Start Nibbling on Fertilizer (Stocks that is)

It was all about oil as the violence in Libya took center stage. Global markets were lower over the holiday lengthened weekend and the futures in the U.S. suggested a more than 1% drop at the open. The holiday shortened week began with a nasty gap lower. An early low was painted just six minutes into the session and dip buyers quickly mounted a charge. Within forty minutes the SPX had recovered more than ten points, certainly bringing to mind all of the disappointments that bears have experienced for months. But this day was different. The bears recovered control and the index began to sell off. After ninety minutes the lows of the day were once again at hand. And then the bears showed some muscle and pushed us into a rare low after the first hour of the day. From 1:30 pm through 3:00 pm was consolidation near the lows before the final hour of the session saw the index break through support. The SPX 1315 area was tested at least four times today before eventually going lower but coming back to close there.

The late session news that Qaddafi ordered the destruction of oil pipelines certainly could drive the price of oil upward even further and thus bring inflation fears to the forefront and cause the SPX to sell even further.

This was widespread sell-off affecting all sectors. Except, wait for it Precious metals (but not stocks in that arena) and oil ETF and some oil stocks.


For the SPX Index there were 35 components advancing and 449 components declining. On the NYSE 3,162 issues were traded with 356 advancing issues and 2,751 retreating issues, a ratio of 7.73 to one declining. There were 133 new highs and 14 new lows. The five day moving average of New Highs is 272 while the five day moving average of New Lows is 11 and the ten day moving average of Net Advancing is 175.

Declining volume was higher at a ratio of 10.52 to one. The closing TRIN was 1.36 and the final tick was -700. The five day average of TRIN is 1.08 and the ten day average of TRIN is 1.06. The NYSE Composite Index lost -2.14% today while the SPX lost -2.1%.

For the NYSE, relative to the previous 30 session average, volume was 27.78% above the average. Of the last 15 sessions 5 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 23 sessions ended on a positive tick, 8 of last 10. For the SPX, the day's volume was 125.7% of the average daily volume for the last year. Volume was 136.2% of the last 10 day average and 143.2% of the previous day’s volume.

There can be little doubt; breadth today was strongly bearish. Yet the ten day Net Advancing remains in positive territory quite close to 200. We’ll need to see another day close negatively before we get too excited on the bearish side.

Total tick for the day was -377,000 and the average tick for the day was -244. There were 13 ticks greater than 600 and 239 ticks more extreme than -600. There were no ticks greater than 1000 and 34 ticks more extreme than -1000. The tick action suggests institutional distribution.

Volume was heavy today; the heaviest of the year. Intraday, the largest spike of volume came with the break of the lows just after 1:00 pm. Looking at the Breadth Indicators its is a bit curious as several of the indicators are up but overall, the most sensitive indicators are showing the impact of today's selling. Still, we will need to see follow-through on the selling. Bears have had their buts handed to them since august of 2010 as every sell-off turned into a buying opportunity. THIS CYCLE MUST BE RESPECTED, I have been wrong on every sell off, and so if anyone wants to go short just do the opposite of what I have been doing in terms of SPX.

As I stated yesterday, the SPX has been holding the 20dma and it did that yesterday, futures are up slightly this morning so today is the important day if you are shorting this market, if bulls don't hold I think we go to 1290 next in the very short-term. One to two sessions, last December we had a similar sell-off of 40 points and the 50dma held.

Also that talk for QE3 has already started and it should happen and that again is going to trip up bears. For anyone who missed the chem/fertilizer trade, they started selling off before the rest of the market did (this is a great opportunity at cheaper prices, I would keep an eye on this group, for the next 2-3 decades this will be a great place to be, I like Potash (POT), and Agurium (AG) because they are in Canada (much more stable than the US will be) been long MOO for a while now, I think the prices of the metals will be so high that tractor and other machinery stocks may not do so well.

I put in a bid at 82 

Put in a bid at 150.50

Metals update to follow