Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) turned systematically neutral on 1/23/13, when it fell below its 50-day SMA.
The S&P 500 (SPX: 1,500.18) fell 2.78 points or 0.18% on Monday. NYSE trading volume fell 5%.
Nasdaq Composite (3,154.30) gained 0.15%, thanks to a bounce in Apple (AAPL 449.83, +9.95), which had fallen 38.30% from 705.07 to 435.00 from 9/24/12 to 1/25/13.
Dealbook.nytimes.com reports: SMALL INVESTORS WARM TO STOCKS After fleeing equities after the financial crisis, individual investors are now pouring money into stock mutual funds and pushing the market close to its highest nominal level ever. On Friday, the S.& P. 500 broke 1,500 to finish at 1,502.96. The optimism of the last few weeks – fueled by a sense that crises are dissipating – is a significant change from recent years. But some market experts warn that the current rally may be driven by an investing public that fears missing out, The New York Times’ Nathaniel Popper writes. “Americans’ latest stock-market romance is young, and it could easily fade before it becomes something more serious. Some market watchers warn that given the big run-up in prices, the market is already ripe for at least a brief correction.”
The Art of Contrary Thinking calls for questioning high and rising optimism. Investor sentiment data indicated high degrees of optimism and bullish complacency in recent weeks, matching or exceeding extremes in September, 2012, when many stock price indexes hit peaks and reversed to the downside. 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 the market mood always reverts to the mean–eventually. Pinpoint accuracy is not guaranteed.
Our clients’ separately managed accounts made gains in 6 of the past 7 consecutive quarters; see:
Robert W. Colby Asset Management, Inc. (click here).
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NASDAQ 100/S&P 500 Relative Strength Ratio (QQQ/SPY) turned systematically bearish again on 1/3/13, when it whipsawed back down below its 50-day SMA.
iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF/SPY) turned systematically neutral on 1/28/13, when it fell below its 50-day SMA.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) turned systematically neutral on 1/23/13, when it fell below its 50-day SMA.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) turned systematically bullish again on 1/24/13, when it whipsawed back above its 50-day SMA.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEF/SPY) turned systematically bearish on 12/17/12, when the 50-day SMA fell below the 200-day SMA. Large Caps tend to underperform Mid Caps and Small Caps in bullish general market trends as investors seek greater potential returns in more volatile, smaller stocks. On the other hand, Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative stability and safety of large size.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) 50-day SMA rose above the 200-day SMA on 1/8/13, thereby turning systematically bullish.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) turned systematically bullish on 12/14/12, when the 50-day SMA crossed above the 200-day SMA.
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Sentiment for Contrary Thinking
Investor sentiment data indicates high degrees of optimism and bullish complacency, matching extremes in September, 2012, when many stock price indexes hit a peak and reversed to the downside. 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 the market mood always reverts to the mean.
The CFTC’s Commitments of Traders report for stock indexes showed smart professionals selling heavily to dumb speculators. Large commercial hedging firms enjoy an enormous inside informational advantage over speculators, who are usually wrong at major market turning points, according to Steve Briese, bullishreview.com. The current maximum bearish reading indicates that a major top is brewing and next move should be down big, possibly to SPX 1074.77, the low of 10/4/2011.
Large speculators held a record net-long position in futures and options contracts on the NASDAQ 100, according to the CFTC’s Commitment of Traders report. Large Speculators, which are mainly hedge funds, are trend-followers, and their aggregate position usually becomes extreme near market reversals.
Small traders just moved to their largest net-long position since the stock market highs in May, 2011, according to The Elliott Wave Financial Forecast.
Commercials hold their largest net-short position in 3.5 years, according to The Elliott Wave Financial Forecast.
SentimentTrader.com noted that 67% of the “dumb money” was bullish, compared to 29% of the “smart money”. At such readings in the past, the stock market suffered a 3% to 8% downside correction spread out over a few weeks.
Put/Call Ratios signal a bearish turning point. The CBOE Equity Put/Call Ratio (which includes only options traded on individual stocks, while excluding options on indexes) fell to 53 on 1/3/13. This matched the 53 reading at the S&P 500 peak on 9/14/12, which was immediately followed by a 9% downside shakeout.
Market Vane’s Bullish Consensus survey shows extreme optimism. The percentage of stock market bulls surged to 70% recently, the highest since June 2007.
AAII Sentiment shows that individual investors are extremely bullish. As of 1/24/13, there were 52.34% bulls, 23.39% neutral, and 24.27% bears. This is the highest percentage of bulls in more than 2 years, since 1/13/11.
Investors Intelligence Sentiment confirms that stock market newsletter advisors are extremely bullish. With 53.2% Bulls versus only 22.3% Bears, advisors are more bullish than they were at the stock market top in September, 2012, just before a 9% downside correction into November.
Hulbert Nasdaq Sentiment is at extremes. The current reading of 81.3 as of 1/24/13 is at its highest levels in years and is up a low of -39 in November, 2012.
Corporate insiders are extremely bearish. Insiders sold 6.67 shares for each share bought in December 2012–up from 1.54-to-1 in November 2012, and up from a 20-year average of 3.41-to-1. This data is compiled by Vickers Weekly Insider Report, published by Argus Research. Reporting for MarketWatch.com, Mark Hulbert wrote, “The picture the data paint is unmistakably bearish.”
NYSE Margin Debt rose to $318 billion, the highest level since March 2011, a few weeks before the highest price for the S&P 500 for the year 2011. Stocks may be vulnerable to forced selling if stock prices turn down.
Short interest in stocks listed on NYSE and Nasdaq both fell 5%, to 12.9 billion and 7.2 billion, respectively, in December. A decline in short interest means less potential demand for stocks from short covering.
VIX Fear Index collapsed to 12.29 on 1/18/13, its lowest level in 5 years, indicating a remarkable level of bullish complacency. 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.
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
1503.26, high of 1/28/13
The S&P 500 Composite Potential Support
1498.85, high of 12/26/2007
1489.46, low of 1/24/13
1474.51, high of 9/14/2012
1463.76, low of 1/15/13
1451.64, low on 1/8/13
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
1434.34, 50-day SMA
1434.27, high of 11/2/2012
1432.82, low of 12/20/2012
1430.53, low of 9/26/2012
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
1409.16, high of 11/23/2012
1403.28, low of 10/26/12
1401.58, low of 12/28/12
1398.11, low of 12/31/2012
1397.68, low of 11/26/2012
1397.12, 200-day SMA
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
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 1/10/13 when it whipsawed back down below its 50-day SMA and a 6-months long downtrend line. 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 turned systematically bearish on 1/11/13 when the 50-day SMA crossed down below the 200-day SMA.
Crude Oil, United States Oil ETF (USO) price turned systematically neutral on 12/26/12, when price rose above its 50-day SMA. The 50-day SMA has remained below its 200-day SMA consistently every day since 6/7/12. Support 34.38, 33.57, 31.00, 29.02, 26.28, and 22.74. Resistance 35.09, 37.17, 38.31, 40.29, 41.38, 42.30, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) price turned systematically neutral on 11/27/12, when it fell below its 50-day SMA. Support: 158.39, 157.40, 154.83, 148.27, 147.19, 143.97, 143.42, and 142.55. Resistance: 164.40, 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 bearish on 12/27/12, when the 50-day SMA crossed below the 200-day SMA.
Silver, iShares Silver Trust ETF (SLV) price turned systematically neutral again on 1/24/13, when it whipsawed back down below its 50-day SMA. Support 28.61, 27.97, 26.87, 26.13, 25.34, 25.00, 24.44, 22.52, 20.73, and 19.44. Resistance: 31.41, 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) turned systematically neutral again on 1/25/13, when it whipsawed back down below its 50-day SMA.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) has been consolidating losses in Triangle Consolidation 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
21.97% , RSH , RADIOSHACK
6.08% , HES , AMERADA HESS
0.40% , IYW , Technology DJ US, IYW
2.16% , WM , WASTE MANAGEMENT
3.66% , SVU , SUPERVALU
3.08% , SPLS , STAPLES
4.98% , DLX , DELUXE
5.51% , NIHD , NII Holdings, Inc.
2.59% , BIIB , BIOGEN IDEC
3.13% , BIDU , Baidu, Inc., BIDU
2.48% , RIG , TRANSOCEAN
1.89% , LH , LAB CRP OF AMER
3.78% , XRX , XEROX
1.96% , CAT , CATERPILLAR
1.34% , LM , LEGG MASON
1.22% , TE , TECO ENERGY
1.63% , AIG , AMER INTL GROUP
1.29% , NWSA , News Corporation, NWSA
2.60% , AMGN , AMGEN
0.63% , FPX , IPOs, First Tr IPOX-100, FPX
0.76% , DBA , Agriculture DB PS, DBA
0.48% , CHRW.O , CH Robinson Worldwide Inc, CHRWD
1.37% , MAR , MARRIOTT INTL STK A
0.24% , IYZ , Telecom DJ US, IYZ
1.86% , HOT , STARWOOD HOTELS
1.86% , VLO , VALERO ENERGY
1.08% , WAG , WALGREEN
1.77% , BBY , BEST BUY
1.14% , BEN , FRANKLIN RSC
0.43% , NTRS , NORTHERN TRUST
0.69% , ITW , ILLINOIS TOOL
0.59% , PEY , Dividend High Yield Equity PS, PEY
0.94% , GE , GENERAL ELECTRIC
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-4.17% , FLEX , Flextronics International Ltd
-0.89% , TLH , Bond 10-20 Year US Treas, TLH
-2.65% , YUM , YUM BRANDS
-1.75% , WY , WEYERHAEUSER
-1.64% , SEE , SEALED AIR
-1.37% , TLT , Bond, 20+ Years Treasury, TLT
-5.57% , MTG , MGIC INVESTMENT
-0.69% , EPU , Peru MSCI iS, EPU
-1.98% , EWY , South Korea Index, EWY
-1.44% , PCL , PLUM CREEK TIMB
-1.06% , CAT , CATERPILLAR
-0.77% , LVLT.K , LEVEL 3 COMMUNICATIONS
-0.43% , EMB , Bond EmrgMkt JPM iS, EMB
-1.48% , NEM , NEWMONT MINING
-0.42% , LXK , LEXMARK INTL STK A
-0.20% , CMS , CMS ENERGY
-1.15% , QCOM , QUALCOMM
-1.46% , TUR , Turkey MSCI iS, TUR
-1.44% , SLV , Silver Trust iS, SLV
-0.54% , COL , ROCKWELL COLLINS
-0.95% , COF , CAPITAL ONE FNCL
-0.59% , R , RYDER SYSTEM
-0.38% , CVS , CVS
-0.34% , EEM , Emerging Markets, EEM
-0.37% , KMB , KIMBERLY CLARK
-0.77% , TAP , ADOLPH COORS STK B, TAP
-0.24% , ECH , Chile MSCI iS, ECH
-0.17% , EWW , Mexico Index, EWW
-0.52% , VMC , VULCAN MATERIALS
-0.20% , XME , Metals & Mining SPDR, XME
-0.49% , IAU , Gold COMEX iS, IAU
-0.97% , RHI , ROBERT HALF
-0.03% , LLL , L-3 COMMS HLDGS
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
0.83% Sweden Index, EWD
0.76% Microcap Russell, IWC
0.76% Agriculture DB PS, DBA
0.63% Semiconductor SPDR, XSD
0.59% Dividend High Yield Equity PS, PEY
0.50% Thailand MSCI iS, THD
0.46% Oil, Crude, U.S. Oil Fund, USO
0.44% Oil Fund PowerShares, DBO
0.42% Netherlands Index, EWN
0.40% Technology DJ US, IYW
0.36% SmallCap Value Russell 2000 iS, IWN
0.34% Belgium Index, EWK
0.34% Technology SPDR, XLK
0.34% Info Tech VIPERs, VGT
0.27% Italy Index, EWI
0.27% Value SmallCap VIPERS, VBR
0.26% REIT VIPERs, VNQ
0.25% Semiconductor iS IGW, SOXX
0.24% Telecom DJ US, IYZ
0.22% QQQ Nasdaq 100 Trust, QQQ
0.18% REIT Wilshire, RWR
0.16% Realty Cohen & Steers, ICF
0.14% Bear, Short S&P 500, SH
0.10% Real Estate US DJ iS, IYR
0.10% China LargeCap Growth G D H USX PS, PGJ
0.09% SmallCap Value S&P 600 iS, IJS
0.08% Consumer Staples SPDR, XLP
0.08% Transportation Av DJ, IYT
0.07% Industrial SPDR, XLI
0.07% Canada Index, EWC
0.07% SmallCap Blend Russell 2000 iS, IWM
0.04% MidCap Value S&P 400 iS, IJJ
0.04% Switzerland Index, EWL
0.03% Small Cap VIPERs, VB
0.03% Dividend U.S. DJ iS, DVY
0.02% Bond, High-Yield Junk, JNK
0.02% DIAMONDS (DJIA), DIA
0.00% LargeCap Blend S&P 500 iS, IVV
0.00% Capital Markets KWB ST, KCE
0.00% Bond Treasury Short-Term iS, SHV
0.00% Austria Index, EWO
-0.03% Networking, IGN
-0.04% Bond, 1-3 Year Treasury, SHY
-0.04% Commodity Tracking, DBC
-0.04% LargeCap Value S&P 500 iS, IVE
-0.05% Bond, High Yield Corp iBoxx iS, HYG
-0.06% Utilities SPDR, XLU
-0.06% SmallCap Blend S&P 600 iS, IJR
-0.06% Russia MV, RSX
-0.07% Singapore Index, EWS
-0.08% LargeCap Blend Russell 3000 iS, IWV
-0.08% Bond, Long-Term Corp iBoxx iS, LQD
-0.09% EMU Europe Index, EZU
-0.09% Dividend ex-U.S. DJ iS, IDV
-0.09% LargeCap Growth Russell 1000 iS, IWF
-0.09% Blend Total Market VIPERs, VTI
-0.09% Dividend Appreciation Vipers, VIG
-0.11% LargeCap Growth S&P 500 iS, IVW
-0.11% Utilities VIPERs, VPU
-0.12% SmallCap Growth Russell 2000 iS, IWO
-0.12% MidCap Blend S&P 400 iS, IJH
-0.12% S&P 500 SPDRs LargeCap Blend, SPY
-0.12% Growth VIPERs, VUG
-0.13% Value LargeCap Dynamic PS, PWV
-0.13% Bond, TIPS U.S. Treasury iS, TIP
-0.14% Chile MSCI iS, ECH
-0.14% Value VIPERs, VTV
-0.14% Bond, Intermediate US Aggregate iS, AGG
-0.15% LargeCap VIPERs, VV
-0.15% Dividend SPDR, SDY
-0.15% MidCap S&P 400 SPDRs, MDY
-0.16% LargeCap Blend Russell 1000 iS, IWB
-0.16% France Index, EWQ
-0.16% Global 100, IOO
-0.17% Value MidCap Russell, IWS
-0.17% Energy SPDR, XLE
-0.18% LargeCap Blend S&P 100, OEF
-0.18% Water Resources, PHO
-0.18% LargeCap Value Russell 1000 iS, IWD
-0.18% Europe 350 S&P Index, IEV
-0.19% Australia Index, EWA
-0.20% Preferred Stock iS, PFF
-0.20% Energy & Nat Res iS GS, IGE
-0.21% Bond, 10 Year Treasury, IEF
-0.22% Financial Preferred, PGF
-0.22% Gold Shares S.T., GLD
-0.23% LargeCap Blend S&P=Weight R, RSP
-0.23% Mexico Index, EWW
-0.24% MidCap Growth S&P 400 iS, IJK
-0.24% Dividend International, PID
-0.25% Growth SmallCap VIPERs, VBK
-0.26% MidCap Russell, IWR
-0.28% Energy Global, IXC
-0.28% Financial DJ US, IYF
-0.28% Brazil Index, EWZ
-0.29% Energy VIPERs, VDE
-0.29% Energy DJ, IYE
-0.31% Pacific ex-Japan, EPP
-0.32% Bond, Emerg Mkt JPM iS, EMB
-0.33% Value EAFE MSCI, EFV
-0.34% Global LargeCap Blend MSCI iS, ACWI
-0.34% China 25 iS, FXI
-0.35% Health Care SPDR, XLV
-0.36% Growth MidCap Russell, IWP
-0.36% Bond, 20+ Years Treasury, TLT
-0.37% SmallCap Growth S&P 600 iS, IJT
-0.38% Taiwan Index, EWT
-0.39% Financials VIPERs, VFH
-0.39% European VIPERs, VGK
-0.40% Financial SPDR, XLF
-0.43% Bond, Muni S&P ATM-Free iS, MUB
-0.45% Bond Ex-US Treas, BWX
-0.47% Germany Index, EWG
-0.47% Consumer Discretionary SPDR, XLY
-0.49% Foreign LargeCap EAFE MSCI iS, EFA
-0.50% Financial Services DJ, IYG
-0.52% Indonesia MV, IDX
-0.54% Biotech SPDR, XBI
-0.59% Hong Kong Index, EWH
-0.60% United Kingdom Index, EWU
-0.60% Growth EAFE MSCI, EFG
-0.63% Global ex U.S. LargeCap Blend, ACWX
-0.63% Emerging 50 BLDRS, ADRE
-0.65% India Earnings WTree, EPI
-0.66% SmallCap Blend EAFE MSCI iS, SCZ
-0.67% Spain Index, EWP
-0.68% WilderHill Clean Energy PS, PBW
-0.70% Emerging Markets MSCI iS, EEM
-0.74% Emerging VIPERs, VWO
-0.83% Frontier Markets Guggenheim , FRN
-0.94% Latin Am 40, ILF
-0.96% Materials SPDR, XLB
-0.99% Pacific VIPERs, VPL
-1.03% Homebuilders SPDR, XHB
-1.06% Basic Materials DJ US, IYM
-1.10% South Korea Index, EWY
-1.19% Silver Trust iS, SLV
-1.36% Malaysia Index, EWM
-1.38% India PS, PIN
-1.52% Japan Index, EWJ
-1.70% Metals & Mining SPDR, XME
-2.01% South Africa Index, EZA
-4.00% Turkey MSCI iS, TUR
