By Robert W. Colby, Senior Analyst TraderPlanet.com
Momentum Lost.
World markets have been consolidating or correcting over the past 2-3 weeks.
Preexisting Major Trends tend to resume after short-term corrections run their course.
The “reports” of the day started on a depressing note: Nonfarm Payrolls fell more than expected and unemployment rose more than expected.
The main technical trend still may be down for the broad-based stock price indexes. But some days, the fundamental worries are temporarily displaced by hopes for some kind of a rescue, from the Fed, the government, or big investors. Day to day, the stock market has been quite reactive to the news, rumors, and “reports” of the day, which certainly have been plentiful, although not always accurate. These “reports” strike at any unpredictable moment, like bolts out of the blue, disrupting trends and making short-term trading risky. In such a shifty market, be nimble, be quick, and control your risk.
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
% Price Change, Symbol , Name
11.93% , ATI , ALLEGHENY TECH
1.42% , EWN , Netherlands Index, EWN
4.39% , PWER , POWER ONE
0.32% , RFV , Value MidCap S&P 400, RFV
3.48% , DYN , DYNEGY
0.64% , RPG , Growth S&P 500, RPG
4.43% , XME , Metals & Mining SPDR, XME
1.55% , VAW , Materials VIPERs, VAW
4.36% , BSX , BOSTON SCIENT
2.82% , MCK , MCKESSON CORP
0.67% , EWK , Belgium Index, EWK
4.00% , ASH , ASHLAND
1.95% , AGN , ALLERGAN
2.59% , STJ , ST JUDE MEDICAL
3.04% , PBW , WilderHill Clean Energy PS, PBW
2.67% , ETN , EATON
2.23% , BC , BRUNSWICK
3.51% , CECO , CAREER EDUCATION CORP
0.52% , PKB , Building & Construction, PKB
0.16% , EWI , Italy Index, EWI
2.28% , IYM , Basic Materials DJ US, IYM
0.60% , EWP , Spain Index, EWP
2.14% , COH , COACH
1.12% , IXC , Energy Global, IXC
0.38% , VUG , Growth VIPERs, VUG
3.52% , MV , METAVANTE TECHNOLOGIES, MV
1.91% , NTAP , NETWK APPLIANCE
3.52% , COL , ROCKWELL COLLINS
4.22% , APOL , APOLLO GROUP
2.10% , D , DOMINION RSCS
4.75% , STLD , Steel Dynamics, STLD
1.54% , CAH , CARDINAL HEALTH
2.60% , CMI , CUMMINS
1.21% , EWA , Australia Index, EWA
1.11% , PPH , Pharmaceutical H, PPH
1.59% , CEPH , Cephalon Inc
2.20% , GR , GOODRICH CORP
1.21% , LQD , Bond, Corp, LQD
7.99% , DDS , DILLARD STK A
0.87% , PBE , Biotech & Genome, PBE
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-0.42% , EWD , Sweden Index, EWD
-11.49% , WM , WASHINGTON MUT
-3.99% , FII , FED INVESTORS STK B
-6.01% , NVDA , NVIDIA
-7.03% , FHN , FIRST TENNESSEE
-1.15% , RPV , Value S&P 500, RPV
-3.61% , Q , QWEST COMMUNICAT
-1.40% , ZMH , ZIMMER HLDGS
-1.99% , NWS.A , NEWS CORP STK A
-3.46% , FDO , FAMILY DLR STRS
-2.77% , ERIC.O , LM Ericsson Telephone Company
-3.70% , SLM , SLM CORP
-3.04% , RFMD , RF Micro Devices Inc
-2.67% , TJX , TJX
-2.55% , MTB , M&T BANK
-1.75% , IYG , Financial Services DJ, IYG
-1.58% , VNQ , REIT VIPERs, VNQ
-7.23% , CFC , COUNTRYWIDE FNCL
-4.84% , KBH , KB HOME
-2.24% , KSU , Kansas City Southern, KSU
-2.33% , BSC , BEAR STEARNS
-4.08% , BK , BANK OF NEW YORK
-4.76% , MBI , MBIA
-4.66% , THC , TENET HEALTHCARE
-1.85% , LIZ , LIZ CLAIRBORNE
-4.40% , STI , SUNTRUST BANKS
-0.68% , PHJ , Dividend Growth PS, PHJ
-2.93% , DELL , DELL
-0.41% , IAH , Internet Architecture H, IAH
-2.15% , PEY , Dividend High Yield Equity PS, PEY
-1.87% , ICF , Realty Cohen & Steers, ICF
-3.89% , SCHW.O , CHARLES SCHWAB
-1.13% , EWM , Malaysia Index, EWM
-0.25% , PFM , Dividend Achievers PS, PFM
-1.26% , EZA , South Africa Index, EZA
-3.97% , QLGC , QLOGIC
-1.90% , JNY , JONES APPAREL
-1.60% , ORCL , ORACLE
-0.82% , IYZ , Telecom DJ US, IYZ
-1.69% , RWR , REIT Wilshire, RWR
Sectors: among the 9 major U.S. sectors, 5 rose and 4 fell.
Major Sectors Ranked for the Day
% Price Change Sector
0.99% Materials SPDR, XLB
0.85% Consumer Staples SPDR, XLP
0.82% Energy SPDR, XLE
0.80% Health Care SPDR, XLV
0.39% Industrial SPDR, XLI
-0.10% Utilities SPDR, XLU
-0.34% Technology SPDR, XLK
-0.47% Consumer Discretionary SPDR, XLY
-1.35% Financial SPDR, XLF
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
Energy (XLE) Neutral, Market Weight. On 3/6/08, the XLE/SPY Relative Strength Ratio rose to new all-time high, confirming a major uptrend.
Materials (XLB) Neutral, Market Weight. On 3/6/08, the XLB/SPY Relative Strength Ratio rose to a new all-time high, confirming a major uptrend.
Consumer Staples (XLP) Neutral, Market Weight. On 3/28/08, the XLP/SPY Relative Strength Ratio rose to new 5-year high.
Industrial (XLI) Neutral, Market Weight. On 3/31/08, the XLI/SPY Relative Strength Ratio rose to another new all-time high.
Utilities (XLU) Neutral, Market Weight. The XLU/SPY Relative Strength Ratio has eroded significantly since its all-time high on 1/9/08, and so Utilities have been slipping in these rankings.
Technology (XLK) Bearish, Underweight. On 2/25/08, the XLK/SPY Relative Strength Ratio fell to a new 10-month low, confirming a significant downtrend.
Consumer Discretionary (XLY) Bearish, Underweight. On 2/21/08, the XLY/SPY Relative Strength Ratio fell to a new 3-week low, suggesting short-term weakness. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to a new 6-year low, confirming a major downtrend.
Health Care (XLV) Bearish, Underweight. On 4/3/08, the XLV/SPY Relative Strength Ratio made another new 8-month low.
Financial (XLF) Bearish, Underweight. On 3/17/08, both absolute price and the XLF/SPY Relative Strength Ratio fell to their lowest levels in nearly 5-years, again confirming a major Bearish trend.
Foreign stock indexes have shown better relative strength short-term, since 3/24/08. Intermediate term, the EFA (the EAFE, international developed country stock markets, (ex the U.S. and Canada) has underperformed since 11/27/07.
NASDAQ Composite price underperformed since 11/7/07. The minor Ripple trend has improved only slightly since 3/3/08 and appears questionable at best. On 3/3/08, Relative Strength fell to a new 9-month low, confirming a significant downtrend.
Growth Stock/Value Stock Relative Strength Ratio turned down since 3/6/08 and underperformed since the peak on 11/7/07. The Growth/Value ratio (IWF/IWD) appears to be in an intermediate-term correction phase.
The Small Cap/Large Cap Relative Strength Ratio broke down to a new 2.5-year low on 1/11/08. It has been trending down since 4/19/06. The main long-term trend is Relatively Bearish for Small Caps.
Crude Oil futures rose moderately within the context of their short-term sideways consolidation pattern over the past 14 trading days. Crude Oil appears to have support near the low of 98.65 and resistance near the high of 110.35. The 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 has underperformed Crude Oil since 12/10/07.
Gold futures recovered modestly within their steep 14-day downside correction. The short-term trend is down, and the intermediate-term trend appears to be broken as well. The long-term trend still could be Bullish.
Silver sharply underperformed Gold since 3/5/08. In addition, iShares Silver Trust (AMEX: SLV) has been relatively weak compared to Gold longer term, since 12/7/06. Finally, for the past 28 years, since 1/2/80, Silver has underperformed Gold.
The Gold Miners ETF (GDX) fell hard since 3/14/08. Longer-term, GDX significantly underperformed Gold since 10/31/07. Therefore, GDX trends have been Bearish relative to Gold itself.
U.S. Treasury Bond prices recovered slightly, within the context of their 10-day downside correction. The short-term trend is corrective. Bond prices benefit from fears of financial crisis, and they correct when crisis takes a back seat to some other news of the day. U.S. governments have been strong ,while corporate bonds have been weak.
The U.S. dollar appears to have entered a sideways consolidation pattern over the past 13 trading days. The minor trend may seem questionable, but the major trend of the dollar is down.
The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood of late. The business and financial news has flipped from fear to hope and back again many times in recent weeks, creating an extremely choppy trading environment. Investors’ moods and stock volatility have jumped up and down abruptly with the latest “reports”. When mass psychology shifts so dramatically and unpredictably from hope to fear, without warning, risk control becomes more important than aggressive profit seeking. Stay flexible.
Sentiment/Contrary Opinion: There were 36.4% Bulls versus 37.5% Bears as of 4/2/08, according to the weekly Investors Intelligence survey of newsletter advisors. The Bull/Bear ratio rose to 0.97, up from 0.89 the previous week. The ratio’s 38-year range is 0.28 to 17.51, and the median is 1.47.
VIX “Fear Index”, now at 24.45, is relatively normal by Bear Market standards (around 20 to 40) but relatively high by Bull Market standards (around 10 to 20). Longer term, VIX has been in a rising trend since it hit a 13-year low of 9.89 on 1/24/07. The all-time high was 45.74 on 10/8/98. 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 25.60, is relatively low by Bear Market standards (around 35 to 80) but relatively high by Bull Market standards (around 12 to 26). Longer term, VXN has been in a rising trend since it hit its all-time low of 12.61 on 7/29/05. The all-time high was 114.23 on 10/8/98. VXN measures Nasdaq Volatility using a method comparable to that used for VIX.
CBOE Put/Call Ratio is 0.82, which indicates moderately Bearish sentiment. Its 4-year simple moving average and median are 0.62, and its 4-year range is 0.35 to 1.28.
ISEE Call/Put Ratio is 1.24, which indicates moderately Bearish sentiment. It is below its 4-year simple moving average at 1.50 and its 4-year median at 1.47. That means customers opened fewer long call options and more long put options than normal. Its 4-year range is 0.51 to 3.04.
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 been weakening.
The Primary Tide Major Trend turned Bearish, and that is a strong force. The Dow Theory confirmed a Primary 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. On 11/7/07, the Transports closed below their 8/16/07 closing price low of 4,671.88. Then on 11/21/07, the Dow-Jones Industrial Average closed below its 8/16/07 closing price low of 12,845.78, thereby turning the Primary Tide 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 (1,370.40):
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
1,403.45, low of 1/7/2008
1,396.02, high of 2/1/2008
1,388.34, high of 2/27/2008
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 (1,370.40):
Potential Support
1,256.98, low of 3/17/2008
1,224.54, low of 7/18/2006
1,219.29, low of 6/14/2006
1,214.45, low of 11/4/2005
1,201.07, low of 11/2/2005
1,168.20, low of 10/13/2005
1,163.23, high of 3/5/2004
1,159.86, low of 5/17/2005
1,153.64, low of 5/16/2005
1,146.18, low of 5/13/2005
1,139.14, low of 4/29/2005
1,136.37, low of 4/20/2005
Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
4.43% Metals & Mining SPDR, XME
3.04% WilderHill Clean Energy PS, PBW
2.28% Basic Materials DJ US, IYM
2.23% Silver Trust iS, SLV
1.69% Oil Services H, OIH
1.55% Materials VIPERs, VAW
1.51% Internet H, HHH
1.47% Oil, Crude, U.S. Oil Fund, USO
1.42% Netherlands Index, EWN
1.41% Energy Exploration & Prod, PXE
1.39% Oil & Gas, PXJ
1.36% Natural Resource iS GS, IGE
1.21% Bond, Corp, LQD
1.21% Australia Index, EWA
1.18% Brazil Index, EWZ
1.18% Biotechnology, IBB
1.16% Healthcare Global, IXJ
1.12% Energy Global, IXC
1.11% Pharmaceutical H, PPH
1.08% Energy VIPERs, VDE
1.05% Energy DJ, IYE
1.04% Value Line Timeliness MidCap Gr, PIV
0.99% Materials SPDR, XLB
0.98% Growth Mid Cap Dynamic PS, PWJ
0.94% Growth MidCap 400 B, IJK
0.94% Growth MidCap S&P 400, RFG
0.93% Gold Shares S.T., GLD
0.93% Biotech SPDR, XBI
0.93% IPOs, First Tr IPOX-100, FPX
0.93% China LargeCap Growth G D H USX PS, PGJ
0.91% Bond, 20+ Years Treasury, TLT
0.91% Aerospace & Defense, PPA
0.90% Nanotech Lux, PXN
0.88% MidCap Growth iS M, JKH
0.87% Biotech & Genome, PBE
0.85% Consumer Staples SPDR, XLP
0.85% Healthcare DJ, IYH
0.85% Bond, Aggregate, AGG
0.82% Growth MidCap Russell, IWP
0.82% Energy SPDR, XLE
0.81% Growth Large Cap, ELG
0.80% Health Care SPDR, XLV
0.77% Biotech H, BBH
0.77% Bond, 10 Year Treasury, IEF
0.77% Health Care VIPERs, VHT
0.76% Growth SmallCap iS M, JKK
0.76% United Kingdom Index, EWU
0.72% Developed 100 BLDRS, ADRD
0.72% Switzerland Index, EWL
0.71% Commodity Tracking, DBC
0.70% Growth LargeCap iS M, JKE
0.69% Value LargeCap Euro STOXX 50 DJ, FEU
0.69% Latin Am 40, ILF
0.69% Pacific ex-Japan, EPP
0.68% MidCap Blend Core iS M, JKG
0.67% Belgium Index, EWK
0.66% Value 40 Large Low P/E FT DB, FDV
0.64% Growth S&P 500, RPG
0.64% Pharmaceuticals, PJP
0.62% Broadband H, BDH
0.62% Ultra MidCap400 Double, MVV
0.60% Spain Index, EWP
0.59% Growth LargeCap NASDAQ 100, QQQQ
0.59% Growth S&P 500/BARRA, IVW
0.58% Austria Index, EWO
0.58% Europe 100 BLDRS, ADRU
0.57% Bond, TIPS, TIP
0.54% Europe 350 S&P Index, IEV
0.53% MidCap VIPERs, VO
0.53% Euro STOXX 50, FEZ
0.52% Growth EAFE MSCI, EFG
0.52% Building & Construction, PKB
0.52% Utilities H, UTH
0.50% Ultra QQQ Double, QLD
0.49% MidCap S&P 400 iS, IJH
0.48% Industrial LargeCap Blend DJ US, IYJ
0.46% Utilities, PUI
0.42% Water Resources, PHO
0.41% Growth 1000 Russell, IWF
0.39% Growth LargeCap Russell 3000, IWZ
0.39% Industrial SPDR, XLI
0.39% France Index, EWQ
0.38% Growth VIPERs, VUG
0.37% Utilities DJ, IDU
0.37% MidCap Russell, IWR
0.37% European VIPERs, VGK
0.35% Canada Index, EWC
0.34% Germany Index, EWG
0.34% EAFE Index, EFA
0.32% Value MidCap S&P 400, RFV
0.30% EMU Europe Index, EZU
0.29% Wilshire 5000 ST TM, TMW
0.27% Technology GS, IGM
0.27% Growth LargeCap NASDAQ Fidelity, ONEQ
0.27% LargeCap Blend S&P=Weight R, RSP
0.27% Value EAFE MSCI, EFV
0.26% Growth SmallCap R 2000, IWO
0.26% Food & Beverage, PBJ
0.25% Pacific VIPERs, VPL
0.25% Japan LargeCap Blend TOPIX 150, ITF
0.25% Semiconductor SPDR, XSD
0.24% Growth SmallCap VIPERs, VBK
0.23% Software, IGV
0.22% SmallCap S&P 600, IJR
0.22% LargeCap Blend Core iS M, JKD
0.22% Technology DJ US, IYW
0.21% Extended Mkt VIPERs, VXF
0.21% Industrials VIPERs, VIS
0.20% Consumer Non-Cyclical, IYK
0.19% LargeCap Blend Total Market DJ, IYY
0.19% Growth BARRA Small Cap 600, IJT
0.19% Utilities VIPERs, VPU
0.18% MidCap S&P 400 SPDRs, MDY
0.18% Bond, 1-3 Year Treasury, SHY
0.18% LargeCap Blend NYSE Composite iS, NYC
0.18% Lg Cap Growth PSD, PWB
0.16% Italy Index, EWI
0.15% Value LargeCap NYSE 100 iS, NY
0.15% Micro Cap Zachs, PZI
0.15% S&P 500 iS LargeCap Blend, IVV
0.13% Value MidCap Russell, IWS
0.13% Growth Small Cap DJ, DSG
0.13% Semiconductor iS GS, IGW
0.13% Growth SmallCap Dynamic PS, PWT
0.12% LargeCap Blend Socially Responsible iS, KLD
0.11% Technology MS sT, MTK
0.11% Global 100, IOO
0.10% Consumer Staples VIPERs, VDC
0.09% OTC Dynamic PS, PWO
0.09% Technology Global, IXN
0.08% Japan Index, EWJ
0.08% LargeCap Blend Russell 3000, IWV
0.07% LargeCap 1000 R, IWB
0.06% Short 100% S&P 500, SH
0.06% Value MidCap Dynamic PS, PWP
0.06% LargeCap Blend S&P 1500 iS, ISI
0.04% Value MidCap S&P 400 B, IJJ
0.04% Info Tech VIPERs, VGT
0.04% Blend Total Market VIPERs, VTI
0.02% Short 100% Dow 30, DOG
0.02% Dividend Appreciation Vipers, VIG
0.01% SmallCap Russell 2000, IWM
0.00% South Korea Index, EWY
0.00% LargeCap Blend Dynamic PS, PWC
-0.01% Dividend International, PID
-0.01% SmallCap Core iS M, JKJ
-0.01% Value SmallCap Russell 2000, IWN
-0.03% Software H, SWH
-0.04% Emerging 50 BLDRS, ADRE
-0.05% LargeCap Blend S&P 100, OEF
-0.05% Value LargeCap Dynamic PS, PWV
-0.07% Short 200% S&P 500 PS, SDS
-0.07% Short 100% QQQ, PSQ
-0.08% LargeCap VIPERs, VV
-0.09% LargeCap Rydex Rus Top 50, XLG
-0.10% Utilities SPDR, XLU
-0.11% S&P 500 SPDRs LargeCap Blend, SPY
-0.12% Taiwan Index, EWT
-0.13% Retail, PMR
-0.13% Value LargeCap Russell 3000, IWW
-0.15% Singapore Index, EWS
-0.15% Consumer Cyclical DJ, IYC
-0.17% Emerging VIPERs, VWO
-0.18% DIAMONDS (DJIA), DIA
-0.19% Value VIPERs, VTV
-0.20% Semiconductors, PSI
-0.21% Microcap Russell, IWC
-0.22% Value LargeCap Fundamental RAFI 1000, PRF
-0.22% Short 200% QQQ PS, QID
-0.23% Small Cap VIPERs, VB
-0.24% Value S&P 500 B, IVE
-0.25% Dividend Achievers PS, PFM
-0.26% SmallCap PS Zacks, PZJ
-0.26% Short 200% Dow 30 PS, DXD
-0.26% Value SmallCap S&P 600 B, IJS
-0.31% Asia 50 BLDRS, ADRA
-0.31% Transportation Av DJ, IYT
-0.31% Networking, IGN
-0.33% Insurance, PIC
-0.34% Ultra S&P500 Double, SSO
-0.34% Technology SPDR, XLK
-0.35% Short 100% MidCap 400, MYY
-0.39% Value LargeCap iS M, JKF
-0.40% Leisure & Entertainment, PEJ
-0.40% Emerging Markets, EEM
-0.41% Internet Architecture H, IAH
-0.41% Value MidCap iS M, JKI
-0.42% Sweden Index, EWD
-0.43% Value 1000 Russell, IWD
-0.44% Value SmallCap Dynamic PS, PWY
-0.45% Consumer D. VIPERs, VCR
-0.46% Semiconductor H, SMH
-0.46% Ultra Dow30 Double, DDM
-0.46% Value Large Cap DJ, ELV
-0.47% Consumer Discretionary SPDR, XLY
-0.48% Telecommunications & Wireless, PTE
-0.49% Value Small Cap DJ, DSV
-0.51% Financials Global LargeCap Value, IXG
-0.52% Software, PSJ
-0.53% Hong Kong Index, EWH
-0.54% Internet Infrastructure H, IIH
-0.56% Value SmallCap VIPERS, VBR
-0.57% Short 200% MidCap 400 PS, MZZ
-0.62% Telecommunications Global, IXP
-0.68% Dividend Growth PS, PHJ
-0.71% Hardware & Electronics, PHW
-0.72% Networking, PXQ
-0.82% Telecom DJ US, IYZ
-0.83% Value SmallCap iS M, JKL
-0.86% Value SmallCap S&P 600, RZV
-0.89% Dividend DJ Select, DVY
-0.89% Dividend SPDR, SDY
-0.91% Retail H, RTH
-0.99% China 25 iS, FXI
-1.01% Capital Markets KWB ST, KCE
-1.13% Malaysia Index, EWM
-1.13% Financial DJ US, IYF
-1.15% Value S&P 500, RPV
-1.17% Telecom H, TTH
-1.20% Mexico Index, EWW
-1.23% Internet B2B H, BHH
-1.26% South Africa Index, EZA
-1.33% Telecom Services VIPERs, VOX
-1.35% Financial SPDR, XLF
-1.39% Financials VIPERs, VFH
-1.42% Dividend Leaders, FDL
-1.53% Homebuilders SPDR, XHB
-1.58% REIT VIPERs, VNQ
-1.63% Real Estate US DJ, IYR
-1.69% REIT Wilshire, RWR
-1.75% Financial Services DJ, IYG
-1.78% Global Titans, DGT
-1.87% Realty Cohen & Steers, ICF
-2.08% Bank Regional H, RKH
-2.15% Dividend High Yield Equity PS, PEY
