S&P Index Recap and A Look Inside the Markets

On Friday, quadruple witching began with an many new developments,  the U.N. Security Council finally authorized a no-fly zone and attacks against Libya. The G7 intervened in the foreign exchange market to limit the Yen's rise. China raised bank reserve requirements for the third time this year. And finally TEPCO (Tokyo Electric Power Co.) reported that power will be restored to all four crippled reactors by Sunday. Nike missed earnings and talked about rising costs and their plans for hiking prices (Procter & Gamble was also talking about raising prices). All of this was leading to a continuation of Thursday's rebound in stock prices.

As did Thursday, the Friday session began with a huge upward gap. The high of the day was quickly put on the chart within the first fifteen minutes of trading. The next forty-five minutes gave back seven points but was quickly followed by a six point bounce. But from a little after 11:00 am the rest of the session was a slow decline giving back a net of eight points to close the day more than nine points off the highs.

In the past couple of days we saw the SPY close lower than the open after a large gap higher. These were sessions that closed in positive territory but traded more like down days. While the two sessions netted a gain of eighteen points the sessions didn't close at the highs.


For the week the SPX lost 25.07 points during the week. The range for the week was 52.14 points, 4.01%. The last time the weekly range exceeded 4% was the last week of August. The four week RSI of the four indices (SPX, Dow, NASDAQ, and Russell 2000) is 29. Pullbacks often occur as this RSI reaches 80 and bounces near 20.

Total tick for the week was 159,000. On the NYSE, the advance/decline line decreased during the week by 1,679 and the 10 day average of Net Advancing decreased from -2 to -303. There were 178 New Highs and 195 New Lows. This is the first week that New Lows exceeded New Highs since the first week of July 2010.

The weekly charts have turned downward; this was the fifth week of lower highs. One measure of a rally ending is to watch for a weekly close below the 50 DMA. Friday's close was the first weekly close below the 50 DMA since the end of August. At that time, QE2 was announced and the market rallied sharply. The market then had a new inflow of cash, and no earthquake, tsunami, nuclear crisis or Middle East turmoil to worry about.

The markets need a catalyst, other than the announcement of QE3, I don't see anything. Even if the headlines I listed above were to somehow magically go away, it won't be enough its a liquidity issue. Hedge  funds were already margined to the hilt prior to this pullback. 


or the SPX Index there were 342 components advancing and 138 components declining. On the NYSE 3,124 issues were traded with 2,181 advancing issues and 843 retreating issues, a ratio of 2.59 to one advancing. There were 50 new highs and 20 new lows. The five day moving average of New Highs is 36 while the five day moving average of New Lows is 39 and the ten day moving average of Net Advancing is -303. The Net Advancing data indicates a bearish trend.

Advancing volume was higher at a ratio of 2.4 to one. The closing TRIN was 0.94 and the final tick was 142. The five day average of TRIN is 1.43 and the ten day average of TRIN is 1.25. The NYSE Composite Index gained 0.64% today while the SPX gained 0.43%.

For the NYSE, relative to the previous 30 session average, volume was 76.54% above the average. Of the last 15 sessions 7 sessions ended with volume greater than the previous rolling 30 day average volume. Of the last 30 sessions, 22 sessions ended on a positive tick, 6 of last 10. For the SPX, the day's volume was 113.1% of the average daily volume for the last year. Volume was 107.7% of the last 10 day average and 114.1% of the previous day’s volume.

Advancing volume was a bit weaker than advancing issues but the NYSE Composite Index outperformed the SPX, so we are seeing mixed signals. Still, the trend is down until we have a reversal on the weekly charts.

Total tick for the day was 131,000 and the average tick for the day was 85. There were 56 ticks greater than 600 and 37 ticks more extreme than -600. There were no ticks greater than 1000 and no ticks more extreme than -1000.

The large volume spike at the open is typical of options expiration. There really isn't much else to see in the intraday volume pattern. Looking at the Breadth Indicators we still see a lot of inconsistency. But the McClellan Oscillator is still oversold while the Summation Index is not.


What to look for: I think we can rally back to the 50dma and thats about it, if we get above it it won't be for long. Like I said before we need a catalyst, and we probably won't get one till we are closer to the next Fed meeting.