Further downside testing may be possible as the market tries to find a bottom. Oversold oscillators and sentiment suggest a good chance. Stocks could find an area of bargain hunting demand around the lows of the year.
Consumer Discretionary Stock Sector Relative Strength Ratio (XLY/SPY) rose above 3-week highs on 5/24/10 and remains bullish. Absolute price of XLY remains above its 200-day SMA and remains neutral.
Industrial (XLI) Stock Sector Relative Strength Ratio (XLI/SPY) crossed slightly below its 50-day SMA on 5/24/10 and so turned neutral, strictly speaking. The major long-term trend still looks bullish.
Energy (XLE) Stock Sector Relative Strength Ratio (XLE/SPY) fell below 7-week lows on 5/24/10 and remains bearish.
NASDAQ Composite/S&P 500 Relative Strength Ratio whipsawed back above its 50-day simple moving average on 5/24/10 thereby turning bullish again. At the same time, absolute price of the NASDAQ whipsawed back below its 200-day SMA on 5/24/10. Its better when Relative Strength and price trends agree.
Growth Stock/Value Stock Relative Strength Ratio (IWF/IWD) rose above 2-month highs on 5/24/10 and, although it is gaining strength, it remains neutral. Absolute price of IWF also remains neutral.
Sentiment is bearish. This is a major change from last month. On 4/26/10, I wrote: “Investors Intelligence survey of stock market newsletter advisors, Call/Put Volume Ratios, and implied option volatility have shown bullish complacency in recent weeks. Excessive bullish sentiment sometimes precedes a shakeout to the downside.” We got that shakeout. And now it may be over—or the worst of it, at least.
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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 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
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
8.62% , S , SPRINT NEXTEL
1.23% , CTL , CENTURYTEL
3.18% , KSU , Kansas City Southern, KSU
0.71% , PUI , Utilities, PUI
1.59% , PTV , PACTIV
0.03% , IIH , Internet Infrastructure H, IIH
0.10% , GVI , Bond Interm U.S. Gov, GVI
1.29% , IPG , INTERPUBLIC GRP
0.43% , PWO , OTC Dynamic PS, PWO
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-9.82% , DYN , DYNEGY
-2.16% , PSTL , Steel Global PS ETF, PSTL
-8.91% , RIG , TRANSOCEAN
-0.90% , JKK , Growth SmallCap iS M, JKK
-1.49% , IJR , SmallCap S&P 600, IJR
-1.17% , JKI , Value MidCap iS M, JKI
-2.10% , EWL , Switzerland Index, EWL
-1.39% , OEF , LargeCap Blend S&P 100, OEF
-2.37% , TIN , TEMPLE INLAND
-0.67% , RFG , Growth MidCap S&P 400, RFG
-2.51% , CBS , CBS CORP.
-2.66% , AVP , AVON
-7.48% , JNS , JANUS CAPITAL
-2.93% , XRX , XEROX
-2.63% , PETM , PETsMART Inc
-1.88% , GENZ , GENZYME
-1.29% , CHKP , Check Point Software Technologies Ltd
-1.71% , IYM , Basic Materials DJ US, IYM
-0.66% , IGM , Technology GS, IGM
-1.13% , SNPS , Synopsys Inc
-1.95% , TUP , TUPPERWARE
-0.57% , PFM , Dividend Achievers PS, PFM
-1.48% , RFV , Value MidCap S&P 400, RFV
-0.62% , ECH , Chile MSCI iS, ECH
-1.12% , JKJ , SmallCap Core iS M, JKJ
-0.99% , ELG , Growth Large Cap, ELG
-0.50% , ERIC.O , LM Ericsson Telephone Company
-1.64% , OMC , OMNICOM
-0.78% , DGX , QUEST DIAG
-0.06% , AGG , Bond, Aggregate, AGG
-0.16% , EIX , EDISON INTL
-2.44% , IYF , Financial DJ US, IYF
-0.96% , GNW , GENWORTH FINANCIAL
-0.08% , TLH , Bond 10-20 Year US Treas, TLH
9 major U.S. stock sectors ranked in order of long-term relative strength:
Consumer Discretionary (XLY) Bullish, Overweight. The Relative Strength Ratio (XLY/SPY) rose above 3-week highs on 5/24/10 and remains bullish. Absolute price of XLY remains above its 200-day SMA and remains neutral. Support 30.34. Resistance 34.39, 36.13, 38.25 and 39.09.
Industrial (XLI) Bullish, Overweight. The Relative Strength Ratio (XLI/SPY) crossed slightly below its 50-day SMA on 5/24/10 and so turned neutral, strictly speaking. Absolute price of XLI fell below its 50-day SMA on 5/14/10 and remains neutral. Support 28.39 and 28.15. Resistance 32.41, 33.46, 34.24, 34.50, and 35.00.
Consumer Staples (XLP) Neutral, Market Weight. The Relative Strength Ratio (XLP/SPY) rose to a 7-month high on 5/20/10 and remains neutral. Absolute price of XLP fell below its 200-day SMA on 5/20/10 and remains neutral. Support 26.09 and 24.95. Resistance 27.83, 27.95, 28.20, 28.75, 29.29 and 30.29.
Technology (XLK) Neutral, Market Weight. The Relative Strength Ratio (XLK/SPY) has been chopping sideways and remains neutral. Absolute price fell below its 200-day SMA on 5/20/10 and remains neutral. Support 20.86 and 20.64. Resistance 23.27, 24.16, 24.68, and 25.69.
Financial (XLF) Neutral, Market Weight. The Relative Strength Ratio (XLF/SPY) fell further below its 2-month lows 5/20/10 and remains neutral. Absolute price of XLF fell below its 2-month lows 5/20/10 and remains neutral. Support 13.95 and 13.51. Resistance 15.67, 16.13, 16.90, 17.12, 17.16, and 17.87.
Health Care (XLV) Neutral, Market Weight. The Relative Strength Ratio (XLV/SPY) fell below 18-month lows on 4/26/10 and remains bearish. Absolute price of XLV fell below its 200-day SMA on 5/14/10 and remains neutral. Support 28.25 and 27.96. Resistance 30.83, 32.05, 32.18, 32.42, 32.69, 33.16, 33.37 and 33.74.
Utilities (XLU) Neutral, Market Weight. The Relative Strength Ratio (XLU/SPY) rose above 2-month highs 5/20/10 and remains neutral. Absolute price of XLU fell back below its 200-day SMA on 5/18/10 and remains neutral. Support 28.00, 25.76. Resistance 30.59, 30.91, 31.64 and 32.08.
Materials (XLB) Neutral, Market Weight. The Relative Strength Ratio (XLB/SPY) fell below 10-month lows on 5/20/10 and remains bearish. Absolute price of XLB crossed below the 200-day SMA on 5/14/10 and remains neutral. Support 29.10. Resistance 33.06, 35.47, and 37.56.
Energy (XLE) Neutral, Market Weight. The Relative Strength Ratio (XLE/SPY) fell below 7-week lows on 5/24/10 and remains bearish. Absolute price of XLE fell below 10-month lows on 5/20/10 and remains neutral. Support 51.01. Resistance 58.11, 59.84, 62.30, 62.73, 69.95, and 78.10.
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Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) fell to a 12-month low on 5/20/10. EEM/SPY trend turned bearish on 4/16/10, according to strict moving average analysis. Absolute price of EEM fell to a 8-month low on 5/20/10.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) fell below 5-year lows on 5/18/10 and remains bearish. Absolute price of EFA fell below 10-month lows on 5/21/10 and is bearish.
NASDAQ Composite/S&P 500 Relative Strength Ratio whipsawed back above its 50-day simple moving average on 5/24/10 thereby turning bullish again. At the same time, absolute price of the NASDAQ whipsawed back below its 200-day SMA on 5/24/10. Its better when Relative Strength and price trends agree.
Growth Stock/Value Stock Relative Strength Ratio (IWF/IWD) rose above 2-month highs on 5/24/10 and, although it is gaining strength, it remains neutral. Absolute price of IWF also remains neutral.
Russell 1000 Value ETF Relative Strength Ratio (IWD/SPY) has underperformed since 5/3/10 and remains neutral.
The S&P 500 Equally Weighted ETF Relative Strength Ratio (RSP/SPY) lost very little upside momentum since 4/26/10 and remains bullish. Absolute price of RSP lost more upside momentum since 4/26/10 and remains neutral.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell below the lows of the previous 22 months on 5/12/10 and remains bearish. Absolute price of OEX fell below its 200-day SMAs on 5/19/10 and remains neutral.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) remains bullish. Absolute price of IWM fell below its 50-day SMA on 5/14/10 and is now neutral.
The S&P MidCap 400/Large Cap Relative Strength Ratio (MDY/SPY) lost very little upside momentum since 5/13/10 and remains bullish. Absolute price of MDY lost more upside momentum since 4/26/10 and remains neutral.
Crude Oil nearest futures contract price fell below 8-month lows on 5/20/10 but still remains neutral for the intermediate-term trend. The short-term trend is down but oversold. Support 67.90 and 65.05. Resistance 78.81, 81.29, 87.15, 90.51, 98.65, and 102.84.
Gold nearest futures contract price pulled back after setting a new all-time high at 1249.7 on 5/14/10. Support 1156.2, 1124.3, 1084.8, 1045.2, 1026.9 and 989.3. Resistance: 1249.7.
Gold Mining Stocks ETF (GDX) Relative Strength Ratio (relative to the Gold bullion ETF, GDX/GLD) fell below 2-month lows and both 50 & 200 SMAs on 5/20/10 and remains bearish. Absolute price fell below 3-week lows on 5/20/10 and is neutral.
Silver/Gold Ratio turned bearish on 5/17/10 when it crossed below both 50- and 200-day SMAs, with the 50-day SMA below the 200-day SMA.
Copper nearest futures price fell below the lows of the previous 3 months on 5/17/10, again confirming a bearish trend for the short-term. Copper entered a correction phase since peaking at 3.68 on 4/12/10. Longer term, Copper remains bullish. Strength in Copper suggests renewed hope about prospects for the world economy, while weakness suggests doubts. Support 2.8525 and 2.811. Resistance 3.2675, 3.3225, 3.795 and 4.27.
U.S. Treasury Bond nearest futures contract price jumped up to a new 13-month high of 126.01 on 5/21/10 and remains bullish. Support 119.26, 118.24, 118.12, 115.15, 114.06. 113.04 and 112.15. Resistance 130.31.
Junk/Investment-Grade Corporate Bonds Relative Strength Ratio (JNK/LQD) fell below 8-month lows on 5/20/10 and remains neutral.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year Relative Strength Ratio (TIP/IEF) fell below 6-month lows on 5/20/10 but still remains neutral for the intermediate-term trend. This implies that investors are choosing somewhat less inflation protection. Absolute price of TIP remains bullish.
The U.S. dollar nearest futures contract price moved further above 12-month highs on 5/18/10 and remains bullish. Support 85.46, 83.07, 81.74, 80.14, 79.73, 79.61, 78.83, 78.20, 76.74 and 75.90. Resistance 89.71 and 92.53.
The Art of Contrary Thinking: The various surveys of investor sentiment are best considered as background factors. The majority of investors can be right for a long time before a major trend finally changes course. The Art of Contrary Thinking is best used together with more precise market timing tools.
Advisory Service Sentiment: There were 43.8% Bulls versus 24.7% Bears as of 5/192/10, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio fell to 1.77, down from 1.91 the previous week. The current Bull/Bear ratio has fallen substantially from its peak at 3.36 set on 1/13/10, which was the highest bullish sentiment in 6 years. The 20-year range is 0.41 to 3.74, the median is 1.51, and the mean is 1.57.
VIX Fear Index rose to a 14-month high of 48.20 on 5/21/10. A high and rising VIX suggests increasing bearish sentiment. 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 rose to a 14-month high of 48.89 on 5/21/10. A high and rising VIX suggests increasing bearish sentiment. VXN measures NASDAQ Volatility using a method comparable to that used for VIX.
ISEE Call/Put Ratio fell to .059 on 5/7/10, a low level that indicates bearish sentiment. Its 2-year mean is 1.20, and its typical range is 0.69 to 1.71, which represents two standard deviations from the mean.
CBOE Put/Call Ratio rose to 0.96 on 5/20/10, its highest level of the year. A high level indicates bearish sentiment. The 2-year mean is 0.70, and the typical range is 0.44 to 0.96, which represents two standard deviations from the mean.
The Dow Theory again confirmed a Bullish Major Trend on 4/26/10, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above their closing price highs of the previous 18 months. The Dow Theory signaled the current Primary Tide Bull Market on 7/23/09, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above their closing price highs of the previous 6 months. That 7/23/09 bullish signal reversed the previous bearish signal: the two Averages signaled a Primary Tide Bear Market on 11/21/07, when both Averages closed below their closing price lows of August 2007.
S&P 500 Composite (SPX) absolute price fell below its 200-day SMA on 5/20/10. SPX is still looking oversold for the short term. The S&P fell 12% from its peak on 4/23/10 at 1217.28 to its low on 5/20/10 at 1071.56, based on closing prices. Support 1055.90, 1044.50, 1029.38, 1019.95, 1012.42, and 1008.55. Resistance 1173.57, 1219.80, 1220.03 and 1228.74.
S&P 500 Cash Index 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
1440.24, high of 5/19/2008
1406.32, high of 5/29/2008
1381.50, Fibonacci 78.6% of 2007-2009 range
1366.59, high of 6/17/2008
1335.63, high of 6/25/2008
1313.15, high of 8/11/2008
1274.42, high of 9/8/2008
1255.09, high of 9/12/2008
1238.81, Fibonacci 78.6% of 1,576.09 high
1228.74, Fibonacci 61.8% of 2007-2009 range
1220.03, high of 9/25/2008
1219.80, high of 4/26/2010
1173.57, high of 5/13/2010
S&P 500 Cash Index Potential Support
1055.90, low of 5/21/2010
1044.50, low of 2/5/2010
1029.38, low of 11/2/2009
1019.95, low of 10/2/2009
1012.42, Gann 37.5% of 2009-2010 range
1008.55, Fibonacci 38.2% of 2009-2010 range
991.97, low of 9/2/2009
978.51, low of 8/17/2009
956.23, high of 6/11/2009
943.29, Gann 50.0% of 2009-2010 range
878.04, Fibonacci 61.8% of 2009-2010 range
874.17, Gann 62.5% of 2009-2010 range
869.32, low of 7/8/2009
805.17, Gann 75.0% of 2009-2010 range
785.13, Fibonacci 78.6% of 2009-2010 range
666.79, intraday low of 3/6/2009
One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
1.56% Thailand MSCI iS, THD
1.56% Silver Trust iS, SLV
1.41% Gold Shares S.T., GLD
1.21% Preferred Stock iS, PFF
1.13% China LargeCap Growth G D H USX PS, PGJ
0.87% South Africa Index, EZA
0.76% Financial Preferred, PGF
0.58% China 25 iS, FXI
0.31% Bond EmrgMkt JPM iS, EMB
0.26% Bond, Corp, LQD
0.21% Hong Kong Index, EWH
0.15% Bond, High-Yield Corporate, HYG
0.10% Telecom DJ US, IYZ
0.02% Bond Muni ATM-Free S&P iS, MUB
0.00% Bond, 10 Year Treasury, IEF
-0.01% Bond, 1-3 Year Treasury, SHY
-0.06% Bond, Aggregate, AGG
-0.09% Commodity Tracking, DBC
-0.10% Bond, TIPS, TIP
-0.18% Taiwan Index, EWT
-0.21% Australia Index, EWA
-0.22% Pacific ex-Japan, EPP
-0.24% Health Care SPDR, XLV
-0.31% Oil, Crude, U.S. Oil Fund, USO
-0.34% Agriculture DB PS, DBA
-0.35% Bond, 20+ Years Treasury, TLT
-0.40% Growth LargeCap NASDAQ 100, QQQQ
-0.41% Biotech SPDR, XBI
-0.42% Mexico Index, EWW
-0.47% Technology SPDR, XLK
-0.47% Bond Ex-US Treas, BWX
-0.55% Singapore Index, EWS
-0.60% Growth 1000 Russell, IWF
-0.62% Chile MSCI iS, ECH
-0.66% Technology DJ US, IYW
-0.66% Info Tech VIPERs, VGT
-0.69% Consumer Discretionary SPDR, XLY
-0.71% Dividend High Yield Equity PS, PEY
-0.71% Consumer Staples SPDR, XLP
-0.75% Dividend DJ Select, DVY
-0.76% Transportation Av DJ, IYT
-0.79% Utilities VIPERs, VPU
-0.83% Dividend SPDR, SDY
-0.84% Growth VIPERs, VUG
-0.86% Growth SmallCap R 2000, IWO
-0.94% Growth MidCap Russell, IWP
-0.94% Utilities SPDR, XLU
-0.96% Homebuilders SPDR, XHB
-0.96% Growth MidCap 400 B, IJK
-0.97% Growth S&P 500/BARRA, IVW
-0.98% MidCap S&P 400 SPDRs, MDY
-0.99% Dividend Appreciation Vipers, VIG
-1.01% MidCap S&P 400 iS, IJH
-1.03% Value LargeCap Dynamic PS, PWV
-1.04% Emerging Markets, EEM
-1.06% Growth SmallCap VIPERs, VBK
-1.07% Networking, IGN
-1.07% Growth BARRA Small Cap 600, IJT
-1.10% Emerging VIPERs, VWO
-1.12% Value MidCap S&P 400 B, IJJ
-1.14% DIAMONDS (DJIA), DIA
-1.17% Microcap Russell, IWC
-1.17% MidCap Russell, IWR
-1.18% Emerging 50 BLDRS, ADRE
-1.21% LargeCap 1000 R, IWB
-1.22% S&P 500 iS LargeCap Blend, IVV
-1.25% Canada Index, EWC
-1.26% Blend Total Market VIPERs, VTI
-1.27% Semiconductor SPDR, XSD
-1.27% LargeCap Blend S&P=Weight R, RSP
-1.29% S&P 500 SPDRs LargeCap Blend, SPY
-1.29% LargeCap Blend Russell 3000, IWV
-1.29% LargeCap VIPERs, VV
-1.29% Small Cap VIPERs, VB
-1.32% South Korea Index, EWY
-1.34% SmallCap Russell 2000, IWM
-1.34% Pacific VIPERs, VPL
-1.36% Japan Index, EWJ
-1.39% LargeCap Blend S&P 100, OEF
-1.40% Dividend International, PID
-1.41% Brazil Index, EWZ
-1.42% Value SmallCap VIPERS, VBR
-1.44% Value S&P 500 B, IVE
-1.45% Turkey MSCI iS, TUR
-1.45% India PS, PIN
-1.45% India Earnings WTree, EPI
-1.49% SmallCap S&P 600, IJR
-1.49% Semiconductor iS GS, IGW
-1.49% Value MidCap Russell, IWS
-1.50% Industrial SPDR, XLI
-1.52% Value VIPERs, VTV
-1.54% Metals & Mining SPDR, XME
-1.59% Value 1000 Russell, IWD
-1.61% Latin Am 40, ILF
-1.61% Water Resources, PHO
-1.61% Value SmallCap S&P 600 B, IJS
-1.71% Materials SPDR, XLB
-1.71% Basic Materials DJ US, IYM
-1.76% Global ex US ACWI iS, ACWX
-1.79% United Kingdom Index, EWU
-1.90% Value SmallCap S&P 600, RZV
-1.90% Value SmallCap Russell 2000, IWN
-2.01% Real Estate US DJ, IYR
-2.02% Natural Resource iS GS, IGE
-2.03% Global 100, IOO
-2.10% Switzerland Index, EWL
-2.10% Energy Global, IXC
-2.13% Growth EAFE MSCI, EFG
-2.14% Malaysia Index, EWM
-2.19% Realty Cohen & Steers, ICF
-2.23% REIT VIPERs, VNQ
-2.28% Energy SPDR, XLE
-2.28% EAFE Index, EFA
-2.29% Sweden Index, EWD
-2.38% Small Cap EAFE MSCI iS, SCZ
-2.41% Energy VIPERs, VDE
-2.41% Russia MV, RSX
-2.42% Value EAFE MSCI, EFV
-2.43% WilderHill Clean Energy PS, PBW
-2.44% Financial DJ US, IYF
-2.44% Energy DJ, IYE
-2.49% Germany Index, EWG
-2.51% Capital Markets KWB ST, KCE
-2.52% REIT Wilshire, RWR
-2.54% Financials VIPERs, VFH
-2.60% Europe 350 S&P Index, IEV
-2.67% Indonesia MV, IDX
-2.73% European VIPERs, VGK
-2.82% Financial Services DJ, IYG
-2.85% Financial SPDR, XLF
-3.06% Netherlands Index, EWN
-3.07% Belgium Index, EWK
-3.29% EMU Europe Index, EZU
-3.32% France Index, EWQ
-3.64% Austria Index, EWO
-4.42% Italy Index, EWI
-5.24% Spain Index, EWP
