Wednesday Recap: A Look Inside the market

Wednesday morning traders appeared to be digesting conflicting earnings reports from the likes of IBM, Apple, and Goldman Sachs. Housing Starts fell by 4.3% in December to an annualized rate of 529K. This was below the consensus for 552K. In addition, the November numbers were revised lower to an annualized rate of 553K from 555K. Building Permits for December rose to 560K. This was above the consensus of 553K and last month’s reading of 544K. The bottom line is there continues to be an overhang of inventory in the U.S. housing market. Futures were weak as the open approached.

The session began with an insignificant gap lower but sellers were plentiful early and the index began a downward trek. It was an orderly descent with no real signs of any panic as volume was moderately low. But the tick action revealed a total lack of buyers; something quite rare over the last twenty-two months. Today finally provided some relief for the bears. The high of the day was the open and the low of the day was 3:33pm. So we saw a bearish reversal of the time of day for the high and low but the question remains whether the bears can continue to push this lower or whether the dip buyers will be out in force Thursday.

Sectors Performance: 
 
Sectors stronger than the SPX for Wednesday:
- Technology -- Outperformed the SPX by +25%.
- Consumer Staples -- Outperformed the SPX by +84%.
- Utilities -- Outperformed the SPX by +105%.
- Health Care -- Outperformed the SPX by +37%.
- Consumer Discretionary -- Outperformed the SPX by +22%.
 
Sectors weaker than the SPX for Wednesday:
- Basic Materials -- Underperformed the SPX by -123%.
- Energy -- Underperformed the SPX by -19%.
- Financials -- Underperformed the SPX by -125%.
- Industrials -- Underperformed the SPX by -4%.




For the SPX Index there were 62 components advancing and 422 components declining. On the NYSE 3,139 issues were traded with 697 advancing issues and 2,358 retreating issues, a ratio of 3.38 to one declining. There were 187 new highs and 22 new lows. The five day moving average of New Highs is 217 while the five day moving average of New Lows is 74 and the ten day moving average of Net Advancing is 32.
 
Declining volume was higher at a ratio of 8.33 to one. The closing TRIN was 2.46 and the final tick was -199. The five day average of TRIN is 1.27 and the ten day average of TRIN is 1.16. The NYSE Composite Index lost -1.05% today while the SPX lost -1.02%.
 
For the NYSE, relative to the previous 30 session average, volume was 12.62% above the average. Of the last 15 sessions 9 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 19 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 103.7% of the average daily volume for the last year. Volume was 100.8% of the last 10 day average and 83.9% of the previous day’s volume.
 
Breadth was very negative the entire session. But it is interesting to note that the New Lows did not explode higher as might have been expected.
 
Total tick for the day was -285,000 and the average tick for the day was -184. There were 0 ticks greater than 600 and 174 ticks more extreme than -600. There were no ticks greater than 1000 and 12 ticks more extreme than -1000. The tick action suggests institutional distribution.
 
Volume was not heavy today but clearly the intraday volume pattern shows surges of volume with each wave lower. Looking at the Nightly Breadth Indicators also clearly shows some bearish looking indicators. The ten day average of the McClellan Oscillator has already moved into negative territory and all of the New High/New Low ratios have flipped bearishly.