280,719 +648.00 Falling
NYSE On Balance Volume (by breadth) 541,150 +648.00 Falling
Nasdaq on Balance Volume by Composite 502.22 +1.96 Rising
Nasdaq on Balance Volume by Breadth 41.86 +1.96 Falling
NYSE Cumulative Advance/Decline 407,447 +909.00 Falling
NYSE Money Flow Index 45,616.1 -1178.43 Falling

  • The short-term-composite had a value gain of 1.7% yesterday, pushing the indicator up to 15.5%. 20% is needed to reverse the chart up and that could happen this week should strength continue. As it stands we would not chase the upside aggressively just yet.
  • The NYSE high-low index dropped three boxes yesterday to test the 60% level. The NASDAQ high-low dropped the same number of boxes to near the neutral 50% level.
  • Other indicators were quiet with no noteworthy action.

          Industry Bullish %s and Sector Sum
          The Semiconductors bullish % rose 0.85% yesterday, enough to reverse the breadth chart up. The status is now “bear correction” and the uptrend off the November 2012 low looks to be reasserting.  Longs are worth considering, reducing exposure should the chart turn back down.
           
          Data I/O Corp (DAIO) was the one buy signal Tuesday. The price pushed through falling trendline resistance drawn down from the December 2010 peak.  That's a big break and if it can hold over the coming days, then longs are worth considering.
           
           
           
           
           
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