By Robert W. Colby, Senior Analyst TraderPlanet.com
Testing support.
Still some signs of hope.
DJIA broke down below its June low but is still holding above its one-year uptrend line and its 200-day simple moving average.
DJTA held above its June low and its 200-day simple moving average.
Financial sector fell steeply on higher volume and made a new price and relative strength lows.
Consumer Discretionary sector price made a new 9-month closing price low.
Crude Oil rose to another new 10-month price high.
Stocks are very oversold according to all short-term oscillators, and these indicators are now showing positive divergences by failing to confirm lower lows.
Recent huge downside volume indicated panic, selling climax conditions. But for every share sold, there was a share bought. When everything appeared scary, SOMEBODY had to be buying.
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
3.88% , PXN , Nanotech Lux, PXN
13.05% , RYAAY , Ryanair Holdings plc
5.59% , MAS , MASCO
11.29% , DJ , DOW JONES
4.20% , TROW , T ROWE PRICE GP
3.66% , GCI , GANNETT
4.29% , SUNW , SUN MICROSYS
2.01% , SAF , SAFECO
2.81% , SYY , SYSCO
0.22% , MKH , Market 2000 H, MKH
4.88% , QID , Short 200% QQQ PS, QID
1.44% , WMI , WASTE MANAGEMENT
1.27% , EKH , Europe 2001 H, EKH
2.28% , CAT , CATERPILLAR
3.98% , WEN , WENDYS INTL
1.65% , LIZ , LIZ CLAIRBORNE
3.38% , PEG , PUBL SVC ENTER
3.81% , CVG , CONVERGYS
1.55% , MYY , Short 100% MidCap 400, MYY
2.60% , XMSR , XM Satellite R
0.81% , DBC , Commodity Tracking, DBC
1.25% , DOV , DOVER
2.46% , DXD , Short 200% Dow 30 PS, DXD
2.02% , UNM , UNUMPROVIDENT
1.59% , ETR , ENTERGY
2.67% , VZ , VERIZON COMMS
2.31% , CTB , COOPER TIRE
1.35% , SIRI , Sirius Satellite
0.82% , ESRX , EXPRESS SCRIPTS
1.11% , EWU , United Kingdom Index, EWU
2.84% , IPG , INTERPUBLIC GRP
0.72% , JNJ , JOHNSON&JOHNSON
0.93% , TNB , THOMAS & BETTS
2.62% , SDS , Short 200% S&P 500 PS, SDS
2.21% , PSQ , Short 100% QQQ, PSQ
1.50% , IFF , INTL FLAV & FRAG
0.96% , MWV , MEADWESTVACO
1.79% , USO , Oil, Crude, U.S. Oil Fund, USO
0.76% , ADP , AUTOMATIC DATA
0.97% , HCR , MANOR CARE
2.00% , BIIB , BIOGEN IDEC
0.71% , WFMI , Whole Foods Market Inc
0.72% , TLT , Bond, 20+ Years Treasury, TLT
2.14% , AW , ALLIED WASTE IND
0.41% , IEF , Bond, 10 Year Treasury, IEF
0.21% , RRD , RR DONNELLEY SON
0.59% , NVDA , NVIDIA
0.91% , HGSI , Human Genome Sciences Inc
1.34% , SH , Short 100% S&P 500, SH
0.43% , EWL , Switzerland Index, EWL
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-24.32% , HMA , HEALTH MGMT STK A
-1.28% , VHT , Health Care VIPERs, VHT
-14.92% , MTG , MGIC INVESTMENT
-7.31% , AVP , AVON
-1.20% , IYH , Healthcare DJ, IYH
-1.87% , IGM , Technology GS, IGM
-2.07% , PXQ , Networking, PXQ
-4.36% , AMGN , AMGEN
-6.33% , BMS , BEMIS
-4.71% , MRVL , MARVELL TECHNOLOGY
-8.16% , ABK , AMBAC FINL GRP
-5.89% , MBI , MBIA
-1.00% , IYK , Consumer Non-Cyclical, IYK
-1.35% , ISI , LargeCap Blend S&P 1500 iS, ISI
-1.03% , PEJ , Leisure & Entertainment, PEJ
-1.40% , RFG , Growth MidCap S&P 400, RFG
-1.91% , PHW , Hardware & Electronics, PHW
-6.84% , AAPL , APPLE COMPUTER
-3.71% , COF , CAPITAL ONE FNCL
-2.17% , IXN , Technology Global, IXN
-5.28% , NTAP , NETWK APPLIANCE
-5.34% , IACI , IAC/INTERACTIVCORP
-1.66% , PHJ , Dividend Growth PS, PHJ
-3.16% , MRO , MARATHON OIL
-0.93% , RPV , Value S&P 500, RPV
-3.83% , BIG , BIG LOTS
-2.05% , HHH , Internet H, HHH
-1.43% , ELV , Value Large Cap DJ, ELV
-1.34% , PBW , WilderHill Clean Energy PS, PBW
-5.18% , SNDK , SanDisk Corporation
-3.76% , CFC , COUNTRYWIDE FNCL
-1.60% , IGW , Semiconductor iS GS, IGW
-4.36% , NUE , NUCOR
-0.91% , VAW , Materials VIPERs, VAW
-1.48% , DSG , Growth Small Cap DJ, DSG
-1.97% , RKH , Bank Regional H, RKH
-2.05% , IYF , Financial DJ US, IYF
-0.94% , EWK , Belgium Index, EWK
-3.49% , LSI , LSI LOGIC
-1.09% , IWV , LargeCap Blend Russell 3000, IWV
-4.74% , BSC , BEAR STEARNS
-1.20% , PJP , Pharmaceuticals, PJP
-2.66% , CTSH , Cognizant Technology Solutions
-3.67% , WM , WASHINGTON MUT
-0.43% , FEZ , Euro STOXX 50, FEZ
-0.83% , XLP , Consumer Staples SPDR, XLP
-0.53% , VIS , Industrials VIPERs, VIS
-2.85% , GNTX , Gentex Corporation
-3.91% , BEN , FRANKLIN RSC
-1.81% , BBH , Biotech H, BBH
Sectors: among the 9 major U.S. sectors, all 9 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
-0.18% Utilities
-0.70% Technology
-0.83% Consumer Staples
-0.98% Energy
-1.09% Health Care
-1.20% Materials
-1.35% Industrial
-1.52% Consumer Discretionary
-3.18% Financial
Energy (XLE) Bullish. Price made a new high on 7/20/07 and relative strength made a new high on 7/23/07. XLE has been relatively strong compared to the S&P since 3/12/03. Overweight.
Materials (XLB) Bullish. Price made a new high on 7/19/07 and relative strength made a new high on 7/18/07. XLB has been relatively strong compared to the S&P since 9/27/00. Overweight.
Industrial (XLI) Bullish. Price made a new high on 7/19/07 and relative strength made a new high on 7/30/07. 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 on 7/19/07 and relative strength made a new 19-month high on 7/26/07. XLK has been relatively strong compared to the S&P since its low on 7/24/06.
Utilities (XLU) Bearish. XLU has been relatively weak compared to the S&P since 4/2/07. Underweight.
Consumer Discretionary (XLY) Bearish. Price made a new 9-month closing price low on 7/31/07. Relative strength made a new 10-month low on 7/31/07 and has been relatively weak compared to the S&P since 1/5/05. Underweight. Consumer Staples (XLP) Bearish. Price hit a new 4-month closing price low on 7/31/07. 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.
Health Care (XLV) Bearish. XLV made a new 5-year relative strength low on 7/19/07 and has been relatively weak compared to the S&P since 10/9/02. Underweight.
Financial (XLF) Bearish. XLF fell steeply on higher volume. XLF made a new 11-month price low and relative strength made a new 5-year low on 7/31/07. Underweight.
Foreign stocks strongly outperformed since 7/26/07. The long-term trend is still Bullish: EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) has outperformed the S&P 500 since 3/19/03.
NASDAQ outperformed since 5/17/07. Relative strength made a new 8-month high on 7/27/07.
Growth fell back moderately but has been beating Value since 5/16/07. Longer term, the major trend of Growth/Value, mostly Bearish for seven years, could be turning.
Large Caps beat Small Caps since 4/19/06, and that trend in is motion.
Crude Oil rose to another new 10-month price high on 7/31/07. Longer term, the U.S. OIL FUND ETF (AMEX: USO) remains in its uptrend since its shakeout low at 42.56 on 1/18/07.
Energy stocks gave back part of Monday’s gains, underperforming USO but outperforming S&P. 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 outperformed the S&P since 7/17/07. Longer term, StreetTRACKS Gold Trust ETF (NYSE: GLD) has been in a choppy trading range since 5/12/06.
Silver underperformed Gold since 6/5/07. Longer term, iShares Silver Trust (AMEX: SLV) broke down to a new 6-month low on 6/26/07 and underperformed GLD since 12/7/06. So, the main trend is relatively Bearish.
The Gold Miners Index (XAU) fell on Tuesday and underperformed Gold since 7/19/07. XAU also underperformed Gold since 1/31/06. Gold mining stocks have substantially underperformed the S&P 500 for more than 20 years.
Deflating: inflation expectations have been falling since 6/22/07. The ratio of the price of bond TIPS to 10-year U.S. Treasury Notes indicates declining inflation expectations.
U.S. Treasury Bond prices rose to a new 11-week price high on 7/31/07 on a continued flight to safety. Money has been shifting from risk to safety. The short-term bond price trend has been Bullish since the price low on 6/12/07. But since the peak at 97.66 on 6/16/03, the long-term trend appears Bearish for iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT).
U.S. dollar consolidated following its sharp oversold counter trend bounce since its 7/24/07 low. Longer term, dollar fell to a new 15-year price low on 7/24/07. The dollar has been falling most of the time since its peak at 121.29 on 7/5/01.
1.11% United Kingdom
0.91% AMEX Composite
0.54% British Pound
0.43% Switzerland
0.40% 30Y T-Bond
0.35% Canadian Dollar
0.30% Australian Dollar
0.25% Germany
0.20% Dow Utilities
0.20% Canada
0.05% Swiss Franc
0.02% REITs
0.01% Euro Index
-0.05% Drugs
-0.06% US Dollar Index
-0.08% France
-0.18% Utilities
-0.19% Japanese Yen
-0.27% Italy
-0.32% Australia
-0.35% Paper
-0.36% Spain
-0.47% Chemicals
-0.48% Japan
-0.54% Natural Gas
-0.56% Oil Services
-0.56% Netherlands
-0.63% Brazil
-0.65% Insurance
-0.67% Taiwan
-0.69% Gold Mining
-0.70% Technology
-0.71% NYSE Composite
-0.83% Consumer Staples
-0.85% Health Care
-0.88% S&P Small Caps
-0.88% Hong Kong
-0.89% Dow Composite
-0.93% Commodity Related
-0.94% Health Care Products
-0.94% Belgium
-0.95% South Korea
-0.98% Energy
-0.99% Value Line
-1.03% Russell 2000
-1.09% Health Care
-1.09% Oil
-1.10% Dow Industrial
-1.15% S&P Mid Caps
-1.15% Wilshire 5000
-1.20% Russell 3000
-1.20% Materials
-1.21% Russell 1000
-1.26% S&P 500
-1.26% Biotechs
-1.27% Dow Transports
-1.27% Malaysia
-1.28% Mexico
-1.35% Industrial
-1.36% S&P 100
-1.43% Nasdaq Composite
-1.46% Sweden
-1.52% Consumer Discretionary
-1.55% Hospitals
-1.79% Computer Tech
-1.81% Singapore
-1.86% Internet
-1.89% Hardware
-2.01% Banks
-2.01% Retailers
-2.10% DOT
-2.12% Nasdaq 100
-2.31% Semiconductors
-2.38% Airlines
-2.39% Disk Drives
-2.67% Broker Dealers
-3.15% Network
-3.18% Financial
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.
Investors might perceive anything that threatens to end abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and the net balance of positive earnings surprises as threats to the popular Bullish scenario.
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 (and indeed they have) 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.
