The Dow Theory confirmed a Secondary Reaction on 6/20-6/21/13, when the Dow-Jones Transportation Average and the Dow-Jones Industrial Average both closed below their price lows of the previous 7 weeks. Previously, on 5/28/13, the Dow Theory warned of a non-confirmation bearish divergence when the Industrial Average rose to a higher high without confirmation by the Transportation Average, which made a lower high. A Secondary Reaction is often significant in extent and duration, possibly retracing a substantial fraction of the previous move over a period lasting several months.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) remains systematically neutral. MDY/SPY fell below its lows of the previous 6 months on 6/21/13–an obvious sign of weakness. MDY/SPY has been trending lower since peaking on 3/20/13.
NASDAQ 100/S&P 500 Relative Strength Ratio (QQQ/SPY) whipsawed back down below its 50-day SMA on 6/21/13, thereby turning systematically bearish again (from neutral).
U.S. stocks opened moderately higher on Friday but were not able to sustain any upside momentum all day. Stock price indexes closed mixed: the S&P 500 Composite Index (SPX: 1,592.43) rose 0.27% while the Nasdaq Composite fell 0.22%.
On Thursday 6/20/13, SPX closed at its lowest closing price in 7 weeks, since 5/1/13. On Friday 6/21/13, SPX closed below its 50-day SMA (now at 1,618.23) for the second time this year, and SPX closed at its largest percentage below its 50-day SMA since November, 2012.
The bullish majority had been taking encouragement from the SPX and other major stock price indexes holding support at or near their widely-followed 50-day SMAs, but now that support has been taken out.
The Cumulative Daily Advance-Decline Line on the NYSE also fell hard, again, breaking below its lows of the previous 8 weeks. The A-D Line fell below its 50-day SMA on Wednesday 6/19/2013.
NYSE Volume rose 14% from Wednesday’s level and was 75% above its own 200-day SMA, confirming substantial selling pressure. The Cumulative Up-Down Volume Line fell below its lows of the previous 8 weeks on 6/20/13, after it crossed below its 50-day SMA on Wednesday 6/19/2013.
The S&P 500 fell 4.85% from 5/21/13 to 6/20/13, based on closing prices–the largest down wave since last September-November. It also is the longest in time, lasting 21 trading days so far. The magnitude and duration of this price decline is probably telling us that this time is different from all previous minor price corrections since last November.
A wide variety of technical oscillators previously had given early warning after losing upside momentum and showing persistent bearish divergences over periods of weeks and months. Now, it seems quite apparent that there has been considerable technical damage to the previously bullish stock market trend. This damage probably signals a significant downside correction, or possibly worse. In any case, caution seems warranted.
Following a persistent trend, investors typically overestimate the market’s ability to continue in that same trend direction, while underestimating risks of trend reversal and the natural tendency of all markets to move both up and down, going from overbought to oversold, just as they always have.
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Stock Market Indicators
The Dow Theory confirmed a Secondary Reaction on 6/20-6/21/13, when the Dow-Jones Transportation Average and the Dow-Jones Industrial Average both closed below their price lows of the previous 7 weeks. Previously, on 5/28/13, the Dow Theory warned of a non-confirmation bearish divergence when the Industrial Average rose to a higher high without confirmation by the Transportation Average, which made a lower high. A Secondary Reaction is often significant in extent and duration, possibly retracing a substantial fraction of the previous move over a period lasting several months.
NASDAQ 100/S&P 500 Relative Strength Ratio (QQQ/SPY) whipsawed back down below its 50-day SMA on 6/21/13, thereby turning systematically bearish again (from neutral). Longer term, QQQ has underperformed SPY since 4/10/12, and so I previously warned “that Relative Strength downtrend will probably resume.”
iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF/SPY) fell below the lows of the previous 4 years on 6/20/13, again reconfirming its major downtrend. BKF/SPY turned systematically bearish on 3/27/13, when the 50-day SMA crossed below the 200-day SMA. BKF/SPY fell below its 50-day SMA on 2/4/13 and fell below its 200-day SMA on 2/19/13. Price peaked at 42.29 on 2/1/13 and fell to a 20-month low on 6/20/13.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) fell below the lows of the previous 4 years on 6/20/13, reconfirming its preexisting major downtrend. EEM/SPY turned systematically bearish on 3/20/13, when the 50-day SMA fell below the 200-day SMA. Price peaked at 45.34 on 1/2/13 and fell to a 19-month low on 6/20/13, confirming its bearish major trend.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) fell below the lows of the previous 10 months on 6/20/13. The EFA/SPY 50-day SMA fell below the 200-day SMA on 5/24/13, thereby turning systematically bearish (from neutral).
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEF/SPY) whipsawed back up above its 50-day SMA on 6/19/13, thereby turning systematically neutral again (from bearish). Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative stability and safety of large size. On the other hand, 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.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) whipsawed back up above its 50-day SMA on 5/28/13, thereby turning systematically bullish again (from neutral). Absolute price has stalled out since peaking on 5/22/13 and fell below its 50-day SMA on 6/20/13, thereby turning systematically neutral (from bullish).
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) remains systematically neutral. MDY/SPY fell below its lows of the previous 6 months on 6/21/13–an obvious sign of weakness. MDY/SPY has been trending lower since peaking on 3/20/13. Absolute price has stalled out since peaking on 5/22/13 and fell below its 50-day SMA on 6/20/13, thereby turning systematically neutral (from bullish).
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) price turned systematically neutral (from bullish) on 6/3/13, when it fell below the 50-day SMA. Longer term, UUP has been consolidating secular trend losses since bottoming at 20.84 on 5/4/11. Support 21.82, 21.53, 21.07, and 20.84. Resistance 22.96, 22.69, 23.14, 23.52, 25.84, 27.19, and 28.97.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price remains systematically bearish. Price has been trending down since peaking on 3/4/11.
Crude Oil, United States Oil ETF (USO) price has been consolidating losses in a choppy, sideways trend for 4 years, whipsawing around both the 50-day SMA and 200-day SMA. Support 32.53, 32.12, 30.79, 29.02, 26.28, and 22.74. Resistance 35.53, 37.17, 38.31, 40.29, 41.38, 42.30, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) price trend remains systematically bearish. Price fell below its lows of the previous 2 years on 6/20/13, thereby reconfirming its preexisting major bearish trend. GLD has been down trending since peaking at 185.85 on 9/6/11. Support: 113.08 and 102.28. Resistance: 137.62, 143.43, 149.44, 153.85, 156.80, 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) has stayed systematically bearish most of the time since 12/27/12, when the 50-day SMA crossed below the 200-day SMA. Longer term, GDX/GLD has remained mostly bearish for more than 6 years, since 9/5/06.
Silver, iShares Silver Trust ETF (SLV) price trend remains systematically bearish. Price fell below its lows of the previous 2 years on 6/20/13, again reconfirming its preexisting major bearish trend. The trend has been bearish since price peaked at 48.35 on 4/28/11. Support 16.73, 14.37, 12.27, 11.64, and 8.45. Resistance: 22.65, 23.70, 25.34, 27.14, 27.35, 28.50, 28.61, 29.73, 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) fell below its lows of the previous 2 years on 6/20/13, again reconfirming its major downtrend. SLV/GLD remains systematically bearish. SLV has underperformed GLD since SLV price peaked at 48.35 on 4/28/11.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) fell below its lows of the previous 2 years on 6/20/13, again reconfirming its major downtrend. The JJC price trend has been bearish since price peaked at 61.69 on 2/14/11. “Dr. Copper” is widely accepted as one of the better indicators of investor confidence (or lack thereof) in the global industrial economy, so price weakness in Copper implies a weak economic outlook.
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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
1.07% , VPU , Utilities VIPERs, VPU
3.59% , PIN , India PS, PIN
1.70% , PCG , PG&E
1.59% , FRX , FOREST LABS STK A
1.72% , CVG , CONVERGYS
3.44% , EQR , EQUITY RESIDENT BEN INT
2.13% , PLD , PROLOGIS TRUST
3.47% , IDX , Indonesia MV, IDX
1.59% , PETM , PETsMART Inc
1.14% , VZ , VERIZON COMMS
2.08% , AMGN , AMGEN
1.62% , HSY , HERSHEY FOODS
2.06% , MKC , MCCORMICK
2.62% , BF.B , BROWN FORMAN STK B
3.14% , DISH , EchoStar Communications
2.73% , BAX , BAXTER INTL
1.95% , WAT , WATERS
0.59% , ININ , Interactive Intelligence ININ
3.05% , NIHD , NII Holdings, Inc.
1.42% , GPS , GAP
2.21% , SNV , SYNOVUS
4.46% , THD , Thailand MSCI iS, THD
2.65% , ETR , ENTERGY
2.21% , CMCSA , COMCAST HOLDINGS STK A
0.78% , SRCL , Stericycle, SRCL
1.11% , ESRX , EXPRESS SCRIPTS
0.68% , BBBY , BED BATH BEYOND
1.47% , ADM , ARCHER DANIELS
1.10% , ADI.O , ANALOG DEVICES
0.62% , IXC , Energy Global, IXC
2.90% , PG , PROCTER & GAMBLE
0.29% , EFV , Value EAFE MSCI, EFV
1.59% , AET , AETNA
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Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-9.26% , ORCL , ORACLE
-4.52% , TLAB , TELLABS
-3.68% , AGN , ALLERGAN
-5.80% , WHR , WHIRLPOOL
-3.98% , ROK , ROCKWELL AUTOMAT
-3.64% , SIRI , Sirius Satellite
-2.93% , ODP , OFFICE DEPOT
-1.86% , RSH , RADIOSHACK
-2.25% , CPWR , COMPUWARE
-2.17% , DRI , DARDEN REST
-4.52% , LPX , LOUISIANA PAC
-3.26% , OMX , OFFICEMAX INC., OMX
-2.97% , FEZ , Euro STOXX 50, FEZ
-2.88% , HOG , HARLEY DAVIDSON
-4.13% , FNP , Fifth & Pacific Cos., FNP
-2.62% , VMC , VULCAN MATERIALS
-1.34% , EWL , Switzerland Index, EWL
-0.21% , QLGC , QLOGIC
-2.85% , MAS , MASCO
-1.14% , CHRW.O , CH Robinson Worldwide Inc, CHRWD
-2.32% , MTG , MGIC INVESTMENT
-0.62% , EIS , Israel MSCI iS, EIS
-4.13% , MPEL , Melco Crown Entertainment, MPEL
-2.48% , APOL , APOLLO GROUP
-4.20% , TDC , Teradata Corporation, TDC
-2.09% , CTXS , CITRIX SYSTEMS
-1.10% , EZU , EMU Europe Index, EZU
-1.14% , EWI , Italy Index, EWI
-1.49% , IP , INTL PAPER
-2.15% , C , CITIGROUP
-1.03% , WOR , WORTHINGTON INDS
-2.53% , FII , FED INVESTORS STK B
-1.59% , SHW , SHERWIN WILLIAMS
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
4.46% , Thailand MSCI iS, THD
3.63% , Japan Index, EWJ
3.59% , India PS, PIN
3.47% , Indonesia MV, IDX
3.32% , India Earnings WTree, EPI
3.25% , South Africa Index, EZA
2.59% , Russia MV, RSX
2.54% , Pacific VIPERs, VPL
2.38% , Turkey MSCI iS, TUR
2.29% , Singapore Index, EWS
2.24% , Silver Trust iS, SLV
2.13% , Malaysia Index, EWM
1.95% , Chile MSCI iS, ECH
1.83% , Realty Cohen & Steers, ICF
1.77% , Emerging VIPERs, VWO
1.75% , Mexico Index, EWW
1.65% , China 25 iS, FXI
1.44% , Emerging Markets MSCI iS, EEM
1.35% , REIT VIPERs, VNQ
1.26% , Pacific ex-Japan, EPP
1.18% , Real Estate US DJ iS, IYR
1.17% , Gold Shares S.T., GLD
1.07% , Utilities VIPERs, VPU
0.93% , Australia Index, EWA
0.87% , Dividend High Yield Equity PS, PEY
0.86% , Biotech SPDR, XBI
0.86% , Dividend U.S. DJ iS, DVY
0.76% , SmallCap Blend EAFE MSCI iS, SCZ
0.73% , Latin Am 40, ILF
0.67% , Financial DJ US, IYF
0.66% , Consumer Staples SPDR, XLP
0.63% , Taiwan Index, EWT
0.62% , Energy Global, IXC
0.57% , REIT Wilshire, RWR
0.52% , Health Care SPDR, XLV
0.49% , Global ex U.S. LargeCap Blend, ACWX
0.49% , Growth EAFE MSCI, EFG
0.45% , LargeCap Value Russell 1000 iS, IWD
0.43% , Semiconductor iS IGW, SOXX
0.41% , LargeCap Value S&P 500 iS, IVE
0.41% , Dividend Appreciation Vipers, VIG
0.40% , SmallCap Value S&P 600 iS, IJS
0.40% , Telecom DJ US, IYZ
0.39% , Value VIPERs, VTV
0.39% , SmallCap Blend S&P 600 iS, IJR
0.38% , Energy DJ, IYE
0.36% , SmallCap Value Russell 2000 iS, IWN
0.33% , Foreign LargeCap EAFE MSCI iS, EFA
0.32% , LargeCap Blend S&P 100, OEF
0.32% , Agriculture DB PS, DBA
0.31% , LargeCap Blend S&P 500 iS, IVV
0.30% , SmallCap Growth S&P 600 iS, IJT
0.30% , LargeCap VIPERs, VV
0.30% , Global LargeCap Blend MSCI iS, ACWI
0.30% , SmallCap Blend Russell 2000 iS, IWM
0.29% , LargeCap Growth S&P 500 iS, IVW
0.29% , Value EAFE MSCI, EFV
0.27% , Utilities SPDR, XLU
0.27% , SmallCap Growth Russell 2000 iS, IWO
0.26% , Global 100, IOO
0.26% , Microcap Russell, IWC
0.26% , Blend Total Market VIPERs, VTI
0.25% , Semiconductor SPDR, XSD
0.21% , LargeCap Blend Russell 3000 iS, IWV
0.16% , Hong Kong Index, EWH
0.15% , LargeCap Blend Russell 1000 iS, IWB
0.14% , Energy VIPERs, VDE
0.10% , Energy & Nat Res iS GS, IGE
0.10% , Financials VIPERs, VFH
0.10% , DIAMONDS (DJIA), DIA
0.09% , Value MidCap Russell, IWS
0.07% , MidCap Russell, IWR
0.06% , LargeCap Growth Russell 1000 iS, IWF
0.05% , Growth SmallCap VIPERs, VBK
0.05% , China LargeCap Growth G D H USX PS, PGJ
0.00% , Growth VIPERs, VUG
0.00% , Frontier Markets Guggenheim , FRN
0.00% , Brazil Index, EWZ
0.00% , Bond Treasury Short-Term iS, SHV
-0.04% , Small Cap VIPERs, VB
-0.05% , Value SmallCap VIPERS, VBR
-0.08% , Dividend SPDR, SDY
-0.09% , Bond, 1-3 Year Treasury, SHY
-0.09% , MidCap Value S&P 400 iS, IJJ
-0.10% , South Korea Index, EWY
-0.12% , Consumer Discretionary SPDR, XLY
-0.13% , Basic Materials DJ US, IYM
-0.15% , Dividend ex-U.S. DJ iS, IDV
-0.16% , Growth MidCap Russell, IWP
-0.17% , Financial Services DJ, IYG
-0.17% , Financial Preferred, PGF
-0.18% , Preferred Stock iS, PFF
-0.21% , S&P 500 SPDRs LargeCap Blend, SPY
-0.21% , LargeCap Blend S&P=Weight R, RSP
-0.28% , United Kingdom Index, EWU
-0.31% , Energy SPDR, XLE
-0.31% , Financial SPDR, XLF
-0.32% , Water Resources, PHO
-0.33% , Bear, Short S&P 500, SH
-0.34% , Networking, IGN
-0.36% , Belgium Index, EWK
-0.37% , MidCap Blend S&P 400 iS, IJH
-0.40% , Canada Index, EWC
-0.41% , MidCap S&P 400 SPDRs, MDY
-0.45% , Industrial SPDR, XLI
-0.48% , Emerging 50 BLDRS, ADRE
-0.48% , MidCap Growth S&P 400 iS, IJK
-0.56% , Bond, Intermediate US Aggregate iS, AGG
-0.56% , Info Tech VIPERs, VGT
-0.57% , Technology DJ US, IYW
-0.60% , Transportation Av DJ, IYT
-0.61% , Value LargeCap Dynamic PS, PWV
-0.63% , Commodity Tracking, DBC
-0.65% , Bond, High Yield Corp iBoxx iS, HYG
-0.78% , WilderHill Clean Energy PS, PBW
-0.79% , Metals & Mining SPDR, XME
-0.79% , France Index, EWQ
-0.82% , Bond, Long-Term Corp iBoxx iS, LQD
-0.84% , QQQ Nasdaq 100 Trust, QQQ
-0.87% , European VIPERs, VGK
-0.87% , Bond, High-Yield Junk, JNK
-0.90% , Netherlands Index, EWN
-0.90% , Europe 350 S&P Index, IEV
-0.98% , Austria Index, EWO
-1.06% , Bond, 10 Year Treasury, IEF
-1.09% , Bond Ex-US Treas, BWX
-1.10% , EMU Europe Index, EZU
-1.10% , Technology SPDR, XLK
-1.11% , Materials SPDR, XLB
-1.14% , Italy Index, EWI
-1.15% , Capital Markets KWB ST, KCE
-1.17% , Bond, TIPS U.S. Treasury iS, TIP
-1.19% , Oil, Crude, U.S. Oil Fund, USO
-1.20% , Dividend International, PID
-1.34% , Switzerland Index, EWL
-1.35% , Spain Index, EWP
-1.43% , Oil Fund PowerShares, DBO
-1.46% , Germany Index, EWG
-1.57% , Sweden Index, EWD
-1.62% , Bond, Emerging Mkt JPM iS, EMB
-1.69% , Homebuilders SPDR, XHB
-1.69% , Bond, 20+ Years Treasury, TLT
-1.72% , Bond, Muni S&P ATM-Free iS, MUB
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The S&P 500 Composite Potential Resistance
1687.18, high of 5/22/2013
1674.21, high of 5/28/2013
1654.19, high of 6/18/2013
1618.23, 50-day SMA
1606.04, Fib 23.6% of Nov-May 2013
The S&P 500 Composite Potential Support
1556.24, Equal Waves Projection
1555.84, Fib 38.2% of Nov-May 2013
1536.03, low of 4/18/2013
1530.94, high of 2/19/2013
1515.27, Fib 50% of Nov-May 2013
1506.06, 200-day SMA
1485.01, low of 2/26/2013
1474.69, Fib 61.8% of Nov-May 2013
1474.51, high of 9/14/2012
1468.82, Fib 78.6% of 2009-13 range
1451.64, low on 1/8/2013
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
1426.76, low of 12/12/2012
1425.53, low of 10/12/2012
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
1416.93, Fib 79.6% of Nov-May 2013
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
1396.56, low of 9/4/2012
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
1370.58, high of 5/2/2011
1363.49, high of 6/19/2012
1357.38, low of 4/10/2012
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
1306.62, low of 6/12/2012
1297.39, Fib 61.8% of 2009-13 range
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
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
1176.99, Fib 50% of 2009-13 range
1158.66, low of 11/25/2011
1121.44, Fibonacci 50% of 2007-2009 range
1056.58, Fib 38.2% of 2009-13 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
907.60, Fib 23.6% of 2009-13 range
881.38, Fibonacci 23.6% of 2007-2009 range
869.32, low of 7/8/2009
666.79, intraday low of 3/6/2009
