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Conclusion
We knew last week would be huge, in fact that's the exact adjective I used in last week's "Prepare..." note. The week did not disappoint in terms of shaking off a very quiet low volatility period. We saw:
Facts
* A single day where all three major indices dropped by 2%.
* A single day Dow drop of more than 300 points.
* All of the indices down more than 2% for the week.
* Economic 'misses' everywhere you would look (but were they really misses?)
* A question of when interest rates will be raised. #WatchTheRates
Watch. The. Rates.
And of course, the one phenomenon which I always check, momentum. One huge trend continues... momentum is imploding.
We are now in official bear territory for market internals.
Opinions (outside Media)
* The 20% market correction has already started
* 3 market warning signs predict 20% stock tumble
Last Week: Must Know
All Stock Indices: Down
Data provided, Yahoo! Finance, Charles Schwab optionsXpress
Economic Misses (but do they matter and were they misses?)
1. Nonfarm payrolls: 209K vs. 220K consensus vs. 298K prior month
2. Nonfarm private payrolls: 198K vs. 225K consensus vs. 270K prior month
3. Unemployment Rate: 6.2% vs. 6.1% consensus (and prior month)
4. Hourly Earnings: 0.0% vs. 0.2% consensus (and prior month)
But the issue is momentum (not economic numbers that are changed and re-changed) and we can now say, without hedging our language, that momentum is into new annual low territory across the board.
* As of Friday: 21% of stocks are now trading above their 20-day MA
* As of last month: 75% of stocks were trading above their 20-day MA
* As of Friday: 29% of stocks are now trading above their 50-day MA
* As of last month: 79% of stocks were trading above their 50-day MA (annual low)
* The Dow Jones Industrial Average is now down on the year (-2%).
Putting The SPX 2% Drop into Perspective: This May Shock You... Because It's Not Shocking
But there's so much more in the momentum phenomenon, which is included a bit later in this post.
Feels like the most bearish sentiment correction in a long time. Which would be... bullish? - Market Neutral: Buy 'best' Short the 'worst'
— Ophir Gottlieb (@OphirGottlieb) August 2, 2014
Chart of the Week: Percent of Stocks Trading Above 50-day Moving Average
Provided by Barchart.com
There's more to momentum, but for a chart of the week, this does just fine. The measure sank below an annual low. Here's how it looks over the last month:
But this isn't the most important chart for momentum if the 'fear' is a correction or bear market turn.
Last Week: Phenomena We Must Know
7-31-2014
* Putting The SPX 2% Drop into Perspective: This May Shock You... Because It's Not Shocking
7-31-2014
* Collapsing Momentum in 3-Charts; Why Today Was Predictable; Why The Bull May Not be Dead
7-28-2014
* Herbalife (HLF) - Earnings Preview: We've Never Seen Risk This... Low?
Last Week: Stats Must Know
Momentum collapsed, and now it's time to look at all of it.
Provided by BarChart.com
* As of Friday: 21% of stocks are now trading above their 20-day MA
* As of three weeks ago: 75% of stocks were trading above their 20-day MA
* As of Friday: 29% of stocks are now trading above their 50-day MA
* As of a month ago: 79% of stocks were trading above their 50-day MA (annual low)
But this is the big one...
* As of Friday: 46% of stocks are now trading above their 200-day MA
* As of a month ago: 70% of stocks were trading above their 200-day MA (annual low)
We saw the 50-day MA chart at the top of the post (and it's new annual low). But it's the 200-day MA that I focus on.
Provided by BarChart.com
In four weeks we have gone from an intra-day high of ~70% to now 46% and not only hit a new low, it obliterated it. I focus more n the 20DMA than the short-term measures when focusing an actual correction or end to the bull market because it takes a substantial and prolonged change in the AD (advance / decline line) to really move this measure substantially.
For those that have been reading this report over the last weeks, we've been watching that headline number creep lower, and then... collapse lower.
Last Week: Must Know Headlines:
* 3 market warning signs predict 20% stock tumble
* Fed Hawks Shake the Stock Markets on Interest Rates
* Argentina blames US, 'incompetent' judge for default
* Fed offers no clearer hint on first rate increase
* The 20% market correction has already started
This Week: Must Know
This week has some economic data and the tail-end of earnings season. I use optionsXpress (aka Charles Schwab) for all of this data, so if you want to find it yourself, just click on the pic below.
Below you will find all that we need to prepare for the week to come. All data and images for this report are provided by Charles Schwab optionsXpress.
This Week: Economic Calendar
- I've circled in blue economic results vs. consensus vs. last month results.
- I've highlighted in red the news to come this week.
Partial List of Noteworthy Earnings This Week
Earnings has a mash up of biotechs (ARIA, MNKD), MOMO's (FEYE, ZNGA) and even a huge blue chip (AIG... is this a 'blue' chip anymore?)
This is trade analysis, not a recommendation.
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