Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price fell below 7-months lows on 2/11/13. Price turned systematically bearish on 1/11/13 when the 50-day SMA crossed down below the 200-day SMA.
Stocks opened slightly lower and remained on the minus side most the day on Monday: the S&P 500 (SPX: 1,517.01) finished down 0.06%, the Nasdaq Composite Index fell 0.06%, and the Dow Jones Industrial Average fell 0.16%.
Bullish momentum appears to be stalling out. Although the S&P 500 rose modestly in February, popular daily price momentum oscillators have moved lower and are showing bearish momentum divergences. For example, RSI(14) is now 66.14, down from 74.46 on 1/29/13. MACD(12,26,9) also peaked on 1/29/13. MACD crossed below its signal line on 2/4/13 and remains below it. Momentum is a leading indicator of price.
The Art of Contrary Thinking called for questioning strong bullish sentiment. 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. Sentiment extremes are a leading indicator of price.
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) fell below its 50-day SMA on 2/4/13, thereby turning systematically neutral. Price peaked on 2/1/13.
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. Price peaked on 1/2/13 and fell below its 50-day SMA on 2/7/13.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) fell below its 50-day SMA on 2/4/13, thereby turning systematically neutral. Price peaked on 2/1/13.
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 54.7% Bulls versus only 21.1% Bears as of 2/6/13, 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 at record extremes. The current reading of 87.5 is the highest levels in many years. It is up from a low of -39 in November, 2012.
Corporate insiders are extremely bearish, and history shows that insiders are usually right. Insiders sold 9.20 shares for each share bought in January 2013. That is 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.
NYSE Margin Debt rose for the fifth consecutive month to $331 billion, the highest level since February 2008. 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.
Investors are all in, fully invested. The current reading of 104% long is the most bullish sentiment since the beginning of the survey in 2006 by the National Association of Active Investment Managers.
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
The S&P 500 Composite Potential Support
1495.02, low of 2/4/2013
1489.46, low of 1/24/2013
1474.51, high of 9/14/2012
1463.76, low of 1/15/2013
1458.85, 50-day SMA
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
1434.27, 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
1403.71, 200-day SMA
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
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 neutral on 2/7/13 when it rose above 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 21.53, 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 7-months lows on 2/11/13. 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, although the 50-200 spread has narrowed since 1/3/13. Support 34.38, 33.57, 31.00, 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 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 appears to be in a neutral trading range, whipsawing around its 50-day SMA since 1/22/13. Support 29.73, 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 2/7/13, when it whipsawed back down below its 50-day SMA.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) rose above its highs of the previous 3 months on 2/1/13, which generally could be taken as a bullish signal, but there was no follow through and price has drifted lower. JJC has been consolidating in trading range between 38.99 and 51.41 since October, 2011, and still may not be ready to pick a sustainable direction. “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
2.38% , HSP , HOSPIRA
6.38% , CECO , CAREER EDUCATION CORP
3.10% , CSX , CSX
1.06% , FLEX , Flextronics International Ltd
0.25% , EWQ , France Index, EWQ
1.19% , HOG , HARLEY DAVIDSON
1.31% , USB , US BANCORP
1.15% , NKE , NIKE STK B
3.77% , MHP , MCGRAW HILL
0.95% , LM , LEGG MASON
1.21% , USO , Oil, Crude, U.S. Oil Fund, USO
1.41% , WFM.O , Whole Foods Market Inc
0.77% , CSC , COMPUTER SCIENCE
1.23% , AIV , APT INV MNGMT
0.39% , IXN , Technology Global, IXN
0.37% , LVLT.K , LEVEL 3 COMMUNICATIONS
0.30% , IWC , Microcap Russell, IWC
0.23% , KCE , Capital Markets KWB ST, KCE
0.54% , BLK , BlackRock Inc.
1.13% , NVDA , NVIDIA
1.09% , WFC , WELLS FARGO
1.11% , DBO , Oil Fund PowerShares, DBO
0.84% , CTAS , CINTAS
1.84% , EQR , EQUITY RESIDENT BEN INT
0.38% , VPL , Pacific VIPERs, VPL
0.67% , KR , KROGER
0.28% , MZZ , Short 200% MidCap 400 PS, MZZ
0.25% , OMC , OMNICOM
0.38% , HSIC , Henry Schein Inc
0.19% , WAG , WALGREEN
0.72% , HOLX , Hologic, Inc., HOLX
0.34% , LNC , LINCOLN NATL
0.07% , FE , FIRSTENERGY
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-0.59% , IEV , Europe 350 S&P Index, IEV
-0.89% , EWI , Italy Index, EWI
-1.82% , MTG , MGIC INVESTMENT
-1.41% , SLV , Silver Trust iS, SLV
-1.55% , EL , Estee Lauder
-1.16% , GLD , Gold Shares S.T., GLD
-1.10% , BMC.O , BMC SOFTWARE
-1.46% , R , RYDER SYSTEM
-1.05% , IAU , Gold COMEX iS, IAU
-0.36% , EFG , Growth EAFE MSCI, EFG
-1.06% , A , AGILENT TECH
-0.17% , IJT , Growth BARRA Small Cap 600, IJT
-0.54% , ITT , ITT INDS
-1.73% , LEN , Lennar Corp. (LEN)
-1.70% , SIAL , SIGMA ALDRICH
-1.44% , HUM , HUMANA
-0.55% , EWU , United Kingdom Index, EWU
-0.67% , XBI , Biotech SPDR, XBI
-1.22% , GILD , Gilead Sciences Inc
-0.59% , DBA , Agriculture DB PS, DBA
-0.72% , PXJ , Oil & Gas, PXJ
-0.83% , NWL , NEWELL RUBBER
-0.49% , BLL , BALL
-0.46% , SJM , J. M. Smucker
-1.24% , WOR , WORTHINGTON INDS
-0.66% , FITB , FIFTH THIRD BANC
-0.22% , IXP , Telecommunications Global, IXP
-0.12% , IJS , Value SmallCap S&P 600 B, IJS
-0.10% , AGG , Bond, Aggregate, AGG
-1.09% , NTAP , NETWK APPLIANCE
-0.55% , GRMN , GARMIN LTD
-0.25% , MDY , MidCap S&P 400 SPDRs, MDY
-0.78% , L , LOEWS
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
1.21% Oil, Crude, U.S. Oil Fund, USO
1.11% Oil Fund PowerShares, DBO
1.11% WilderHill Clean Energy PS, PBW
1.10% Japan Index, EWJ
0.94% Indonesia MV, IDX
0.45% Financial SPDR, XLF
0.41% Semiconductor SPDR, XSD
0.40% South Korea Index, EWY
0.38% Value LargeCap Dynamic PS, PWV
0.38% Pacific VIPERs, VPL
0.35% Financial DJ US, IYF
0.33% Financials VIPERs, VFH
0.31% Sweden Index, EWD
0.31% Realty Cohen & Steers, ICF
0.30% Microcap Russell, IWC
0.30% Taiwan Index, EWT
0.25% France Index, EWQ
0.25% Hong Kong Index, EWH
0.25% Utilities SPDR, XLU
0.24% Semiconductor iS IGW, SOXX
0.23% Capital Markets KWB ST, KCE
0.22% Austria Index, EWO
0.21% Utilities VIPERs, VPU
0.20% Technology SPDR, XLK
0.19% Financial Services DJ, IYG
0.17% REIT Wilshire, RWR
0.15% REIT VIPERs, VNQ
0.14% Netherlands Index, EWN
0.14% Bond, Emerg Mkt JPM iS, EMB
0.14% Technology DJ US, IYW
0.10% Real Estate US DJ iS, IYR
0.10% Info Tech VIPERs, VGT
0.09% Dividend High Yield Equity PS, PEY
0.08% Value VIPERs, VTV
0.07% Bond, High-Yield Junk, JNK
0.07% Malaysia Index, EWM
0.06% Value SmallCap VIPERS, VBR
0.05% Financial Preferred, PGF
0.05% LargeCap Value Russell 1000 iS, IWD
0.05% Dividend U.S. DJ iS, DVY
0.04% Switzerland Index, EWL
0.03% LargeCap Blend S&P=Weight R, RSP
0.03% Global 100, IOO
0.03% QQQ Nasdaq 100 Trust, QQQ
0.02% SmallCap Blend EAFE MSCI iS, SCZ
0.01% LargeCap Value S&P 500 iS, IVE
0.00% Bond Treasury Short-Term iS, SHV
0.00% Preferred Stock iS, PFF
0.00% LargeCap Blend S&P 100, OEF
0.00% Consumer Staples SPDR, XLP
0.00% Bear, Short S&P 500, SH
-0.01% Bond, High Yield Corp iBoxx iS, HYG
-0.01% SmallCap Value Russell 2000 iS, IWN
-0.01% Chile MSCI iS, ECH
-0.02% S&P 500 SPDRs LargeCap Blend, SPY
-0.02% Metals & Mining SPDR, XME
-0.03% LargeCap Blend S&P 500 iS, IVV
-0.03% Bond, 1-3 Year Treasury, SHY
-0.05% Emerging VIPERs, VWO
-0.05% Emerging Markets MSCI iS, EEM
-0.05% Dividend SPDR, SDY
-0.05% LargeCap Growth S&P 500 iS, IVW
-0.05% Bond, Long-Term Corp iBoxx iS, LQD
-0.05% Blend Total Market VIPERs, VTI
-0.05% Value MidCap Russell, IWS
-0.06% LargeCap Blend Russell 3000 iS, IWV
-0.06% Dividend ex-U.S. DJ iS, IDV
-0.06% LargeCap Blend Russell 1000 iS, IWB
-0.07% LargeCap VIPERs, VV
-0.07% South Africa Index, EZA
-0.07% Industrial SPDR, XLI
-0.07% Bond, TIPS U.S. Treasury iS, TIP
-0.08% Bond, 20+ Years Treasury, TLT
-0.08% Germany Index, EWG
-0.09% Global ex U.S. LargeCap Blend, ACWX
-0.09% Dividend Appreciation Vipers, VIG
-0.10% Transportation Av DJ, IYT
-0.10% Bond, Intermediate US Aggregate iS, AGG
-0.10% China LargeCap Growth G D H USX PS, PGJ
-0.10% Foreign LargeCap EAFE MSCI iS, EFA
-0.10% Bond, 10 Year Treasury, IEF
-0.11% SmallCap Blend Russell 2000 iS, IWM
-0.12% SmallCap Value S&P 600 iS, IJS
-0.12% SmallCap Blend S&P 600 iS, IJR
-0.12% MidCap Russell, IWR
-0.13% Materials SPDR, XLB
-0.14% MidCap Value S&P 400 iS, IJJ
-0.14% Small Cap VIPERs, VB
-0.14% Homebuilders SPDR, XHB
-0.14% Belgium Index, EWK
-0.14% Pacific ex-Japan, EPP
-0.14% MidCap Blend S&P 400 iS, IJH
-0.14% Singapore Index, EWS
-0.15% DIAMONDS (DJIA), DIA
-0.16% Global LargeCap Blend MSCI iS, ACWI
-0.16% SmallCap Growth Russell 2000 iS, IWO
-0.17% SmallCap Growth S&P 600 iS, IJT
-0.17% Growth VIPERs, VUG
-0.17% LargeCap Growth Russell 1000 iS, IWF
-0.18% Latin Am 40, ILF
-0.18% Value EAFE MSCI, EFV
-0.18% Dividend International, PID
-0.19% Mexico Index, EWW
-0.20% Brazil Index, EWZ
-0.20% China 25 iS, FXI
-0.21% Growth MidCap Russell, IWP
-0.21% Health Care SPDR, XLV
-0.22% Water Resources, PHO
-0.23% MidCap Growth S&P 400 iS, IJK
-0.24% Growth SmallCap VIPERs, VBK
-0.25% MidCap S&P 400 SPDRs, MDY
-0.26% Networking, IGN
-0.28% Bond, Muni S&P ATM-Free iS, MUB
-0.30% Russia MV, RSX
-0.30% EMU Europe Index, EZU
-0.34% Consumer Discretionary SPDR, XLY
-0.34% Australia Index, EWA
-0.35% Canada Index, EWC
-0.35% Commodity Tracking, DBC
-0.36% Growth EAFE MSCI, EFG
-0.37% Basic Materials DJ US, IYM
-0.40% Bond Ex-US Treas, BWX
-0.44% Telecom DJ US, IYZ
-0.45% Energy Global, IXC
-0.47% Emerging 50 BLDRS, ADRE
-0.50% Energy SPDR, XLE
-0.55% United Kingdom Index, EWU
-0.58% European VIPERs, VGK
-0.59% Agriculture DB PS, DBA
-0.59% Europe 350 S&P Index, IEV
-0.60% Energy VIPERs, VDE
-0.60% Energy DJ, IYE
-0.62% India Earnings WTree, EPI
-0.67% Biotech SPDR, XBI
-0.71% Energy & Nat Res iS GS, IGE
-0.79% India PS, PIN
-0.89% Italy Index, EWI
-1.13% Frontier Markets Guggenheim , FRN
-1.16% Gold Shares S.T., GLD
-1.38% Spain Index, EWP
-1.40% Thailand MSCI iS, THD
-1.41% Silver Trust iS, SLV
-1.91% Turkey MSCI iS, TUR
