The S&P 500 (SPX: 1,472.05 ) finished nearly unchanged on Friday, resulting in an indecisive Doji Candlestick. NYSE trading volume fell 18%, confirming hesitation to bid stock prices higher.
SPX rose 5.58 points or 0.38% for the week as a whole. On Thursday, SPX closed above its closing price levels of the previous 5 years–but that higher closing price high was not confirmed by many stock market indicators. And SPX remained below its intraday high of 1474.51 on 9/14/2012, so that level still might be offering resistance to further advance.
A number of momentum oscillators did not make new highs, suggesting continuing bearish momentum divergence. For example, popular momentum oscillators such as RSI(14) and MACD(12,26,9) remain below their 2011-2012 highs.
On-Balance Volume based on the S&P 500 also remains below its mid-December highs, thereby diverging bearishly.
The Cumulative Daily Advancing-Declining Volume Line also is lagging below its highs of 2012 and 2011. It has been lagging the SPX index for 19 months, since April, 2011, thereby demonstrating relative weakness and bearish divergence. Volume has not been confirming the price strength of the stock indexes for a long time. It takes volume to push prices up. After the shorts have been forced to cover and the longs have had their fill of buying, in the absence of a fresh source of demand, stocks fall of their own weight.
The percentage of stocks in the S&P 500 Composite Price Index above their own 50-day SMAs lost upside momentum last week. Both this and the percentage above their own 200-day SMAs still show lower highs over the past 2 years, indicating diminishing upside momentum for the uptrend that started nearly 4 years ago.
The percentage of S&P 500 stocks that are in Bullish Point-and-Figure Chart uptrends rose above 77%, up from 58% in November, but still down from 79% in September, and down from a peak of 85% in February. The Bullish Percentage is not confirming higher highs in the S&P 500 Composite Price Index.
The Art of Contrary Thinking calls for questioning popular optimism. Investor sentiment data indicated alarming 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.
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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Sentiment for Contrary Thinking
Investor sentiment data indicates alarming 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 1/10/13, there are 46.45% bulls, 26.63% neutral, and 26.92% bears. This is the highest percentage of bulls in 11 months, since 2/9/12.
Investors Intelligence Sentiment confirms that stock market newsletter advisors are extremely bullish. With only 23.4% Bears, advisors are more bullish than they were at the stock market top in September, 2012, just before a 9% downside correction into November.
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 13.22 on 1/9/13 from 23.23 on 12/28/12. This indicates a rapid shift to bullish complacency from worried concern. 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
1498.85, high of 12/26/2007
1474.51, high of 9/14/2012
The S&P 500 Composite Potential Support
1467.94, high of 1/4/13
1464.02, high of 10/18/2012
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
1417.10, 50-day SMA
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
1395.14, Fibonacci 38.2% of June-Sept 2012 range
1392.78, 200-day SMA
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. USO price fell below its 200-day SMA on 9/17/12, and the 50-day SMA has remained below its 200-day SMA consistently every day since 6/7/12. Support 33.57, 31.00, 29.02, 26.28, and 22.74. Resistance 34.32, 34.70, 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: 164.14, 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 on 12/13/12 when it fell 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: 30.04, 30.47, 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 4 months on 12/20/12. SLV/GLD turned systematically neutral on 12/14/12 when it fell below its 50-day SMA.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) turned systematically neutral on 12/26/12, when it rose above its 50-day SMA. Long term, 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
16.38% , BBY , BEST BUY
13.76% , RIMM , RESEARCH IN MOTION LTD
4.59% , JNS , JANUS CAPITAL
1.19% , IGN , Networking, IGN
4.56% , CTSH , Cognizant Technology Solutions
2.17% , FRX , FOREST LABS STK A
2.04% , SNDK , SanDisk Corporation
1.38% , LBTYA , Liberty Global Inc. (LBTYA)
1.08% , SNPS , Synopsys Inc
0.36% , EWK , Belgium Index, EWK
3.44% , THC , TENET HEALTHCARE
0.63% , EWQ , France Index, EWQ
1.42% , MJN , Mead Johnson Nutrition
0.43% , EWN , Netherlands Index, EWN
2.22% , PM , Philip Morris, PM
0.33% , SCZ , Small Cap EAFE MSCI iS, SCZ
1.14% , DISCA , Discovery Communications
1.32% , EBAY , EBAY
0.96% , SIRI , Sirius Satellite
1.62% , MU.O , MICRON TECH
0.20% , EFV , Value EAFE MSCI, EFV
1.26% , CNP , CENTERPNT ENERGY
1.26% , MAS , MASCO
3.36% , NFLX , Netflix, NFLX
0.74% , AXP , AMERICAN EXPRESS
1.40% , CTXS , CITRIX SYSTEMS
1.37% , WAG , WALGREEN
1.10% , CR , CRANE
1.05% , NKE , NIKE STK B
0.83% , TER , TERADYNE
0.82% , FEZ , Euro STOXX 50, FEZ
1.23% , KLAC , KLA TENCOR
0.23% , JKE , Growth LargeCap iS M, JKE
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-4.86% , WPI , WATSON PHARM
-4.65% , JCP , JC PENNEY
-3.24% , CIEN.O , CIENA
-2.50% , BA , BOEING
-4.05% , CLF , CLIFFS NATURAL RESOURCES, CLF
-2.36% , GIS , GENERAL MILLS
-2.24% , VRSN , VeriSign Inc
-0.70% , PIN , India PS, PIN
-1.58% , PFG , PRINCIPAL FINL
-1.68% , CHKP , Check Point Software Technologies Ltd
-0.22% , ADRE , Emerging 50 BLDRS, ADRE
-1.49% , DPS , Dr Pepper Snapple Group
-0.43% , THD , Thailand MSCI iS, THD
-1.80% , PETM , PETsMART Inc
-0.97% , RSX , Russia MV, RSX
-1.14% , LH , LAB CRP OF AMER
-1.65% , XME , Metals & Mining SPDR, XME
-1.50% , GLW , CORNING
-0.07% , PXE , Energy Exploration & Prod, PXE
-0.09% , IWP , Growth MidCap Russell, IWP
-1.90% , JWN , NORDSTROM
-0.86% , EWA , Australia Index, EWA
-1.29% , FHN , First Horizon National
-0.17% , RFG , Growth MidCap S&P 400, RFG
-1.22% , LLTC , LINEAR TECH
-0.55% , UNH , UNITEDHEALTH GRP
-0.82% , SWK , Stanley Black & Decker
-0.71% , AEP , AM ELEC POWER
-0.47% , ETR , ENTERGY
-0.50% , EMB , Bond EmrgMkt JPM iS, EMB
-0.57% , FE , FIRSTENERGY
-0.79% , MHP , MCGRAW HILL
-0.71% , DRI , DARDEN REST
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
1.19% Networking, IGN
0.94% Spain Index, EWP
0.89% Bond, 20+ Years Treasury, TLT
0.85% EMU Europe Index, EZU
0.72% Germany Index, EWG
0.69% Sweden Index, EWD
0.63% France Index, EWQ
0.63% Italy Index, EWI
0.50% Capital Markets KWB ST, KCE
0.48% Semiconductor iS IGW, SOXX
0.46% WilderHill Clean Energy PS, PBW
0.45% Consumer Staples SPDR, XLP
0.43% Switzerland Index, EWL
0.43% Netherlands Index, EWN
0.42% Europe 350 S&P Index, IEV
0.42% European VIPERs, VGK
0.41% Global 100, IOO
0.36% Info Tech VIPERs, VGT
0.36% Belgium Index, EWK
0.33% SmallCap Blend EAFE MSCI iS, SCZ
0.32% Dividend ex-U.S. DJ iS, IDV
0.32% Bond, 10 Year Treasury, IEF
0.31% Energy DJ, IYE
0.30% Japan Index, EWJ
0.28% Water Resources, PHO
0.25% Agriculture DB PS, DBA
0.23% Bond, Muni S&P ATM-Free iS, MUB
0.22% Technology DJ US, IYW
0.21% Foreign LargeCap EAFE MSCI iS, EFA
0.20% Turkey MSCI iS, TUR
0.20% Value EAFE MSCI, EFV
0.20% Utilities VIPERs, VPU
0.18% Bond, Long-Term Corp iBoxx iS, LQD
0.18% Bond, High Yield Corp iBoxx iS, HYG
0.18% Energy Global, IXC
0.17% Semiconductor SPDR, XSD
0.16% Austria Index, EWO
0.15% LargeCap Growth Russell 1000 iS, IWF
0.14% Homebuilders SPDR, XHB
0.14% Technology SPDR, XLK
0.13% QQQ Nasdaq 100 Trust, QQQ
0.13% Energy VIPERs, VDE
0.13% DIAMONDS (DJIA), DIA
0.13% Growth EAFE MSCI, EFG
0.13% Dividend Appreciation Vipers, VIG
0.12% Preferred Stock iS, PFF
0.12% Growth VIPERs, VUG
0.12% Energy SPDR, XLE
0.11% Utilities SPDR, XLU
0.10% China LargeCap Growth G D H USX PS, PGJ
0.10% Bond, Intermediate US Aggregate iS, AGG
0.09% Bond, TIPS U.S. Treasury iS, TIP
0.09% LargeCap Growth S&P 500 iS, IVW
0.08% Bond Ex-US Treas, BWX
0.08% Consumer Discretionary SPDR, XLY
0.07% Global ex U.S. LargeCap Blend, ACWX
0.07% Canada Index, EWC
0.07% Dividend SPDR, SDY
0.06% Dividend International, PID
0.05% Financial Preferred, PGF
0.05% LargeCap Blend S&P 500 iS, IVV
0.04% LargeCap VIPERs, VV
0.04% LargeCap Blend S&P=Weight R, RSP
0.03% LargeCap Blend S&P 100, OEF
0.02% Bond, High-Yield Junk, JNK
0.02% LargeCap Blend Russell 3000 iS, IWV
0.01% Blend Total Market VIPERs, VTI
0.01% LargeCap Blend Russell 1000 iS, IWB
0.00% Bond Treasury Short-Term iS, SHV
0.00% Energy & Nat Res iS GS, IGE
0.00% Dividend High Yield Equity PS, PEY
-0.01% S&P 500 SPDRs LargeCap Blend, SPY
-0.01% Bond, 1-3 Year Treasury, SHY
-0.02% Real Estate US DJ iS, IYR
-0.02% Transportation Av DJ, IYT
-0.02% Health Care SPDR, XLV
-0.03% MidCap Growth S&P 400 iS, IJK
-0.03% LargeCap Value Russell 1000 iS, IWD
-0.03% Growth SmallCap VIPERs, VBK
-0.04% SmallCap Growth Russell 2000 iS, IWO
-0.04% Global LargeCap Blend MSCI iS, ACWI
-0.04% LargeCap Value S&P 500 iS, IVE
-0.05% Biotech SPDR, XBI
-0.05% United Kingdom Index, EWU
-0.06% Microcap Russell, IWC
-0.06% Value MidCap Russell, IWS
-0.06% REIT VIPERs, VNQ
-0.07% MidCap Value S&P 400 iS, IJJ
-0.07% MidCap Blend S&P 400 iS, IJH
-0.07% Dividend U.S. DJ iS, DVY
-0.07% MidCap Russell, IWR
-0.07% SmallCap Value S&P 600 iS, IJS
-0.08% Realty Cohen & Steers, ICF
-0.08% REIT Wilshire, RWR
-0.08% Value VIPERs, VTV
-0.08% Small Cap VIPERs, VB
-0.09% SmallCap Blend S&P 600 iS, IJR
-0.09% Bear, Short S&P 500, SH
-0.09% SmallCap Growth S&P 600 iS, IJT
-0.09% Growth MidCap Russell, IWP
-0.13% Value LargeCap Dynamic PS, PWV
-0.14% Mexico Index, EWW
-0.15% SmallCap Blend Russell 2000 iS, IWM
-0.15% Materials SPDR, XLB
-0.16% MidCap S&P 400 SPDRs, MDY
-0.17% Financials VIPERs, VFH
-0.17% SmallCap Value Russell 2000 iS, IWN
-0.17% Financial DJ US, IYF
-0.17% Value SmallCap VIPERS, VBR
-0.18% Pacific VIPERs, VPL
-0.22% Emerging 50 BLDRS, ADRE
-0.23% Financial SPDR, XLF
-0.30% Oil Fund PowerShares, DBO
-0.32% Telecom DJ US, IYZ
-0.32% Financial Services DJ, IYG
-0.32% Oil, Crude, U.S. Oil Fund, USO
-0.36% Industrial SPDR, XLI
-0.43% Basic Materials DJ US, IYM
-0.43% Commodity Tracking, DBC
-0.43% Thailand MSCI iS, THD
-0.44% Frontier Markets Guggenheim , FRN
-0.46% Malaysia Index, EWM
-0.50% Bond, Emerg Mkt JPM iS, EMB
-0.55% Hong Kong Index, EWH
-0.57% South Korea Index, EWY
-0.57% Gold Shares S.T., GLD
-0.59% Latin Am 40, ILF
-0.64% Indonesia MV, IDX
-0.70% India PS, PIN
-0.73% Taiwan Index, EWT
-0.75% Emerging VIPERs, VWO
-0.76% Chile MSCI iS, ECH
-0.79% Emerging Markets MSCI iS, EEM
-0.83% Pacific ex-Japan, EPP
-0.86% Australia Index, EWA
-0.86% India Earnings WTree, EPI
-0.87% Singapore Index, EWS
-0.97% Russia MV, RSX
-1.00% Brazil Index, EWZ
-1.01% Silver Trust iS, SLV
-1.04% China 25 iS, FXI
-1.65% Metals & Mining SPDR, XME
-1.76% South Africa Index, EZA
