by Robert W. Colby, Senior Analyst TraderPlanet.com
Stock Market: Manipulated markets are not to be trusted.
Changing the rules of “free market capitalism” disrupts markets and makes for an uncertain, high-risk trading environment.
Volatility may remain heightened in weeks ahead, in both directions.
The Small Cap/Large Cap Relative Strength Ratio jumped up to another new 21-year high, confirming a Bullish major uptrend.
Bonds appear to have broken their short-term uptrend.
TIP/TLT Relative Strength Ratio broke down to another new multi-year low, suggesting deflation.
The U.S. dollar broke down and appears to be vulnerable.
On Friday, responding to a dramatic proposal for a massive U.S. government bailout of big financial companies and a temporary ban on short sales of 799 financial stocks, major stocks indexes gapped much higher on the open. The open proved to be the high of the day. Prices settled below that open, and nearer to the low of the day, but still up substantially for the day. The Standard & Poor’s 500 cash index (1,255.08) closed up 48.57 points, or 4.03%. Total NYSE volume fell 11% below Thursday’s heavy pace, indicating less demand for stocks. Technically, it was not the impressive performance that it might seem to be to a more casual observer.
Bullish Stocks: Rising Price and Rising Volume
% Price Change, Symbol, Name
43.12% , AIG , AMER INTL GROUP
3.73% , RPG , Growth S&P 500, RPG
4.98% , IYK , Consumer Non-Cyclical, IYK
40.82% , FNM , FANNIE MAE
5.05% , PHJ , Dividend Growth PS, PHJ
66.67% , FRE , FREDDIE MAC
3.87% , IXN , Technology Global, IXN
10.51% , VC , VISTEON
1.37% , IYH , Healthcare DJ, IYH
7.07% , VGK , European VIPERs, VGK
10.92% , WOR , WORTHINGTON INDS
8.55% , LVLT , LEVEL 3 COMMUNICATIONS
3.19% , MTK , Technology MS sT, MTK
11.97% , HANS , Hansen Natural, HANS
9.53% , FLR , FLUOR
13.46% , OXY , OCCIDENTAL
16.25% , FMCN , Focus Media, FMCN
18.48% , ETFC.O , E*TRADE FINANCIAL
16.83% , ZION , ZIONS
18.30% , FITB , FIFTH THIRD BANC
12.23% , TXT , TEXTRON
14.62% , VWO , Emerging VIPERs, VWO
2.03% , VCR , Consumer D. VIPERs, VCR
5.21% , TUP , TUPPERWARE
3.36% , XSD , Semiconductor SPDR, XSD
9.53% , DDS , DILLARD STK A
2.36% , PWO , OTC Dynamic PS, PWO
6.34% , KSU , Kansas City Southern, KSU
9.96% , RHI , ROBERT HALF
9.94% , ADM , ARCHER DANIELS
7.26% , SANM , SANMINA
4.86% , BC , BRUNSWICK
7.09% , EFA , EAFE Index, EFA
42.14% , WM , WASHINGTON MUT
8.67% , WY , WEYERHAEUSER
6.02% , BIIB , BIOGEN IDEC
5.11% , PIC , Insurance, PIC
6.24% , EXC , EXELON CORP
3.65% , PWB , Lg Cap Growth PSD, PWB
5.81% , LPX , LOUISIANA PAC
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-16.02% , OMX , OFFICEMAX INC., OMX
-41.98% , ABK , AMBAC FINL GRP
-4.40% , SH , Short 100% S&P 500, SH
-3.92% , BCR , C R BARD
-1.87% , TAP , ADOLPH COORS STK B, TAP
-3.17% , TLT , Bond, 20+ Years Treasury, TLT
-8.24% , ODP , OFFICE DEPOT
-3.59% , DELL , DELL
-1.78% , IEF , Bond, 10 Year Treasury, IEF
-1.63% , ITT , ITT INDS
-5.11% , CTAS , CINTAS
-1.48% , SHLD , SEARS HOLDINGS
-1.24% , CTB , COOPER TIRE
-2.43% , HSP , HOSPIRA
-1.12% , APOL , APOLLO GROUP
-2.21% , MNST , MONSTER WORLDWID
-0.98% , NYT , NY TIMES STK A
-4.38% , MET , METLIFE
-1.24% , CLX , CLOROX
-2.95% , PSQ , Short 100% QQQ, PSQ
-0.59% , CAH , CARDINAL HEALTH
-2.58% , LMT , LOCKHEED MARTIN
-1.61% , XEL , XCEL ENERGY
-3.66% , ABI , Applera Corp-Applied Biosystems Group (ABI)
-2.26% , PCG , PG&E
-0.06% , PMR , Retail, PMR
-0.84% , ERTS , ELECTRONIC ARTS
-2.03% , FDO , FAMILY DLR STRS
-1.26% , MCO , MOODYS CORP
-1.00% , ESRX , EXPRESS SCRIPTS
-1.25% , KO , COCA COLA
-2.33% , HOLX , Hologic, Inc., HOLX
-0.69% , BF.B , BROWN FORMAN STK B
-1.86% , ACV , Alberto-Culver Co.
-2.78% , SO , SOUTHERN
-2.90% , WMT , WAL MART STORES
-1.03% , FAST , Fastenal Company
-1.93% , DLTR , Dollar Tree Stores Inc
-3.98% , TGT , TARGET
-0.28% , MRK , MERCK & CO
Sectors: among the 9 major U.S. sectors, 8 rose and 1 fell.
Major Sectors Ranked for the Day
% Price Change, Sector ETF, Symbol
11.84% Financial SPDR, XLF
6.52% Energy SPDR, XLE
5.75% Materials SPDR, XLB
2.31% Utilities SPDR, XLU
2.25% Industrial SPDR, XLI
1.00% Consumer Discretionary SPDR, XLY
0.64% Health Care SPDR, XLV
0.39% Technology SPDR, XLK
-0.89% Consumer Staples SPDR, XLP
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):
Energy (XLE) Bearish, Underweight. On 9/16/08, the XLE absolute price fell to a new 8-month intraday low, indicating significant trend weakness.
Materials (XLB) Bearish, Underweight. On 9/18/08, the XLB absolute price hit a new 8-month intraday low, indicating significant trend weakness.
Consumer Discretionary (XLY) Bearish, Underweight. 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.
Industrial (XLI) Bearish, Underweight. On 9/18/08, the XLI absolute price hit a new 2-year intraday low, indicating long-term trend weakness.
Utilities (XLU) Bearish, Underweight. On 9/17/08, the XLU absolute price fell to a new 2-year low, indicating long-term trend weakness.
Technology (XLK) Bearish, Underweight. On 9/17/08, the XLK absolute price fell to a new 3-year low, indicating long-term trend weakness.
Financial (XLF) Bearish, Underweight. On 9/19/08, the XLF absolute price hit a new 3-month intraday high, reflecting dramatic government intervention. On 9/18/08, the XLF absolute price hit a new 2-month intraday low, indicating intermediate-term trend weakness. With the rules changing day by day, trading these stocks would seem to be extraordinarily risky.
Foreign stock index EFA Relative Strength Ratio fell to a new 34-month low on 9/17/08 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 remains Bearish. On 9/18/08, absolute price broke down to another new 2-year intraday low, indicating long-term trend weakness. Relative Strength Ratio has been in a declining trend since 8/14/08.
NASDAQ 100 Index absolute price broke down to a new 2-year intraday low on 9/18/08.
Growth Stock/Value Stock Relative Strength Ratio fell to a new 5-month low on 9/19/08. The short-term trend appears relatively weak. 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 jumped up to a 21-year high on 9/19/08, confirming a major uptrend. The long-term trend has been Bullish most of the time since 4/8/99.
Crude Oil futures contract price rose above the highs of the previous 6 trading days. There appears to be some upside momentum for the short-term, but there could be resistance in the 110-120 zone. The intermediate-term trend remains Bearish. 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 outperformed Crude Oil since 7/11/08.
Gold futures contract price surrendered a moderate fraction of its previous 2-day upsurge. Gold’s short-term prospects appear uncertain. On 9/18/08, Gold jumped sharply higher to a new 6-week high intraday. Gold has been in an intermediate-term downtrend since the peak of 1033.90 on 3/17/08.
Gold Mining stocks continue to underperform Gold futures on a major trend basis.
U.S. Treasury Bond futures contract price fell below the lows of the previous 8 trading days. Bonds appear to have broken their short-term uptrend. Bonds have been in an intermediate-term uptrend since 6/13/08. Long term, Bonds have been in a neutral sideways trend since June 2003.
iShares iBoxx $ Invest Grade Corp Bond (LQD) ETF recovered somewhat over the past 2 trading days, but all trends remain Bearish. On 9/17/08, LQD/TLT Relative Strength Ratio broke down to another new multi-year low, again confirming that the short-term, intermediate-term, and long-term trends all are Bearish. Bond investors appear to be seriously concerned about the economic outlook.
iShares Lehman TIPS Bond (TIP) ETF remains relatively weak. On 9/19/08, TIP/TLT Relative Strength Ratio broke down to another new multi-year low, again confirming that the short-term, intermediate-term, and long-term trends all are Bearish. This implies that Bond investors may be anticipating deflation.
The U.S. dollar broke down. On 9/18/08, the dollar broke down below the lows of the previous 3 weeks. The short-term trend appears to be vulnerable to further downside action.
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 37.9% Bulls versus 43.7% Bears as of 9/17/2008, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio fell to 0.87, down from 0.92 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 32.07, has moderated somewhat from its recent peak of 36.22 on 9/17/08, which was the highest level of Fear since 10/11/02. 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 34.26, has moderated somewhat from its recent peak of 35.88 on 9/17/08, which was the highest level of Fear since 4/14/03. 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 0.51, which indicates Bullish 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 0.65, which indicates 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 and seem likely to weaken further over the next several months.
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.
The breadth of the market has been in a 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 9/17/08, the Cumulative Daily Advance-Decline Lines for the NYSE and for the NASDAQ both fell to new 22-month lows, so major breadth trends remain Bearish.
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 (1,255.08):
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
1,274.42 high of 9/8/2008
1,255.09 high of 9/12/2008
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 (1,255.08):
Potential Support
1,133.50, low of 9/18/2008
Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
15.09% Brazil Index, EWZ
14.62% Emerging VIPERs, VWO
12.93% Capital Markets KWB ST, KCE
12.45% Emerging Markets, EEM
11.84% Financial SPDR, XLF
11.74% Latin Am 40, ILF
11.57% Financials Global LargeCap Value, IXG
11.35% China 25 iS, FXI
11.19% Financial Services DJ, IYG
11.11% Internet Infrastructure H, IIH
10.01% Bank Regional H, RKH
9.11% Austria Index, EWO
9.10% Financial DJ US, IYF
9.00% Energy Exploration & Prod, PXE
8.69% Oil & Gas, PXJ
8.64% Value EAFE MSCI, EFV
8.54% Emerging 50 BLDRS, ADRE
8.51% Belgium Index, EWK
8.31% Ultra Dow30 Double, DDM
8.27% Oil Services H, OIH
8.22% Financials VIPERs, VFH
8.21% Italy Index, EWI
8.15% Ultra MidCap400 Double, MVV
7.81% Euro STOXX 50, FEZ
7.74% Healthcare Global, IXJ
7.72% Sweden Index, EWD
7.71% France Index, EWQ
7.65% Ultra S&P500 Double, SSO
7.62% Natural Resource iS GS, IGE
7.62% EMU Europe Index, EZU
7.58% WilderHill Clean Energy PS, PBW
7.56% Canada Index, EWC
7.55% Energy Global, IXC
7.48% Australia Index, EWA
7.42% IPOs, First Tr IPOX-100, FPX
7.41% Spain Index, EWP
7.33% Energy DJ, IYE
7.22% Value LargeCap iS M, JKF
7.14% Europe 350 S&P Index, IEV
7.12% Singapore Index, EWS
7.09% Value LargeCap Euro STOXX 50 DJ, FEU
7.09% EAFE Index, EFA
7.07% European VIPERs, VGK
6.87% Taiwan Index, EWT
6.86% Metals & Mining SPDR, XME
6.73% Germany Index, EWG
6.58% Networking, PXQ
6.57% South Africa Index, EZA
6.52% Energy SPDR, XLE
6.45% Basic Materials DJ US, IYM
6.40% Netherlands Index, EWN
6.37% Energy VIPERs, VDE
6.35% China LargeCap Growth G D H USX PS, PGJ
6.29% Japan LargeCap Blend TOPIX 150, ITF
6.16% SmallCap PS Zacks, PZJ
6.14% Global 100, IOO
6.00% United Kingdom Index, EWU
5.92% Growth EAFE MSCI, EFG
5.86% Broadband H, BDH
5.80% Dividend DJ Select, DVY
5.79% Materials VIPERs, VAW
5.79% Value SmallCap Russell 2000, IWN
5.78% Asia 50 BLDRS, ADRA
5.75% Materials SPDR, XLB
5.74% Dividend Leaders, FDL
5.62% Dividend International, PID
5.57% Growth MidCap Russell, IWP
5.52% South Korea Index, EWY
5.51% Pacific VIPERs, VPL
5.46% Developed 100 BLDRS, ADRD
5.41% Japan Index, EWJ
5.32% Value VIPERs, VTV
5.26% LargeCap Blend NYSE Composite iS, NYC
5.23% Malaysia Index, EWM
5.22% Pacific ex-Japan, EPP
5.20% Water Resources, PHO
5.16% Value LargeCap Russell 3000, IWW
5.11% Insurance, PIC
5.05% Dividend Growth PS, PHJ
5.04% Value 1000 Russell, IWD
4.98% Consumer Non-Cyclical, IYK
4.94% Value S&P 500, RPV
4.89% Telecommunications Global, IXP
4.88% Micro Cap Zachs, PZI
4.85% Value S&P 500 B, IVE
4.83% Blend Total Market VIPERs, VTI
4.79% Silver Trust iS, SLV
4.77% Networking, IGN
4.74% Dividend High Yield Equity PS, PEY
4.73% Growth SmallCap R 2000, IWO
4.73% Small Cap VIPERs, VB
4.72% Growth SmallCap iS M, JKK
4.69% Building & Construction, PKB
4.67% Telecom Services VIPERs, VOX
4.61% Leisure & Entertainment, PEJ
4.59% Europe 100 BLDRS, ADRU
4.58% MidCap Growth iS M, JKH
4.58% Extended Mkt VIPERs, VXF
4.56% Microcap Russell, IWC
4.54% Value Line Timeliness MidCap Gr, PIV
4.53% Switzerland Index, EWL
4.46% SmallCap Russell 2000, IWM
4.43% LargeCap Blend Dynamic PS, PWC
4.43% Software, IGV
4.39% Value MidCap Russell, IWS
4.39% MidCap Russell, IWR
4.38% LargeCap VIPERs, VV
4.38% Growth SmallCap VIPERs, VBK
4.38% Nanotech Lux, PXN
4.37% Oil, Crude, U.S. Oil Fund, USO
4.37% LargeCap Blend S&P 1500 iS, ISI
4.34% Homebuilders SPDR, XHB
4.33% Value LargeCap Fundamental RAFI 1000, PRF
4.32% Value MidCap S&P 400 B, IJJ
4.29% S&P 500 iS LargeCap Blend, IVV
4.18% Value MidCap iS M, JKI
4.17% Value LargeCap NYSE 100 iS, NY
4.16% Value SmallCap VIPERS, VBR
4.14% Realty Cohen & Steers, ICF
4.13% Software, PSJ
4.11% Value SmallCap iS M, JKL
4.11% LargeCap Blend Russell 3000, IWV
4.08% LargeCap 1000 R, IWB
4.07% Value Small Cap DJ, DSV
4.04% Growth Small Cap DJ, DSG
4.03% Mexico Index, EWW
3.95% Growth SmallCap Dynamic PS, PWT
3.92% Value SmallCap S&P 600 B, IJS
3.91% Utilities H, UTH
3.89% LargeCap Blend Total Market DJ, IYY
3.87% Value 40 Large Low P/E FT DB, FDV
3.87% Technology Global, IXN
3.87% MidCap VIPERs, VO
3.84% Gold Shares S.T., GLD
3.83% SmallCap Core iS M, JKJ
3.82% Growth MidCap 400 B, IJK
3.82% Ultra QQQ Double, QLD
3.82% Value SmallCap Dynamic PS, PWY
3.81% Industrial LargeCap Blend DJ US, IYJ
3.79% Value LargeCap Dynamic PS, PWV
3.75% MidCap Blend Core iS M, JKG
3.75% Telecom DJ US, IYZ
3.73% Growth S&P 500, RPG
3.71% Growth Mid Cap Dynamic PS, PWJ
3.65% Lg Cap Growth PSD, PWB
3.61% Utilities VIPERs, VPU
3.59% Industrials VIPERs, VIS
3.56% Value MidCap S&P 400, RFV
3.53% Biotech & Genome, PBE
3.51% Telecom H, TTH
3.48% Growth MidCap S&P 400, RFG
3.45% LargeCap Rydex Rus Top 50, XLG
3.43% LargeCap Blend Socially Responsible iS, KLD
3.41% Growth LargeCap Russell 3000, IWZ
3.40% Growth LargeCap iS M, JKE
3.37% S&P 500 SPDRs LargeCap Blend, SPY
3.36% Semiconductor SPDR, XSD
3.32% MidCap S&P 400 iS, IJH
3.31% LargeCap Blend S&P=Weight R, RSP
3.30% Commodity Tracking, DBC
3.30% Growth LargeCap NASDAQ Fidelity, ONEQ
3.29% Info Tech VIPERs, VGT
3.28% Value Large Cap DJ, ELV
3.27% DIAMONDS (DJIA), DIA
3.27% Real Estate US DJ, IYR
3.24% Growth BARRA Small Cap 600, IJT
3.23% Utilities DJ, IDU
3.20% Growth LargeCap NASDAQ 100, QQQQ
3.19% Technology MS sT, MTK
3.16% Biotech SPDR, XBI
3.15% Wilshire 5000 ST TM, TMW
3.12% Bond, Corp, LQD
3.06% MidCap S&P 400 SPDRs, MDY
3.05% Utilities, PUI
3.05% Growth Large Cap, ELG
3.04% Value MidCap Dynamic PS, PWP
3.02% Technology DJ US, IYW
2.98% Growth VIPERs, VUG
2.98% REIT VIPERs, VNQ
2.96% Growth 1000 Russell, IWF
2.95% Telecommunications & Wireless, PTE
2.92% Technology GS, IGM
2.90% Value SmallCap S&P 600, RZV
2.81% LargeCap Blend S&P 100, OEF
2.67% LargeCap Blend Core iS M, JKD
2.66% Growth S&P 500/BARRA, IVW
2.58% SmallCap S&P 600, IJR
2.51% Semiconductor H, SMH
2.48% Internet Architecture H, IAH
2.42% Semiconductor iS GS, IGW
2.36% OTC Dynamic PS, PWO
2.34% Dividend Appreciation Vipers, VIG
2.31% Utilities SPDR, XLU
2.25% Industrial SPDR, XLI
2.14% Global Titans, DGT
2.12% Dividend Achievers PS, PFM
2.03% Consumer D. VIPERs, VCR
1.96% Internet H, HHH
1.86% Software H, SWH
1.86% Hong Kong Index, EWH
1.82% Hardware & Electronics, PHW
1.75% Internet B2B H, BHH
1.59% Semiconductors, PSI
1.51% Biotechnology, IBB
1.41% REIT Wilshire, RWR
1.37% Healthcare DJ, IYH
1.00% Consumer Discretionary SPDR, XLY
0.91% Health Care VIPERs, VHT
0.91% Pharmaceuticals, PJP
0.85% Transportation Av DJ, IYT
0.85% Consumer Cyclical DJ, IYC
0.81% Pharmaceutical H, PPH
0.64% Health Care SPDR, XLV
0.51% Bond, TIPS, TIP
0.45% Bond, Aggregate, AGG
0.44% Food & Beverage, PBJ
0.39% Technology SPDR, XLK
0.23% Dividend SPDR, SDY
0.22% Aerospace & Defense, PPA
0.06% Consumer Staples VIPERs, VDC
-0.06% Retail, PMR
-0.20% Retail H, RTH
-0.55% Biotech H, BBH
-0.56% Bond, 1-3 Year Treasury, SHY
-0.89% Consumer Staples SPDR, XLP
-1.78% Bond, 10 Year Treasury, IEF
-2.95% Short 100% QQQ, PSQ
-3.17% Bond, 20+ Years Treasury, TLT
-3.46% Short 100% Dow 30, DOG
-3.79% Short 200% QQQ PS, QID
-3.89% Short 100% MidCap 400, MYY
-4.40% Short 100% S&P 500, SH
-6.44% Short 200% Dow 30 PS, DXD
-7.54% Short 200% S&P 500 PS, SDS
-7.97% Short 200% MidCap 400 PS, MZZ
