While the major indices looked to waffle at mid-session, buyers, either bulls or running bears, bought the major indices right back to their best levels of the session, as sharp declines in oil, another BIG round of buying in Treasuries, and some "just right" economic data has stocks threatening to close at their highs of the week.
Oil and Unleaded Gas futures - June to December 2004
Sharp declines were found in both the oil and unleaded gas futures markets today.
A point and figure chart of the July Crude Oil futures (CLN4) from Dorsey/Wright and Associates ($0.25 box size) shows this contract having recently given a sell signal at $39.75, then a buy signal at $41.75 (right at the prior contract high) and today's trade giving a reversing sell signal at $39.25 (sense some volatility?) where the current bearish vertical count is to $36.00.
A point and figure chart of the July Unleaded Gas futures (HUN4) from Dorsey/Wright and Associates (.005 box size) shows this contract giving its first sell signal since giving a buy signal at $1.160 back in April, where a current bearish vertical count of $1.140 is currently building until a 3-box reversal would fully establish a potential downside risk objective.
I wanted to show the above futures contracts several months out, as we may revisit these data in the weeks/months to come.
One reason I wanted to quickly cover these energy futures is for an understanding of the CRB Index (cr00y) 275.70, which finished unchanged, as gold, industrial metals like copper, and euro strength offset oil's weakness.
Market Snapshot / Internals - 05/27/04 Close
Stocks closed STRONGER than I thought they would at the midpoint of today's session, and I may not me alone in this thinking. There was great opportunity at the 03:00 PM EDT mark for bears or long sellers to show up for some selling to the close, but that didn't happen. The number of new highs at the NASDAQ showed a nice little pop after being basically flat from 12:00.
I must make immediate correction to last night's Index Trader Wrap, when I said the NYSE NH/NL 10-day Average Ratio had not yet reversed up and was reading just 16.1%. I do not know how, or why I got that number. However, similar to the NASDAQ NH/NL 10- day ratio, the NYSE NH/NL 10-day Average Ratio reversed up to "bull alert" status on Monday at 21.5%, rose to 28.8% on Tuesday, rose to 35.8% yesterday, and 43.0% today.
NYSE Composite 52-week NH/NL 10-day Avg. - 2% box size
My incorrect comments regarding the NYSE Composite 52-week NH/NL 10-day Avg. would have given a false impression that bullish leadership wasn't present in the NYSE. The above chart would reflect current readings. I think what I did was I that I was looking at last Friday's 10-day Avg. reading of 16.2% when writing last night's wrap.
Today's trade would have the NASDAQ NH/NL 10-day Avg. rising to 40.8%.
NYSE and NASDAQ NH/NL Indications -
I don't want to focus on my error, but I caused great confusion among subscribers to Dorsey/Wright and other traders/investors that were calculating their own NH/NL indications. I can't apologize enough.
Key dates for these indications would be 05/18/04 for the NYSE when the 5-day moved above the 10-day (short-term above intermediate term) while 10-day would have hit an inflection low reading, and 05/24/04 when NYSE showed 3-box reversal up to "bull alert." On 05/29/04, NASDAQ's 5-day average ratio moved above its 10-day, on 05/20/04 the inflection low of 23.4% was realized, and on 05/25/04 the 10-day Avg. ratio reversed up to "bull alert" status.
Pivot Matrix -
I first want to say that I think today's close was stronger than what I would have expected for any sign of a defensive posture into the 3-day weekend. I will follow up on this thought in a minute but want to discuss some observations.
In this afternoon's market monitor, I made comment as to "sign of weakness" as it relates to my observation that the Semiconductor Index (SOX.X) 482.46 +0.89% is the only equity-based index in our pivot matrix to not yet see trade at its WEEKLY R2. I can't call a market based on what the SOX.X does or doesn't do, and while tomorrow is a new day and the WEEKLY R2 is easily in reach, the SOX.X didn't trade its WEEKLY R2 and would lag the NDX/QQQ.
Today's close in the BIX.X at 347.03 comes right in between its WEEKLY R2 and MONTHLY R1. Again, I wouldn't take anything away from the BIX.X and call this group of stocks "pigs," but based on some thoughts in last night's Index Trader Wrap, today's trade was rather similar to what we wanted to be on the lookout for. During today's mid-point of trade, I was sure I was onto something here, but the ability of the BIX.X to muster enough buying, or lack of selling to still reclaim the MONTHLY R1 and park itself in the zone highlighted, isn't necessarily bearish.
I highlight the QQQ session low today. This is a penny lower than what was today's (Thursday's) daily Pivot. While the QQQ seemed to be married to the BIX.X intra-day trade, there was some type of eager buying at the DAILY Pivot. Carry this observation into tomorrow's trade. If we're going to see ANY type of defensive trade into the weekend, then the DAILY Pivots would have to be violated.
Let's quickly look at some intra-day charts, which are updated versions of charts we were looking at and discussing in today's Market Monitor.
S&P Banks Index (BIX.X) - 10-minute intervals
We looked at the BIX.X daily interval bar chart last night. Here's a quick look at the BIX.X on an intra-day chart. It certainly looks like other market participants were thinking "sell strength" below 350 as the BIX.X jumped at the open, then consolidated, and then a sell program premium was generated. I'm thinking... "Aha! We're onto something." Not shown is another sell program that had the BIX.X falling below its MONTHLY R1. This was my "failure" or alert to weakness level from last night. As I look at the BIX.X, there was EVERY OPPORTUNITY for bulls to either liquidate back down to the WEEKLY R1, but it may well have been the VERY SHARP drop in the benchmark 10-year YIELD ($TNX.X) and strong buying in Treasuries, where there may still be a heck of a lot of pain to be inflicted on bears, should the scenario of SHARPLY RISING RATES being a negative for the banks and broader equities really be falling apart.
NASDAQ-100 Tracker (QQQ) - 10-minute intervals
The BEAR in my says "gulp" at tonight's close. While there isn't a bank in the bunch, the QQQ session trade was VERY similar to the BIX.X, and certainly institutional computers were going to be set for selling distribution into the weekend. While the SOX.X trade and slight weakness in the WEEKLY Pivot may be an alert to pending QQQ weakness, I did say in this afternoon's Market Monitor (03:04:54) as both the SPX and QQQ had just slipped back below their WEEKLY R2s that "If the bears/sellers are going to whack'em its going to be here." going to hit them, now's the time." That must have given institutions just enough time to set up a buy program at 03:33 PM EDT to lift the QQQ back above its MONTHLY 38.2% retracement of $36.31. I've marked tomorrow's DAILY Pivot of $36.33 on the above chart, and while a dip below the DAILY Pivot might be a VERY alert to weakness, I'd really have to say WEEKLY R2 is the test.
S&P 500 Index (SPX.X) Chart - Daily Intervals
SPX looks pretty darned similar to the BIX.X as it relates to "zones" doesn't its? I was talking to a futures trading buddy of mine after the close and he was trading the e-mini S&P futures and he too shorted the futures late this afternoon on the re-test of the WEEKLY R2. He also thought things were looking pretty good and the MARKET was going to "whack'em" to the close. I can't remember the exact number, but he said on the re-test just before the buy program back above the WEEKLY R2, there was a large looking offer that simply got gobbled up as if to say... "is that all you got piker?" (Piker is a slang term traders will use to designate another trader as a small player. Traders will jokingly use the term in an attempt to prove their macho).