Daily Stock Market Commentary – 8/18/2008

Stock Market: Upside momentum has slowed.

The markets appear to be caught in Secondary Reactions (counter trend correction/consolidation waves) since the stock market low on 7/15/2008.

Updated Weekly Rankings as of the close on Friday, August 15, 2008, are posted below.

Daily updates resume: next update posted here late on Monday, 8/18/08.

Since the lows on 7/15/2008, major stock priceindexes have been choppy with modest positive net change. Short-term day-to-day movements appear to be prone to sudden reversals, which may contribute to trader unwillingness to hold positions. Both price momentum and total NYSE volume have been slowing, which is typical of the summer vacation season. This seasonal pattern may continue for a few more weeks.

The Standard & Poor’s 500 cash index (1,298.20) has been in an irregular firming trend since the intraday low of 1,200.44 on 7/15/2008. It may have encountered some resistance, however, at 1,313.15, the high of 8/11/2008. The S&P has been in a long-term downtrend since the intraday high of 1,576.09 on 10/11/2007.

The breadth of the market has been in a relatively Bearish trend long term since June 2007. The number of New Lows has exceeded the number of New Highs most days for more than a year, since July 2007, and that is one sign of a Bear Market. On 7/15/08, the Cumulative Daily Advance-Decline Lines for the NYSE and for the NASDAQ both fell to new 20-month lows, so major breadth trends remain Bearish.

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
24.56% , ABK , AMBAC FINL GRP
11.70% , ADSK , AUTODESK
7.29% , KSS , KOHLS
4.82% , PCAR , PACCAR
5.59% , WY , WEYERHAEUSER
8.44% , JCP , JC PENNEY
0.63% , DGT , Global Titans, DGT
7.62% , CTB , COOPER TIRE
5.90% , S , SPRINT NEXTEL
6.42% , AMD , ADV MICRO DEV
4.22% , CIEN.O , CIENA
4.64% , PFG , PRINCIPAL FINL
0.89% , IGN , Networking, IGN
4.12% , WEN , WENDYS INTL
2.78% , ESRX , EXPRESS SCRIPTS
5.63% , RYAAY , Ryanair Holdings plc
2.62% , WLP , WELLPOINT HEALTH
1.06% , FDL , Dividend Leaders, FDL
5.65% , SSCC , Smurfit-Stone Container Corporation
4.37% , JWN , NORDSTROM
2.87% , BEN , FRANKLIN RSC
0.28% , RFV , Value MidCap S&P 400, RFV
2.71% , PG , PROCTER & GAMBLE
3.12% , HGSI , Human Genome Sciences Inc
2.88% , MIL , MILLIPORE
3.08% , LMT , LOCKHEED MARTIN
1.09% , PEY , Dividend High Yield Equity PS, PEY
2.87% , WFMI , Whole Foods Market Inc
4.14% , BIG , BIG LOTS
1.33% , PPA , Aerospace & Defense, PPA
8.72% , MBI , MBIA
0.74% , RSP , LargeCap Blend S&P=Weight R, RSP
9.87% , MTG , MGIC INVESTMENT
0.59% , FPX , IPOs, First Tr IPOX-100, FPX
3.30% , XRX , XEROX
3.26% , MOLX , MOLEX
5.32% , LUV , SOUTHWEST AIRLS
1.78% , GAS , NICOR
3.47% , HMA , HEALTH MGMT STK A
2.38% , AW , ALLIED WASTE IND

Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-7.35% , BHH , Internet B2B H, BHH
-9.67% , SLV , Silver Trust iS, SLV
-1.20% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-4.16% , SIAL , SIGMA ALDRICH
-2.70% , MRVL , MARVELL TECHNOLOGY
-2.30% , PEG , PUBL SVC ENTER
-1.39% , VWO , Emerging VIPERs, VWO
-2.17% , GLD , Gold Shares S.T., GLD
-3.40% , NOV , NATIONAL OILWELL VARC0
-3.21% , RDC , ROWAN COMPANIES
-2.32% , PXJ , Oil & Gas, PXJ
-1.19% , CMS , CMS ENERGY
-0.70% , IEV , Europe 350 S&P Index, IEV
-2.74% , SLB , SCHLUMBERGER
-2.80% , ERIC.O , LM Ericsson Telephone Company
-2.37% , XME , Metals & Mining SPDR, XME
-0.66% , ADRA , Asia 50 BLDRS, ADRA
-0.54% , PZJ , SmallCap PS Zacks, PZJ
-1.72% , SWY , SAFEWAY
-3.21% , NBR , NABORS
-1.59% , NIHD , NII Holdings, Inc.
-1.36% , DBC , Commodity Tracking, DBC
-2.31% , IAU , Gold COMEX iS, IAU
-2.47% , OIH , Oil Services H, OIH
-0.78% , EWO , Austria Index, EWO
-1.29% , LSI , LSI LOGIC
-1.18% , SLE , SARA LEE
-2.15% , HAL , HALLIBURTON
-0.08% , IXN , Technology Global, IXN
-2.33% , MRO , MARATHON OIL
-3.51% , APA , APACHE
-3.59% , FLR , FLUOR
-0.63% , CNP , CENTERPNT ENERGY
-1.04% , MDP , MEREDITH
-0.18% , RFG , Growth MidCap S&P 400, RFG
-1.01% , USO , Oil, Crude, U.S. Oil Fund, USO
-0.40% , TE , TECO ENERGY
-0.58% , CC , CIRCUIT CITY STR
-0.61% , PBW , WilderHill Clean Energy PS, PBW
-2.21% , OXY , OCCIDENTAL

Sectors: among the 9 major U.S. sectors, 7 rose and 2 fell.
Major Sectors Ranked for the Day
% Price Change, Sector ETF, Symbol
1.17% Consumer Discretionary SPDR, XLY
0.99% Health Care SPDR, XLV
0.98% Consumer Staples SPDR, XLP
0.71% Financial SPDR, XLF
0.56% Industrial SPDR, XLI
0.38% Technology SPDR, XLK
0.35% Utilities SPDR, XLU
-0.63% Materials SPDR, XLB
-1.87% Energy SPDR, XLE

Primary Tide Trends for the 9 major sectors last for years. Here are my up-to-date Relative Strength Rankings, as measured with emphasis on these long-term Primary Tide Trends (listed in order of long-term relative strength):

Consumer Staples (XLP) Neutral, Market Weight. On 8/12/08, XLP /SPY Relative Strength Ratio rose to another new 5-year high, again confirming that the long-term trend is up.

Health Care (XLV) Neutral, Market Weight. On 8/13/08, the XLV/SPY Relative Strength Ratio moved up to a new 7-month high, confirming an intermediate-term upside correction.

Technology (XLK) Neutral, Market Weight. Since making a 10-month low on 2/25/08, XLK/SPY Relative Strength Ratio has firmed up, producing a rise in this ranking.

Industrial (XLI) Neutral, Market Weight. Since making a 5-month low on 7/2/08, XLI/SPY Relative Strength Ratio has firmed up, producing a rise in this ranking.

Consumer Discretionary (XLY) Bearish, Underweight. Since making a 26-week low on 7/11/08, XLY/SPY Relative Strength Ratio has firmed up, producing a modest rise in this ranking. Longer term, on 7/15/08, XLY absolute price fell to its lowest level in 5 years. Since 1/5/05, the XLY/SPY Relative Strength Ratio has underperformed substantially.

Materials (XLB) Bearish, Underweight. On 8/4/08, both the XLB absolute price and the XLB/SPY Relative Strength Ratio fell to new 3-month lows, thereby suggesting an intermediate-term downside correction.

Energy (XLE) Bearish, Underweight. On 8/11/08, both the XLE absolute price and the XLE/SPY Relative Strength Ratio fell to new 5-month lows, thereby suggesting an intermediate-term downside correction.

Utilities (XLU) Bearish, Underweight. On 8/15/08, XLU/SPY Relative Strength Ratio broke down to a new 4-month low, confirming an intermediate-term downside correction.

Financial (XLF) Bearish, Underweight. On 7/15/08, the XLF absolute price and the XLF/SPY Relative Strength Ratio both fell to their lowest level in 8 years, again confirming a Bearish Primary Tide Trend. Since 3/23/04, the XLF/SPY Relative Strength Ratio has underperformed substantially.

Foreign stock index EFA Relative Strength Ratio fell to a new 26-month low on 8/15/08 and has been in a falling trend since 5/23/08. EFA is the ETF representing the EAFE, the international developed country stock markets, ex the U.S. and Canada.

NASDAQ Composite Relative Strength Ratio has been in a rising trend since 3/3/08.

Growth Stock/ValueStockRelative Strength Ratio stabilized since making a new 7-week low on 7/23/08. The short-term trend is neutral. Longer term, this ratio (IWF/IWD) has been in an uptrend since 8/8/06, and it rose to a new 4-year high on 7/15/08.

The Small Cap/Large Cap Relative Strength Ratio rose to a new 23-month high on 8/14/08. The main trend is again confirmed Bullish.

Crude Oil September futures contract trend is down for the short-term. The intermediate-term trend also may have turned down. The long-term trend remains Bullish. U.S. OIL FUND ETF (AMEX: USO) is not a pure play on Crude Oil, although it generally moves in the same direction.

The Energy stock sector has underperformed Crude Oil since 12/10/07.

Gold futures contract has been in a downtrend since the peak of 1033.90 on 3/17/08. Still, Gold has been in a long-term uptrend since 8/25/1999.

Gold Mining stocks continue to underperform Gold futures.

U.S. Treasury Bond futures contract trend remains up.Bonds made a new 4-month high on 8/15/08 and have been in an intermediate-term uptrend since 6/13/08. Long term, Bonds have been in a neutral sideways trend since June 2003.

The U.S. dollar trend is up for the short-term. The intermediate-term trend also has turned up. The long-term trend remains Bearish.

The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood. The business and financial news has flipped from fear to hope and back again this year, creating higher levels of volatility. Investors might be wise to focus on risk control.

Sentiment/Contrary Opinion: There were 31.8% Bulls versus 45.5% Bears as of 8/13/08, according to the weekly Investors Intelligence survey of newsletter advisors. The Bull/Bear ratio fell to 0.70, down from 0.78 the previous week. The low of 0.57 on 7/16/08 was the lowest level of the ratio since 1994. The ratio’s 38-year range is 0.28 to 17.51, and the median is 1.47.

VIX Fear Index, now at 19.58, indicates falling Fear since the peak at 28.48 on 7/14/08. Previously, VIX fell from a peak of 32.64 on 3/17/08 to a low of 16.30 on 5/15/08, indicating decreasing Fear. The all-time high was 45.74 on 10/8/98. The all-time low was 9.89 on 1/24/07. VIX is a market estimate of expected constant 30-day volatility, calculated by weighting S&P 500 Index CBOE option bid/ask quotes spanning a wide range of strike prices for the two nearest expiration dates.

VXN Fear Index, now at 22.52, indicates falling Fear since the peak at 33.20 on 7/14/08. Previously, VXN fell from a peak of 35.63 on 1/22/08 to a low of 20.00 on 5/16/08, indicating decreasing Fear. The all-time high was 114.23 on 10/8/98. The all-time low was 12.61 on 7/29/05. VXN measures NASDAQ Volatility using a method comparable to that used for VIX.

CBOE Put/Call Ratio is 0.65, which indicates Neutral sentiment. Its 4-year mean and median are 0.62, and its 4-year range is 0.35 to 1.28.

ISEE Call/Put Ratio is 1.23, which indicates mildly Bearish sentiment. The ratio’s 4-year mean is 1.50, 4-year median is 1.47, and 4-year range is 0.51 to 3.16.

Fundamentals: The 2003-2007 Bull Market was fed by abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and the net balance of positive earnings surprises. The unfolding fallout from the subprime credit market crisis has derailed that engine. Economic statistics and corporate earnings have weakened.

A Secondary Reaction (corrective wave) was signaled on 8/8/08, when the Dow-Jones Industrials and Transports both closed at new 6-week highs. The Dow Theory confirmed a Primary Tide Bear Market on 11/21/07 when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their respective closing price lows of August, 2007.

To discover the next Resistance, traders probably will be watching how the market acts at the following levels for the Standard & Poor’s 500 cash index (1,298.20):

Potential Resistance
1,576.09, high of 10/11/2007
1,552.76, high of 10/31/2007
1,523.57, high of 12/11/2007
1,498.85, high of 12/26/2007
1,440.24, high of 5/19/2008
1,406.32, high of 5/29/2008
1,366.59, high of 6/17/2008
1,335.63, high of 6/25/2008
1,313.15 high of 8/11/2008

To discover the next Support, traders probably will be watching how the market acts at the following levels for the S&P 500 cash index (1,298.20):

Potential Support
1,200.44, low of 7/15/2008
1,168.20, low of 10/13/2005
1,163.23, high of 3/5/2004
1,159.86, low of 5/17/2005
1,153.64, low of 5/16/2005
1,146.18, low of 5/13/2005
1,139.14, low of 4/29/2005
1,136.37, low of 4/20/2005

Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol

1.74% Homebuilders SPDR, XHB
1.69% Telecom H, TTH
1.50% Retail H, RTH
1.39% Insurance, PIC
1.39% Telecom DJ US, IYZ
1.34% Value SmallCap iS M, JKL
1.33% Aerospace & Defense, PPA
1.17% Consumer Discretionary SPDR, XLY
1.15% Value S&P 500, RPV
1.15% Bank Regional H, RKH
1.14% Consumer Cyclical DJ, IYC
1.14% Dividend DJ Select, DVY
1.12%Financial ServicesDJ, IYG
1.09% Dividend High Yield Equity PS, PEY
1.08% Dividend Growth PS, PHJ
1.06% Dividend Leaders, FDL
0.99% Retail, PMR
0.99% Consumer Staples VIPERs, VDC
0.99% Health Care SPDR, XLV
0.99% Consumer D. VIPERs, VCR
0.98% Ultra S&P500 Double, SSO
0.98% Financial DJ US, IYF
0.98% Consumer Staples SPDR, XLP
0.89% Networking, IGN
0.88% Capital Markets KWB ST, KCE
0.87% Bond, 20+ Years Treasury, TLT
0.85% Value MidCap iS M, JKI
0.84% Dividend SPDR, SDY
0.82% Telecom Services VIPERs, VOX
0.81% Value MidCap Russell, IWS
0.80% Health Care VIPERs, VHT
0.80% Broadband H, BDH
0.79% Ultra Dow30 Double, DDM
0.78% Pharmaceutical H, PPH
0.78% Value S&P 500 B, IVE
0.75% Healthcare DJ, IYH
0.74% LargeCap Blend S&P=Weight R, RSP
0.71% Ultra MidCap400 Double, MVV
0.71% Financial SPDR, XLF
0.69% Consumer Non-Cyclical, IYK
0.69% Value LargeCap Russell 3000, IWW
0.69% Leisure & Entertainment, PEJ
0.69% Value LargeCap Fundamental RAFI 1000, PRF
0.68% Dividend Achievers PS, PFM
0.67% LargeCap Blend Core iS M, JKD
0.65% Value 1000 Russell, IWD
0.64% Financials VIPERs, VFH
0.63% Global Titans, DGT
0.62% Value SmallCap Dynamic PS, PWY
0.62% Industrial LargeCap Blend DJ US, IYJ
0.62% Healthcare Global, IXJ
0.62% Dividend Appreciation Vipers, VIG
0.61% Value MidCap Dynamic PS, PWP
0.61% Food & Beverage, PBJ
0.59% IPOs, First Tr IPOX-100, FPX
0.58% Blend Total Market VIPERs, VTI
0.57% Hardware & Electronics, PHW
0.56% Industrials VIPERs, VIS
0.56% Industrial SPDR, XLI
0.56% Utilities VIPERs, VPU
0.51% Wilshire 5000 ST TM, TMW
0.51% Utilities DJ, IDU
0.49% Value VIPERs, VTV
0.49% Short 100% QQQ, PSQ
0.49% S&P 500 SPDRs LargeCap Blend, SPY
0.48% LargeCap Blend Total Market DJ, IYY
0.48% Value 40 Large Low P/E FT DB, FDV
0.48% Utilities, PUI
0.46% Semiconductor iS GS, IGW
0.46% Value SmallCap VIPERS, VBR
0.42% Growth S&P 500, RPG
0.41% Value Large Cap DJ, ELV
0.41% S&P 500 iS LargeCap Blend, IVV
0.38% Technology SPDR, XLK
0.38% MidCap Blend Core iS M, JKG
0.37% Bond, 10 Year Treasury, IEF
0.35% Utilities SPDR, XLU
0.35% MidCap Russell, IWR
0.34% LargeCap Blend S&P 1500 iS, ISI
0.34% Value LargeCap iS M, JKF
0.32% LargeCap 1000 R, IWB
0.31% Growth SmallCap Dynamic PS, PWT
0.30% Value SmallCap Russell 2000, IWN
0.30% LargeCap Blend S&P 100, OEF
0.29% Bond, Aggregate, AGG
0.28% Value MidCap S&P 400, RFV
0.28% Value LargeCap Dynamic PS, PWV
0.27% LargeCap VIPERs, VV
0.27% Transportation Av DJ, IYT
0.27% Pharmaceuticals, PJP
0.27% Utilities H, UTH
0.26% Semiconductor SPDR, XSD
0.26% Value SmallCap S&P 600 B, IJS
0.25% LargeCap Blend Socially Responsible iS, KLD
0.25% Netherlands Index, EWN
0.25% Bond, TIPS, TIP
0.24% Networking, PXQ
0.24% MidCap S&P 400 SPDRs, MDY
0.24% Extended Mkt VIPERs, VXF
0.23% Bond, Corp, LQD
0.21% SmallCap S&P 600, IJR
0.21% Software, PSJ
0.21% LargeCap Blend Russell 3000, IWV
0.20% LargeCap Rydex Rus Top 50, XLG
0.20% LargeCap Blend Dynamic PS, PWC
0.17% Mexico Index, EWW
0.13% MidCap VIPERs, VO
0.13% Telecommunications & Wireless, PTE
0.12% China 25 iS, FXI
0.12% Value Small Cap DJ, DSV
0.11% Biotech H, BBH
0.11% Growth BARRA Small Cap 600, IJT
0.11% Info Tech VIPERs, VGT
0.10% DIAMONDS (DJIA), DIA
0.10% Short 100% MidCap 400, MYY
0.09% Growth LargeCap Russell 3000, IWZ
0.09% SmallCap Core iS M, JKJ
0.07% Value MidCap S&P 400 B, IJJ
0.07% Bond, 1-3 Year Treasury, SHY
0.07% Growth 1000 Russell, IWF
0.06% Ultra QQQ Double, QLD
0.06% Small Cap VIPERs, VB
0.05% Technology DJ US, IYW
0.05% Growth Mid Cap Dynamic PS, PWJ
0.04% Growth MidCap Russell, IWP
0.04% Growth Large Cap, ELG
0.03% LargeCap Blend NYSE Composite iS, NYC
0.00% Growth S&P 500/BARRA, IVW
0.00% Switzerland Index, EWL
0.00% Short 200% Dow 30 PS, DXD
0.00% MidCap S&P 400 iS, IJH
-0.01% Telecommunications Global, IXP
-0.02% Value LargeCap NYSE 100 iS, NY
-0.03% Short 200% QQQ PS, QID
-0.04% Short 100% S&P 500, SH
-0.05% Financials Global LargeCap Value, IXG
-0.05% Technology GS, IGM
-0.06% Building & Construction, PKB
-0.06% Semiconductors, PSI
-0.08% Realty Cohen & Steers, ICF
-0.08% Growth LargeCap NASDAQ Fidelity, ONEQ
-0.08% Technology Global, IXN
-0.10% Internet Architecture H, IAH
-0.10% Technology MS sT, MTK
-0.12% Lg Cap Growth PSD, PWB
-0.13% Growth VIPERs, VUG
-0.14% Growth MidCap 400 B, IJK
-0.14% MidCap Growth iS M, JKH
-0.14% REIT VIPERs, VNQ
-0.16% Real Estate US DJ, IYR
-0.16% Semiconductor H, SMH
-0.17% Internet H, HHH
-0.17% Growth SmallCap VIPERs, VBK
-0.18% Growth MidCap S&P 400, RFG
-0.19% Growth LargeCap NASDAQ 100, QQQQ
-0.23% Belgium Index, EWK
-0.27% SmallCap Russell 2000, IWM
-0.27% Software, IGV
-0.29% Growth Small Cap DJ, DSG
-0.30% OTC Dynamic PS, PWO
-0.31% Biotechnology, IBB
-0.33% Short 100% Dow 30, DOG
-0.34% Growth LargeCap iS M, JKE
-0.35% Growth SmallCap iS M, JKK
-0.36% Growth SmallCap R 2000, IWO
-0.40% Global 100, IOO
-0.40% Short 200% MidCap 400 PS, MZZ
-0.41% Spain Index, EWP
-0.49% Nanotech Lux, PXN
-0.51% Micro Cap Zachs, PZI
-0.52% Biotech SPDR, XBI
-0.52% European VIPERs, VGK
-0.54% SmallCap PS Zacks, PZJ
-0.56% Dividend International, PID
-0.56% Australia Index, EWA
-0.60% REIT Wilshire, RWR
-0.61% WilderHill Clean Energy PS, PBW
-0.62% France Index, EWQ
-0.63% Value EAFE MSCI, EFV
-0.63% Materials SPDR, XLB
-0.65% Japan LargeCap Blend TOPIX 150, ITF
-0.66% EAFE Index, EFA
-0.66% Asia 50 BLDRS, ADRA
-0.66% EMU Europe Index, EZU
-0.69% South Korea Index, EWY
-0.70% Growth EAFE MSCI, EFG
-0.70% Europe 350 S&P Index, IEV
-0.70% Japan Index, EWJ
-0.71% Pacific VIPERs, VPL
-0.71% Developed 100 BLDRS, ADRD
-0.76% Software H, SWH
-0.76% China LargeCap Growth G D H USX PS, PGJ
-0.78% Austria Index, EWO
-0.78% United Kingdom Index, EWU
-0.79% Microcap Russell, IWC
-0.83% Italy Index, EWI
-0.84% Biotech & Genome, PBE
-0.91% Value Line Timeliness MidCap Gr, PIV
-0.93% Water Resources, PHO
-0.94% Value SmallCap S&P 600, RZV
-0.96% Pacific ex-Japan, EPP
-1.01% Germany Index, EWG
-1.01% Materials VIPERs, VAW
-1.01% Oil, Crude, U.S. Oil Fund, USO
-1.04% Hong Kong Index, EWH
-1.04% Euro STOXX 50, FEZ
-1.05% Europe 100 BLDRS, ADRU
-1.07% Short 200% S&P 500 PS, SDS
-1.20% Value LargeCap Euro STOXX 50 DJ, FEU
-1.22% Internet Infrastructure H, IIH
-1.29% South Africa Index, EZA
-1.34% Basic Materials DJ US, IYM
-1.35% Energy VIPERs, VDE
-1.36% Commodity Tracking, DBC
-1.39% Emerging VIPERs, VWO
-1.41% Sweden Index, EWD
-1.53% Taiwan Index, EWT
-1.53% Energy Global, IXC
-1.56% Emerging Markets, EEM
-1.59% Canada Index, EWC
-1.72% Energy DJ, IYE
-1.72% Emerging 50 BLDRS, ADRE
-1.80% Latin Am 40, ILF
-1.87% Energy SPDR, XLE
-2.10% Natural Resource iS GS, IGE
-2.11% Energy Exploration & Prod, PXE
-2.14% Singapore Index, EWS
-2.17% Gold Shares S.T., GLD
-2.32% Oil & Gas, PXJ
-2.37% Metals & Mining SPDR, XME
-2.47% Oil Services H, OIH
-2.61% Malaysia Index, EWM
-2.66% Brazil Index, EWZ
-7.35% Internet B2B H, BHH
-9.67% Silver Trust iS, SLV