By Robert W. Colby, Senior Analyst TraderPlanet.com
Technology sector Bullish: relative strength made a new 19-month high.
Consumer Discretionary sector Bearish: relative strength made a new 9-month low.
Most of the major stock price indices ended modestly lower on Monday, breaking a three-day winning streak. Trading volume fell on the NYSE, reflecting reluctance to chase stock prices higher. The Advance-Decline balances were Bearish on the NYSE and on the NASDAQ.
Spotlight on event stocks: Here is a stock screen I designed to pick out potential “event” stocks, both Bullish and Bearish. Sometimes, stocks with large changes in price and volume are revealed to be deal stocks, sooner or later, or are the subject of some other extraordinary events, positive or negative.
Bullish Stocks: Rising Price and Rising Volume
% Price Change, Symbol, Name
5.51% , JNS , JANUS CAPITAL
2.82% , ETN , EATON
2.39% , VZ , VERIZON COMMS
0.77% , RFG , Growth MidCap S&P 400, RFG
2.43% , JCI , JOHNSON CONTROLS
1.89% , CHRW.O , CH Robinson Worldwide Inc, CHRWD
1.45% , DOV , DOVER
6.30% , DISCA , Discovery Holding Co.
1.71% , FLEX , Flextronics International Ltd
1.82% , NVLS , NOVELLUS SYS
1.39% , KO , COCA COLA
1.88% , AMD , ADV MICRO DEV
0.43% , BHH , Internet B2B H, BHH
2.23% , UTX , UNITED TECH
2.64% , FAST , Fastenal Company
2.77% , HUM , HUMANA
1.09% , AM , AMER GREETINGS STK A
1.97% , WPI , WATSON PHARM
0.81% , TEK , TEKTRONIX
0.53% , NOVL , NOVELL
0.69% , DHR , DANAHER
1.81% , NVDA , NVIDIA
0.54% , CDWC , CDW Corporation
3.09% , S , SPRINT NEXTEL
2.86% , URBN , Urban Outfitters Inc.
0.55% , WHR , WHIRLPOOL
0.42% , EXPD , Expeditors International WA
1.14% , UNP , UNION PACIFIC
0.82% , EMR , EMERSON ELECTRIC
1.37% , MZZ , Short 200% MidCap 400 PS, MZZ
0.87% , VIS , Industrials VIPERs, VIS
1.92% , SIRI , Sirius Satellite
1.08% , CSX , CSX
0.56% , GRMN , GARMIN LTD
0.73% , CA , COMPUTER ASSOC
0.75% , IYZ , Telecom DJ US, IYZ
0.39% , FRX , FOREST LABS STK A
0.80% , CAH , CARDINAL HEALTH
1.75% , MU , MICRON TECH
0.33% , EWL , Switzerland Index, EWL
2.53% , MAT , MATTEL
0.46% , TTH , Telecom H, TTH
0.77% , MIL , MILLIPORE
1.38% , PWER , POWER ONE
0.45% , DELL , DELL
0.96% , TLT , Bond, 20+ Years Treasury, TLT
0.45% , YHOO , YAHOO
0.58% , JNJ , JOHNSON&JOHNSON
0.67% , AT , ALLTEL
0.98% , IBM , IBM
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-7.35% , KG , KING PHARM
-3.92% , CFC , COUNTRYWIDE FNCL
-0.78% , JKJ , SmallCap Core iS M, JKJ
-3.51% , BIG , BIG LOTS
-3.37% , COP , CONOCOPHILLIPS
-3.57% , PEG , PUBL SVC ENTER
-3.04% , TRB , TRIBUNE
-2.92% , VMC , VULCAN MATERIALS
-1.45% , VWO , Emerging VIPERs, VWO
-0.89% , PWT , Growth SmallCap Dynamic PS, PWT
-4.18% , GWW , WW GRAINGER
-0.27% , ELV , Value Large Cap DJ, ELV
-3.20% , JNPR , Juniper Networks Inc
-0.85% , PZJ , SmallCap PS Zacks, PZJ
-0.91% , ADRE , Emerging 50 BLDRS, ADRE
-1.76% , DBC , Commodity Tracking, DBC
-0.73% , PXN , Nanotech Lux, PXN
-1.16% , IYE , Energy DJ, IYE
-1.98% , PGJ , China LargeCap Growth G D H USX PS, PGJ
-0.33% , IJK , Growth MidCap 400 B, IJK
-1.77% , AET , AETNA
-0.55% , IJS , Value SmallCap S&P 600 B, IJS
-0.99% , BDX , BECTON DICKINSON
-0.16% , PEJ , Leisure & Entertainment, PEJ
-0.94% , DJ , DOW JONES
-1.52% , XME , Metals & Mining SPDR, XME
-0.87% , HMA , HEALTH MGMT STK A
-0.52% , ADRA , Asia 50 BLDRS, ADRA
-1.63% , ATVI , Activision Inc.
-1.39% , VDE , Energy VIPERs, VDE
-2.06% , SUN , SUNOCO
-1.76% , GTW , GATEWAY
-0.48% , IJT , Growth BARRA Small Cap 600, IJT
-0.71% , PWY , Value SmallCap Dynamic PS, PWY
-2.15% , PGN , PROGRESS ENERGY
-0.12% , ISI , LargeCap Blend S&P 1500 iS, ISI
-0.33% , SDY , Dividend SPDR, SDY
-1.77% , CEG , CONSTELL ENERGY
-1.09% , CTL , CENTURYTEL
-0.85% , GILD , Gilead Sciences Inc
-2.48% , EOG , EOG RESOURCES
-0.86% , SIAL , SIGMA ALDRICH
-0.79% , GCI , GANNETT
-1.48% , LTR , LOEWS
-1.69% , NYT , NY TIMES STK A
-0.59% , DSG , Growth Small Cap DJ, DSG
-1.38% , FXI , China 25 iS, FXI
-0.58% , PEY , Dividend High Yield Equity PS, PEY
-1.77% , TYC , TYCO INTL
-0.28% , HCR , MANOR CARE
Sectors: among the 9 major U.S. sectors, 3 rose and 6 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.64% Industrial
0.30% Technology
0.11% Health Care
-0.35% Financial
-0.40% Consumer Staples
-0.40% Consumer Discretionary
-0.54% Materials
-1.28% Energy
-1.45% Utilities
Looking beyond the daily fluctuation to the major trends:
Energy (XLE) Bullish. Both price and relative strength made new highs on 7/13/07. Relative strength has been strong compared to the S&P since 3/12/03. Overweight.
Materials (XLB) Bullish. Both price and relative strength made new highs on 7/13/07. XLB has been relatively strong compared to the S&P since 9/27/00. Overweight.
Industrial (XLI) Bullish. Price and relative strength made new highs on 7/16/07. XLI has been relatively strong compared to the S&P since 8/9/06. Overweight.
Technology (XLK) Bullish. Price made a new 6-year high close and relative strength made a new 19-month high on 7/16/07. XLK has been relatively Bullish compared to the S&P since its low on 7/24/06.
Financial (XLF) Bearish. XLF made a new 5-year low relative to the S&P 500 on 7/11/07. Underweight.
Consumer Staples (XLP) Bearish. Relative strength made a new 7-year low on 6/19/07. XLP has been relatively weak compared to the S&P since 10/9/02. Underweight.
Utilities (XLU) Bearish. XLU has been relatively weak compared to the S&P since 9/20/01. Underweight.
Health Care (XLV) Bearish. XLV made a new 14-month relative strength low on 7/13/07 and has been relatively weak compared to the S&P since 10/9/02. Underweight.
Consumer Discretionary (XLY) Bearish. XLY made a new 9-month relative strength low on 7/16/07 and has been relatively weak compared to the S&P since 1/5/05. Underweight.
Foreign stocks absorbed mild profit taking as the U.S. dollar fell further. EFA made a new absolute price high on 7/12/07 and outperformed strongly since 6/13/07. The EFA’s short-term relative strength trend is still Bullish. Long term, EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) outperformed the S&P 500 since 3/19/03.
NASDAQ has underperformed moderately since 7/10/07. The NASDAQ Composite also has been relatively weak compared to the S&P since 3/10/00.
Growth beat Value. Growth stocks rose more (and fell less) than Value stocks since 5/16/07. But longer term, the major trend of Growth/Value has been mostly Bearish for seven years.
Large Caps beat Small Caps since 6/27/07. Longer term, Large Caps beat Small Caps since the Small-Cap relative strength peak on 4/19/06.
Crude Oil rose again and outperformed the SPY and XLE. The short-term trend is still up but the U.S. OIL FUND ETF (AMEX: USO) remains well below its peak at 73.29 on 7/13/06.
Energy stocks underperformed both the USO and the SPY. Long term, since 3/12/03, the stocks in the Energy Select Sector SPDR ETF (XLE) have significantly outperformed crude oil as a commodity as well as the S&P 500. So, the Relative Strength major trend is Bullish for the energy stocks.
Gold fell in price and underperformed the SPY–again. Longer term, StreetTRACKS Gold Trust ETF (NYSE: GLD), which reflects the market price of gold futures, topped out at 70.2 on 5/12/06, and so GLD has been relatively weak for 13 months.
Silver fell in price and underperformed GLD since 12/7/06. iShares Silver Trust (AMEX: SLV) broke down to a new 6-month low on 6/26/07.
The Gold Miners Index (XAU) outperformed GLD since 6/26/07. On the other hand, XAU has underperformed GLD since 5/31/1996, so the long-term trend is questionable.
Inflation expectations eased moderately lower since 6/22/07. Still, for the longer term, the ratio of the price of bond TIPS to 10-year U.S. Treasury Notes has been rising since 1/16/07, indicating rising inflation expectations.
Bond prices appear to be consolidating within their Bearish major trends. TLT hit a new 3-year price low on 6/12/07, the lowest since June, 2004. That indicated a very serious major price downtrend and yield uptrend. The main trend is clearly Bearish for iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT).
U.S. dollar fell again to another new 2-year low and remains very Bearish long term. The dollar has been heading nearly straight down since 6/13/07. Longer term, the dollar has been falling most of the time since its peak at 121.29 on 7/5/2001.
Japanese Yen appears to be consolidating within its Bearish major trend. On 6/15/07, the Yen fell to its lowest level in more than four years. The Yen has been weak since its peak at 12,625 on 4/19/1995.
0.64% Industrial
0.46% Canadian Dollar
0.36% Spain
0.35% Drugs
0.35% Australian Dollar
0.33% Switzerland
0.31% Dow Industrial
0.30% Technology
0.30% Airlines
0.28% Computer Tech
0.22% Japanese Yen
0.19% Semiconductors
0.17% Dow Transports
0.16% British Pound
0.15% Sweden
0.13% Australia
0.11% Health Care
0.06% Netherlands
0.06% Swiss Franc
0.03% Health Care
-0.02% S&P 100
-0.06% Health Care Products
-0.06% US Dollar Index
-0.06% Euro Index
-0.08% Banks
-0.10% Hospitals
-0.12% AMEX Composite
-0.12% Dow Composite
-0.14% Hardware
-0.19% S&P 500
-0.19% United Kingdom
-0.20% Nasdaq 100
-0.20% Japan
-0.23% Russell 1000
-0.23% Chemicals
-0.28% Russell 3000
-0.28% Disk Drives
-0.28% Italy
-0.29% Wilshire 5000
-0.32% NYSE Composite
-0.35% Financial
-0.36% Nasdaq Composite
-0.36% Network
-0.40% Consumer Staples
-0.40% Consumer Discretionary
-0.40% Germany
-0.54% Materials
-0.54% REITs
-0.55% France
-0.55% Mexico
-0.56% Value Line
-0.56% DOT
-0.58% Internet
-0.60% Belgium
-0.61% Austria
-0.62% S&P Small Caps
-0.63% Canada
-0.65% S&P Mid Caps
-0.66% Malaysia
-0.77% Singapore
-0.85% Russell 2000
-0.86% Commodity Related
-0.89% Biotechs
-0.89% Brazil
-0.93% Oil Services
-0.94% Broker Dealers
-0.95% Insurance
-1.04% Gold Mining
-1.04% Retailers
-1.04% Hong Kong
-1.23% Taiwan
-1.28% Energy
-1.38% South Korea
-1.45% Utilities
-1.56% Paper
-1.57% Dow Utilities
-1.69% Natural Gas
-1.71% Oil
To sum up the current position of the U.S. stock market:
Longer term, the U.S. stock market has shown impressive Bullish resilience since the major low on 10/10/02, more than four years ago. Stock prices have been buoyed by abundant global liquidly (following years of fiscal stimulation, rapid money supply growth, and rising corporate profits), M&A, and earnings comparisons above expectations.
Liquidity driven merger and acquisitions news has been helping to keep the old Bull alive. Both U.S. and foreign corporations hold excess cash after several years of rising profits, and so M&A speculation as well as leveraged buyouts and corporate stock buybacks have provided substantial Bullish stimulus to stock prices. In 2007, mergers and acquisitions are running about 60% ahead of 2006’s record pace, driven by rising stock prices and private-equity funds that raised more than $250 billion for takeovers since the start of 2006. Takeovers are on track to surpass 2006’s all-time high of $3.49 trillion, according to data compiled by Bloomberg.
Conservative earnings estimates also have been useful in keeping the old Bull alive. First quarter 2007 corporate earnings reflected a significant growth slowdown. Nevertheless, earnings were ahead of expectations, which had been lowered to very conservative levels in advance of actual reporting. Managements and Wall Street have learned that investors hate disappointments, so they simply don’t give them any–unless absolutely necessary.
Stocks generally are fully valued to over priced by long-term historical standards. Although that alone does not mean that stocks cannot continue to trend higher, nevertheless, it is good to remember that “no tree grows to the sky.” The cyclical nature of stock prices never really changes, although the turning points are not always easy to predict.
