The S&P 500 (SPX: 1,430.15 ) fell 13.54 points or 0.94% on Friday on a 31% increase in volume on the NYSE, suggesting more substantial selling pressure. SPX closed below the lows of the previous 3 trading days.
The S&P 500 ETF (SPY: 142.79) formed a Dark Cloud Cover Candlestick Pattern on Wednesday and gapped sharply lower on Friday. The stock market’s loss of upward momentum and downside reversal was confirmed by various short-term momentum oscillators.
The Dow-Jones Transportation Average rose above its September-October highs on Thursday 12/20/12, but the Dow-Jones Industrial Average remained substantially below its highs, thereby demonstrating non confirmation and bearish divergence.
Investor sentiment data currently indicate alarming degrees of optimism and bullish complacency now in late December, 2012, matching extremes in September, 2012, as the stock price indexes rose to their 2012 price highs. Elevated levels of optimism are bearish because when the majority is extremely bullish, investors are already fully invested in the market. Once everyone who is going to buy has already bought, stocks are vulnerable to a downside shakeout. The pendulum of emotion tends to swing too far in one direction, but market mood always reverts to the mean.
Corporate insiders sold 6.67 shares for each share bought in December 2012–up from a 20-year average of 3.41-to-1. As Mark Hulbert wrote, “The picture the data paint is unmistakably bearish.”
“Global fund managers are more bullish about economic growth than they have been in nearly two years,” according to the monthly Bank of America Merrill Lynch fund manager survey, cnbc.com/id/100325382. “Risk appetite has also risen, with the percentage of investors that would be willing to take on higher-than-normal risk at its highest level since April 2011.” Note that the S&P 500 high close for 2011 was on April 29, 2011, and that peak was followed by 19% drop to the low on October 3, 2011. The fund managers have also over-weighted European equities relative to U.S. equities for the first time since November 2010.
AAII Sentiment shows that individual investors are now extremely bullish. As of December 20, 2012, there were 46.40% bulls, 28.80% neutral, and 24.80% bears. This was the most extreme optimism in more than 10 months.
Investors Intelligence Sentiment confirms that stock market newsletter advisors are now extremely bullish. Advisors are as bullish as they were at the top in September, 2012, when there were only 24.5% Bears. That top was followed by a 9% downside correction into November.
The Art of Contrary Thinking calls for questioning popular optimism. I have been skeptical that SPX will be able to overcome technical resistance around its September-October highs. The technical condition of the stock market has not supported the excessive optimism that the bullish majority of stock investors and traders clearly exhibit now and over the past several months. Low volume (most days) has revealed a lack of big buying power. Long-term momentum has been showing bearish divergence and has weakened considerably since the S&P 500 price peak on 9/14/12. And the bull phase of the 4-year cycle is long in tooth. Choosing safety over risk still appears to be the most reasonable approach for conservative traders and investors.
Our clients’ separately managed accounts made gains every quarter for the past 6 consecutive quarters; see:
Robert W. Colby Asset Management, Inc. (click here).
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The S&P 500 Composite Potential Resistance
1576.09, high of 10/11/2007
1552.76, high of 10/31/2007
1523.57, high of 12/11/2007
1498.85, high of 12/26/2007
1474.51, high of 9/14/2012
1464.02, high of 10/18/2012
1448.00, high of 12/19/2012
1440.24, high of 5/19/2008
1439.15, high of 9/12/2012
1438.59, high of 12/12/2012
1434.27, high of 11/2/2012
1432.82, low of 12/20/2012
1430.53, low of 9/26/2012
The S&P 500 Composite Potential Support
1426.76, low of 12/12/2012
1425.53, low of 10/12/2012
1425.48, Fibonacci 23.6% of June-Sept ’12 range
1424.41, Fibonacci 61.8% of Sept-Nov ’12 range
1423.73, high of 12/3/2012
1422.58, low of 12/21/2012
1422.38, high of 4/2/2012
1422.06, low of 10/22/2012
1421.12, high of 10/25/2012
1420.34, high of 12/7/2012
1419.70, high of 11/29/2012
1418.71, high of 8/17/2012
1415.32, high of 5/1/2012
1413.41, 50-day SMA
1409.16, high of 11/23/2012
1403.28, low of 10/26/12
1398.23, low of 12/5/2012
1397.68, low of 11/26/2012
1396.56, low of 9/4/2012
1395.14, Fibonacci 38.2% of June-Sept 2012 range
1391.04, low of 8/6/2012
1388.71, low of 5/3/2012
1389.40, 200-day SMA
1385.43, low of 11/28/2012
1381.50, Fibonacci 78.6% of 2007-2009 range
1380.39, high of 7/19/2012
1374.81, high of 7/3/2012
1370.62, Fibonacci 50.0% of June-Sept 2012 range
1370.58, high of 5/2/2011
1363.49, high of 6/19/2012
1357.38, low of 4/10/2012
1355.70, low of 7/2/2012
1346.11, Fibonacci 61.8% of June-Sept 2012 range
1343.35, low of 11/16/2012
1340.03, low of 3/6/2012
1335.52, high of 6/11/2012
1334.93, high of 5/31/2012
1329.24, low of 7/24/2012
1329.05, high of 6/7/2012
1328.49, high of 5/22/2012
1325.41, low of 7/12/2012
1311.20, Fibonacci 78.6% of June-Sept 2012 range
1306.62, low of 6/12/2012
1291.98, low of 5/18/2012
1266.74, low of 6/4/2012
1265.26, low of 1/5/2012
1262.30, low of 12/27/2011
1257.58, Fibonacci 61.8% of 2011 range
1244.80, low of 12/7/2011
1239.73, low of 12/1/2011
1238.81, Fibonacci 78.6% of 1,576.09 high
1234.81, low of 11/3/2011
1231.04, high of 12/16/2011
1228.74, Fibonacci 61.8% of 2007-2009 range
1226.64, low of 11/9/2011
1224.57, high of 12/19/2011
1215.20, low of 12/16/2011
1202.37, low of 12/19/2011
1158.66, low of 11/25/2011
1121.44, Fibonacci 50% of 2007-2009 range
1074.77, low of 10/4/2011
1014.14, Fibonacci 38.2% of 2007-2009 range
1010.91, low of 7/1/2010
991.97, low of 9/2/2009
978.51, low of 8/17/2009
956.23, high of 6/11/2009
881.38, Fibonacci 23.6% of 2007-2009 range
869.32, low of 7/8/2009
666.79, intraday low of 3/6/2009
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) turned systematically bearish again on 12/11/12 when it fell below its 50-day SMA. UUP fell below its 200-day SMA on 8/31/12, and the 50-day SMA fell below the 200-day SMA on 10/2/12. Support 21.57, 21.07, and 20.84. Resistance 22.05, 22.30, 22.45, 23.14, 23.52, 25.84, 27.19, 28.97.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price fell below its lows of the previous 5 months on 12/20/12. DBA turned systematically neutral on 11/30/12 when price crossed back down below its 50-day SMA. The 50-day SMA remains above the 200-day SMA, although the 50-200 spread has been narrowing gradually.
Crude Oil, United States Oil ETF (USO) turned systematically neutral on 12/19/12, when price rose above its 50-day SMA. USO price fell below its 200-day SMA on 9/17/12, and the 50-day SMA has remained below its 200-day SMA consistently every day since 6/7/12. Support 31.00, 29.02, 26.28, and 22.74. Resistance 33.11, 34.70, 37.17, 38.31, 40.29, 41.38, 42.30, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) price fell below its lows of the previous 4 months on 12/20/12. GLD turned systematically neutral on 11/27/12, when price fell below its 50-day SMA. Support: 157.40, 154.83, 148.27, 147.19, 143.97, 143.42, and 142.55. Resistance: 166.94, 170.01, 174.07, 175.46, 177.40, and 185.85.
Gold Mining Stocks ETF/Gold Shares ETF Relative Strength Ratio (GDX/GLD) turned systematically neutral on 11/5/12 when it fell below its 50-day SMA. The 50-day SMA has been above the 200-day SMA since 10/19/12–but the 50-200 spread has been narrowing and a bearish crossover appears probable in days ahead.
Silver, iShares Silver Trust ETF (SLV) price fell below its lows of the previous 4 months on 12/20/12. SLV turned systematically neutral on 12/13/12 when it fell below its 50-day SMA. Support 27.97, 26.87, 26.13, 25.34, 25.00, 24.44, 22.52, 20.73, and 19.44. Resistance: 32.72, 33.31, 34.08, 36.44, 40.23, 41.49, 42.30, 42.78, 44.71, and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) fell below its lows of the previous 4 months on 12/20/12. SLV/GLD turned systematically neutral on 12/14/12 when it fell below its 50-day SMA.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) turned systematically bearish on 12/20/12, when it fell well below both its 50-day SMA and 200-day SMA. Long term, JJC has been consolidating losses in Triangle chart pattern trading range between 38.99 and 51.41 for more than a year since October 2011. “Dr. Copper” is widely accepted as one of the better indicators of investor confidence (or lack thereof) in the global industrial economy.
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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 later revealed to be deal stocks or are the subject of some other extraordinary events, positive or negative.
Bullish Stocks: Rising Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
2.87% , CR , CRANE
7.58% , SVU , SUPERVALU
6.16% , NKE , NIKE STK B
7.92% , AMD , ADV MICRO DEV
2.35% , FAST , Fastenal Company
2.70% , ININ , Interactive Intelligence ININ
2.66% , ODP , OFFICE DEPOT
4.52% , RHT , Red Hat Inc.
1.05% , AMAT , APPLIED MATERIAL
1.45% , TLAB , TELLABS
1.23% , LPX , LOUISIANA PAC
0.59% , GNTX , Gentex Corporation
1.55% , GWW , WW GRAINGER
0.76% , ABT , ABBOTT LABS
0.72% , WPI , WATSON PHARM
1.79% , SDS , Short 200% S&P 500 PS, SDS
0.50% , TLH , Bond 10-20 Year US Treas, TLH
0.61% , ISIL , INTERSIL CORP
0.83% , SH , Short 100% S&P 500, SH
1.07% , PSQ , Short 100% QQQ, PSQ
1.72% , DXD , Short 200% Dow 30 PS, DXD
0.61% , LLY , ELI LILLY
0.31% , DLX , DELUXE
0.76% , F , FORD MOTOR
1.26% , ROST , Ross Stores Inc
0.73% , JNY , JONES APPAREL
0.68% , LMT , LOCKHEED MARTIN
0.44% , AXP , AMERICAN EXPRESS
0.41% , NWL , NEWELL RUBBER
1.09% , TLT , Bond, 20+ Years Treasury, TLT
0.17% , ETR , ENTERGY
0.40% , VRSN , VeriSign Inc
0.29% , COST , COSTCO WHOLESAL
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-22.73% , RIMM , RESEARCH IN MOTION LTD
-7.69% , SHLD , SEARS HOLDINGS
-6.92% , MU.O , MICRON TECH
-1.14% , IXG , Financials Global LargeCap Value, IXG
-2.40% , LEG , LEGGETT & PLATT
-2.80% , PBI , PITNEY BOWES
-3.17% , SNV , SYNOVUS
-0.68% , IYJ , Industrial LargeCap Blend DJ US, IYJ
-3.60% , IR , INGER RAND
-1.51% , CVG , CONVERGYS
-1.18% , IYG , Financial Services DJ, IYG
-2.69% , CTAS , CINTAS
-2.51% , PIN , India PS, PIN
-0.77% , IYH , Healthcare DJ, IYH
-1.12% , LBTYA , Liberty Global Inc. (LBTYA)
-1.30% , HSIC , Henry Schein Inc
-3.93% , YUM , YUM BRANDS
-2.28% , MAS , MASCO
-2.54% , PMR , Retail, PMR
-2.50% , MTG , MGIC INVESTMENT
-0.96% , LRCX , LAM RESEARCH CORP
-3.30% , WAG , WALGREEN
-0.61% , IYK , Consumer Non-Cyclical, IYK
-1.29% , CINF , CINCINNATI FIN
-1.75% , CLX , CLOROX
-1.51% , LXK , LEXMARK INTL STK A
-1.12% , XRX , XEROX
-2.48% , MO , ALTRIA, MO
-2.26% , CMCSA , COMCAST HOLDINGS STK A
-2.42% , STI , SUNTRUST BANKS
-1.84% , SSO , Ultra S&P500 Double, SSO
-1.06% , CLF , CLIFFS NATURAL RESOURCES, CLF
-2.93% , BMC.O , BMC SOFTWARE
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
1.09% Bond, 20+ Years Treasury, TLT
0.83% Bear, Short S&P 500, SH
0.38% Gold Shares S.T., GLD
0.28% Agriculture DB PS, DBA
0.28% Bond, TIPS U.S. Treasury iS, TIP
0.27% Bond, 10 Year Treasury, IEF
0.17% Bond, Long-Term Corp iBoxx iS, LQD
0.14% Indonesia MV, IDX
0.12% Bond, Emerg Mkt JPM iS, EMB
0.10% Spain Index, EWP
0.09% Bond, Intermediate US Aggregate iS, AGG
0.01% Bond, 1-3 Year Treasury, SHY
0.01% Bond Treasury Short-Term iS, SHV
0.01% Silver Trust iS, SLV
-0.02% Bond, Muni S&P ATM-Free iS, MUB
-0.15% Bond Ex-US Treas, BWX
-0.16% Financial Preferred, PGF
-0.17% REIT VIPERs, VNQ
-0.17% SmallCap Growth S&P 600 iS, IJT
-0.18% Commodity Tracking, DBC
-0.20% Preferred Stock iS, PFF
-0.22% Bond, High-Yield Junk, JNK
-0.29% Bond, High Yield Corp iBoxx iS, HYG
-0.30% Transportation Av DJ, IYT
-0.31% SmallCap Blend S&P 600 iS, IJR
-0.31% Real Estate US DJ iS, IYR
-0.32% Realty Cohen & Steers, ICF
-0.33% Utilities VIPERs, VPU
-0.38% SmallCap Value Russell 2000 iS, IWN
-0.41% SmallCap Blend Russell 2000 iS, IWM
-0.42% Dividend ex-U.S. DJ iS, IDV
-0.45% Italy Index, EWI
-0.47% Sweden Index, EWD
-0.50% Growth SmallCap VIPERs, VBK
-0.51% SmallCap Growth Russell 2000 iS, IWO
-0.52% Thailand MSCI iS, THD
-0.55% Value EAFE MSCI, EFV
-0.56% Small Cap VIPERs, VB
-0.56% Canada Index, EWC
-0.57% Value SmallCap VIPERS, VBR
-0.59% Chile MSCI iS, ECH
-0.59% Switzerland Index, EWL
-0.59% France Index, EWQ
-0.60% EMU Europe Index, EZU
-0.61% Japan Index, EWJ
-0.62% Foreign LargeCap EAFE MSCI iS, EFA
-0.62% Pacific VIPERs, VPL
-0.64% Germany Index, EWG
-0.68% SmallCap Value S&P 600 iS, IJS
-0.68% Growth MidCap Russell, IWP
-0.68% Dividend Appreciation Vipers, VIG
-0.68% Basic Materials DJ US, IYM
-0.68% Frontier Markets Guggenheim , FRN
-0.69% Telecom DJ US, IYZ
-0.70% Financial DJ US, IYF
-0.71% Microcap Russell, IWC
-0.72% Austria Index, EWO
-0.72% Belgium Index, EWK
-0.73% Hong Kong Index, EWH
-0.73% MidCap Russell, IWR
-0.74% LargeCap Growth Russell 1000 iS, IWF
-0.74% Technology DJ US, IYW
-0.75% Growth VIPERs, VUG
-0.76% MidCap Blend S&P 400 iS, IJH
-0.76% MidCap Growth S&P 400 iS, IJK
-0.76% Global ex U.S. LargeCap Blend, ACWX
-0.78% LargeCap Growth S&P 500 iS, IVW
-0.79% Dividend U.S. DJ iS, DVY
-0.79% MidCap Value S&P 400 iS, IJJ
-0.80% Australia Index, EWA
-0.81% Singapore Index, EWS
-0.81% Energy & Nat Res iS GS, IGE
-0.82% Biotech SPDR, XBI
-0.82% Latin Am 40, ILF
-0.83% Energy Global, IXC
-0.83% MidCap S&P 400 SPDRs, MDY
-0.83% Growth EAFE MSCI, EFG
-0.84% LargeCap Blend Russell 1000 iS, IWB
-0.84% LargeCap VIPERs, VV
-0.85% Info Tech VIPERs, VGT
-0.85% Blend Total Market VIPERs, VTI
-0.87% LargeCap Blend Russell 3000 iS, IWV
-0.87% Global LargeCap Blend MSCI iS, ACWI
-0.87% Dividend High Yield Equity PS, PEY
-0.89% Value MidCap Russell, IWS
-0.90% European VIPERs, VGK
-0.90% Global 100, IOO
-0.91% SmallCap Blend EAFE MSCI iS, SCZ
-0.91% LargeCap Blend S&P 500 iS, IVV
-0.92% Value VIPERs, VTV
-0.92% Pacific ex-Japan, EPP
-0.93% Semiconductor iS IGW, SOXX
-0.94% Europe 350 S&P Index, IEV
-0.94% Oil Fund PowerShares, DBO
-0.96% LargeCap Blend S&P 100, OEF
-0.96% LargeCap Value Russell 1000 iS, IWD
-0.97% WilderHill Clean Energy PS, PBW
-1.01% Water Resources, PHO
-1.02% Netherlands Index, EWN
-1.03% Brazil Index, EWZ
-1.03% South Korea Index, EWY
-1.04% Financials VIPERs, VFH
-1.05% DIAMONDS (DJIA), DIA
-1.05% United Kingdom Index, EWU
-1.05% Energy VIPERs, VDE
-1.06% Energy DJ, IYE
-1.06% South Africa Index, EZA
-1.06% Dividend International, PID
-1.09% Emerging VIPERs, VWO
-1.10% LargeCap Value S&P 500 iS, IVE
-1.12% REIT Wilshire, RWR
-1.13% Oil, Crude, U.S. Oil Fund, USO
-1.15% Turkey MSCI iS, TUR
-1.15% Emerging Markets MSCI iS, EEM
-1.18% Financial Services DJ, IYG
-1.20% Taiwan Index, EWT
-1.27% LargeCap Blend S&P=Weight R, RSP
-1.28% China 25 iS, FXI
-1.31% China LargeCap Growth G D H USX PS, PGJ
-1.35% Industrial SPDR, XLI
-1.37% Health Care SPDR, XLV
-1.40% Russia MV, RSX
-1.40% Malaysia Index, EWM
-1.43% Technology SPDR, XLK
-1.48% Utilities SPDR, XLU
-1.51% Metals & Mining SPDR, XME
-1.52% Energy SPDR, XLE
-1.52% Consumer Discretionary SPDR, XLY
-1.53% Homebuilders SPDR, XHB
-1.57% Semiconductor SPDR, XSD
-1.58% Mexico Index, EWW
-1.60% QQQ Nasdaq 100 Trust, QQQ
-1.61% S&P 500 SPDRs LargeCap Blend, SPY
-1.66% Value LargeCap Dynamic PS, PWV
-1.71% Emerging 50 BLDRS, ADRE
-1.75% Materials SPDR, XLB
-1.80% Financial SPDR, XLF
-1.87% Dividend SPDR, SDY
-1.95% Consumer Staples SPDR, XLP
-1.97% India Earnings WTree, EPI
-2.51% India PS, PIN
-2.58% Networking, IGN
-2.59% Capital Markets KWB ST, KCE
