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Market Outlook
(Archive)
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- Learn Definitions used in our Market Outlook.
- Market Outlook Archive is updated on a daily basis.
Market Stage
(2/3/2010)
On Tuesday, we wrote that 'Advancing SBV oscillator readings are bullish and would suggest the possibility of a further market recovery. We will continue to monitor this chart setting in order to determine at which point SBV oscillator readings start to decline; this might then suggest increasing odds for a correction.' Today's market action was predominantly sideways as SBV oscillator readings stopped their recent advance and drifted, trading in positive territory on the Nasdaq 100 but staying flat on the Dow and the S&P 500 (both indexes declined today).
60-day charts with a 20-period SBV are now showing flat SBV oscillator readings on the S&P 500 and on the Dow; advancing values were however recorded on the Nasdaq 100. At the end of today's session, the following SBV values were found: Plus 53% on the Nasdaq 100; plus 26% on the S&P 500; plus 33% on the Dow. Positive SBV oscillator readings suggest higher odds for a further up-move; however, we now may start to see a buildup of bullish volume which could serve to push the indexes lower. Furthermore, the flat SBV oscillator readings on the S&P 500 and on the Dow point to a possible change market sentiment. We will continue to monitor this chart setting in order to determine at which point SBV oscillator readings start to decline; this might then suggest increasing odds for a correction.
On 1.5-year charts with a 10-period SBV, SBV oscillator readings are flat on the Dow and on the S&P 500, but they are showing a decline on the Nasdaq 100. The still very low SBV oscillator values suggest a weak market that may yet attempt to retest recent lows.
Market Status
(2/3/2010)
Market Performance:
�Last Change Volume A/D Ratio S&P 500 1,097.23 
6.02 (0.55%) 3,733,720 0.39 NASDAQ 100 1,784.70 
7.78 (0.44%) 808,684 0.83 DJI 10,270.10 26.75 (0.26%) 832,534 0.43
After a strong two-day rally, the market took a breather today. Trading was choppy and the major indexes closed mixed. The NASDAQ 100 advanced for a third straight session, gaining 0.44% (it is currently up 2.51% for the week). In contrast, the S&P 500 declined 0.55% today (but is still showing a weekly gain of 2.19%), and the Dow was off 0.26% (it is presently up 2.05% for the week).
Today's volume production on the S&P 500 amounted to 3,734 million shares. This volume output is roughly in-line with the index's average daily volume generation seen over the past three months.
NASDAQ 100 - 2/3/2010. 1-day Intraday, Modulated Volume.
Volume Analysis:
9:30 - 16:00: Today's session on the Nasdaq 100 - which led to a third consecutive up-day on the index - provides a good example of how bearish volume surges that appear during uptrends can support and prolong an upswing. Bearish volume appears in red on the SBV oscillator pane. Consulting a one-day chart of the index, note how the rising market made periodic, but only modest corrections while maintaining an uptrending channel. Between 10:15 and 10:40, and between 11:25 and 12:00, the market showed two such pullbacks, with each pullback potentially threatening to derail the ongoing uptrend. However, note that near the end of each of these market retractions, the index output a fair amount of bearish volume, thereby generating bearish volume surges. The bearish volume spike that appeared around noon was the session's largest. Note how the appearance of these bearish volume spikes brought support to the index, and how the volume spikes immediately preceded an upturn on the index. In each case, these volume surges thus provided a signal that the bearish effort to drive the market any lower was becoming exhausted, prompting a continuation of the market's uptrend. A 5-day chart of the index reveals how the Nasdaq 100 is currently trading within rising, but very narrow, channel and how the three-day rise on the index has built up a steady surplus of bullish volume (seen in green on the SBV oscillator pane).
Short Term (lasts a few hours to a few days): In Tuesday's report, we suggested that 'further upside will be limited over the short-term and ... we might even see a modest market retracement.' Today's downside action on the Dow and on the S&P 500 confirmed this view. The Nasdaq 100 however saw a third consecutive green close today, up a little over four tenths of a percent. 5-day charts of the major indexes show how the Nasdaq 100 has been trending very cleanly inside a tight up-sloping corridor; in contrast, market action on the Dow and the S&P 500 has been quite choppy and not nearly as consistent.
While the rising broad market has on balance produced an excess of bullish volume over the past three sessions (as discussed in the Volume Analysis section above), we still see a good surplus of bearish volume on higher timeframe charts (for instance, view 30-day charts of the major indexes). Our short-term outlook therefore remains cautiously bullish - we believe there is still some more upside potential on the major indexes, although we do not think the market will continue higher at the same pace that has been displayed since Monday.
Analyst's Daily Tip:
Charts: Drawing Trendlines
You may draw trendlines on all our charts. To draw a trendline, simply right-click anywhere on a chart. Then, while holding the right mouse button down, move the cursor to where you wish to place the other end of the trendline. You can delete the last trendline you added simply by right-clicking once anywhere on a chart. When erasing a trendline, do not drag the mouse (this would create a new trendline); instead, make a quick right-click. To delete multiple trendlines all at once, press the DELETE button.
Overbought/Oversold
After a long run in one direction, the appearance of an unusually large Volume Surge means that a large number of shares are being transferred from one group of market participants to another. At this point the market may be `overbought` or `oversold`.
Financial Press Overview:
A new report on the US services sector was disappointing and seen as a key reason for today's pullback on the S&P 500 after a strong two-day rally. According to the Institute for Supply Management, last month brought weaker than expected activity among US service companies, as reflected by the ISM's index of service activity for January. Rising to 50.5 in January from a revised December reading of 49.8, the January reading still fell short of economists' expectations (for a reading of 51). On the index, activities exceeding 50 signal growth.
Private employers in the US cut fewer jobs than anticipated in January. This is the positive news released today by payroll company ADP, in a report that often serves as a proxy for the US government's 'jobs report' (scheduled for release this Friday). According to ADP, employers slashed 22,000 private (and non-farm) jobs last month - representing the best result since February 2008.
In notable earnings, Dow component Pfizer failed to meet Wall Street's consensus estimates; however after the bell, networking company Cisco reported earnings that beat expectations. Cisco's CEO spoke of a 'dramatic business acceleration' as corporate customers started upgrading their networks for growing Internet traffic. Cisco's revenues for the company's second fiscal quarter were up 8% compared to a year ago. It was Cisco's first year-on-year revenue growth since October 2008. Because Cisco's earnings results include much of January 2010, its earnings outlook often serves as an early indicator how well the technology sector is doing (notably in the enterprise spending sector).
Key economic data for the week starting February 1, 2010. Numbers shown are consensus estimates (market anticipates this value) and prior value.
| Thursday: | |
 | 8:30 AM CONTINUING CLAIMS Jan-23: n.a. / 4602K INITIAL CLAIMS Jan-30: 460K / 470K NON-FARM PRODUCTIVITY (Q4 P): 5.2% / 8.1% 10:00 AM FACTORY ORDERS M/M (Dec): 0.9% / 1.1% |
| Friday: | |
| 8:30 AM NON-FARM PAYROLLS (Jan): 20K / -85K UNEMPLOYMENT RATE (Jan): 10.0% / 10.0% AVERAGE HOURLY EARNINGS M/M (Jan); 0.2% / 0.2% AVERAGE WEEKLY HOURS (Jan): 33.2 / 55.9 3:00 PM CONSUMER CREDIT (Dec): -9.5B / -17.5B |
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