VIX Fear Index collapsed to 13.64 on 1/4/13 from 23.23 on 12/28/12, indicating a rapid shift to bullish complacency from worried concern.
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.
Technology stock sector ETF Relative Strength Ratio (XLK/SPY) fell below its lows of the previous 11 months on 1/4/13, confirming a systematically bearish major trend.
The Dow-Jones Transportation Average rose further above its 2012 highs, but the Dow-Jones Industrial Average remained below its 2012 highs, thereby demonstrating non confirmation and bearish divergence.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) turned systematically neutral again on 1/4/13 when it fell below its 50-day SMA.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price fell below its lows of the previous 6 months on 1/4/13.
Silver, iShares Silver Trust ETF (SLV) price fell below its lows of the previous 4 months on 1/4/13–intraday–before reversing to close above its December low and above the previous day’s close. Price probed new lows but the new levels were rejected by the market.
U.S. dollar ETF (UUP) turned systematically neutral again on 1/3/13 when it rose above its 50-day SMA and a 6-months long downtrend line.
The S&P 500 (SPX: 1,466.47 ) rose 7.10 points or 0.49% on Friday. SPX jumped 4.57% for the week as a whole on news that politicians in the U.S. Congress were able to reach a last-minute compromise on taxes. Decisions on government spending cuts and the federal debt ceiling were postponed, however, which could mean more nervous volatility ahead.
The S&P 500 closed above its closing price levels of the previous 5 years, thereby confirming a long-term uptrend, which also was confirmed by some but not all of the other stock market indicators.
23 of 141 active ETFs confirmed the strength of S&P 500 by closing above previous 5-year closing price highs. These strong ETFs are listed here in order of their major trend relative strength:
Homebuilders SPDR, XHB
Mexico Index, EWW
SmallCap Value S&P 600 iS, IJS
MidCap Value S&P 400 iS, IJJ
Consumer Discretionary SPDR, XLY
SmallCap Value Russell 2000 iS, IWN
MidCap S&P 400 SPDRs, MDY
Value MidCap Russell, IWS
MidCap Blend S&P 400 iS, IJH
SmallCap Blend S&P 600 iS, IJR
Growth SmallCap VIPERs, VBK
Small Cap VIPERs, VB
SmallCap Blend Russell 2000 iS, IWM
LargeCap Blend S&P=Weight R, RSP
Value SmallCap VIPERS, VBR
Microcap Russell, IWC
MidCap Growth S&P 400 iS, IJK
MidCap Russell, IWR
Value LargeCap Dynamic PS, PWV
Growth MidCap Russell, IWP
LargeCap Blend Russell 3000 iS, IWV
Dividend SPDR, SDY
Dividend Appreciation Vipers, VIG
Curiously, although the S&P 500 closed above previous 5-year closing price highs, the S&P 500 ETF (SPY) did not close at a 5-year high.
The widely-followed Dow-Jones Industrial Average and NASDAQ Composite also did not make the 5-year high list.
It is interesting to note that only 1 of the 9 S&P sector ETFs (Consumer Discretionary SPDR, XLY) confirmed the 5-year high in the S&P 500.
SmallCap Value and MidCap Value ETF dominated this list of ETFs at higher highs.
A number of momentum oscillators did not make new highs, suggesting bearish momentum divergence. For example, popular momentum oscillators such as RSI(14) and MACD(12,26,9) remain below their 2011-2012 highs.
The Cumulative Daily Advance-Decline Line has been very strong–but the Cumulative Daily Advancing-Declining Volume Line is lagging. On-Balance Volume based on the S&P 500 also remains below recent highs, thereby diverging bearishly.
Longer term, the Cumulative Daily Advancing-Declining Volume Line 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 rebounded sharply higher last week but remains systematically neutral, with the 50-day SMA below the 200-day SMA, and with a series of lower highs over the past 2 years. The same can be said for the percentage of these same S&P 500 stocks that are above their own 200-day SMAs.
The percentage of S&P 500 stocks that are in Bullish Point-and-Figure Chart uptrends rose above 75%, 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.
Fundamentally, stocks are richly valued by long-term historical standards. The S&P 500 were recently priced at 21 times average earnings for the past 10 years, which is 40% above the median of 15 times average earnings since 1900, according to Yale finance professor Robert Shiller. In addition, the dividend yield on the S&P 500 was only 2.4%, which was 41% below the median of 4.1%.
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 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.
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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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
1464.02, high of 10/18/2012
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
1412.23, 50-day SMA
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
1391.23, 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 neutral again on 1/3/13 when it rose above 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 fell below its lows of the previous 6 months on 1/4/13. DBA turned systematically neutral on 11/30/12 when price crossed back down below its 50-day SMA. The 50-day SMA remains above the 200-day SMA, although the 50-200 spread has been narrowing, and the two SMAs could cross in weeks ahead.
Crude Oil, United States Oil ETF (USO) price rose above its highs of the previous 2 months on 1/2/13. USO turned systematically neutral on 12/26/12, when price rose back 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 31.00, 29.02, 26.28, and 22.74. Resistance 34.70, 37.17, 38.31, 40.29, 41.38, 42.30, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) price fell below its lows of the previous 4 months on 12/20/12. GLD turned systematically neutral on 11/27/12, when price 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 fell below its lows of the previous 4 months on 1/4/13–intraday–before reversing to close above its December low and above the previous day’s close. Price probed new lows but the new levels were rejected by the market. This flush out and reversal price action may set up a short-term trade on the long side. SLV 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 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
13.51% , SVU , SUPERVALU
11.67% , MBI , MBIA
3.66% , PKI , PERKINELMER
3.19% , CVG , CONVERGYS
2.18% , ETFC , E*TRADE FINANCIAL
3.70% , LLY , ELI LILLY
0.73% , IXJ , Healthcare Global, IXJ
3.30% , NVDA , NVIDIA
1.86% , EMN , EASTMAN CHEM
3.61% , DRI , DARDEN REST
1.33% , EWI , Italy Index, EWI
0.98% , IGN , Networking, IGN
2.86% , ZION , ZIONS
4.67% , SNV , SYNOVUS
0.78% , EWN , Netherlands Index, EWN
3.18% , RFMD , RF Micro Devices Inc
0.33% , EWO , Austria Index, EWO
2.74% , ADM , ARCHER DANIELS
0.98% , XBI , Biotech SPDR, XBI
0.62% , PJP , Pharmaceuticals, PJP
0.64% , WPO , Washington Post
0.70% , RPG , Growth S&P 500, RPG
4.27% , MRVL , MARVELL TECHNOLOGY
1.06% , D , DOMINION RSCS
3.15% , NTRS , NORTHERN TRUST
2.67% , BK , BANK OF NEW YORK
1.18% , IYF , Financial DJ US, IYF
1.05% , SYK , STRYKER
2.05% , HON , HONEYWELL INTL
2.19% , BLK , BlackRock Inc.
2.44% , NE , NOBLE
1.80% , PXJ , Oil & Gas, PXJ
2.74% , CMA , COMERICA
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-0.70% , IYW , Technology DJ US, IYW
-2.61% , SNI , Scripps Networks Interactive
-1.78% , CLF , CLIFFS NATURAL RESOURCES, CLF
-0.86% , CPB , CAMPBELL SOUP
-0.48% , IAU , Gold COMEX iS, IAU
-1.29% , JCI , JOHNSON CONTROLS
-0.57% , MCHP , Microchip Technology Incorporated
-0.31% , GLW , CORNING
-1.05% , CBS , CBS CORP.
-1.61% , WAG , WALGREEN
-0.59% , GD , GENERAL DYNAMICS
-0.78% , SNPS , Synopsys Inc
-0.63% , DGX , QUEST DIAG
-0.79% , DBA , Agriculture DB PS, DBA
-1.87% , MSFT , MICROSOFT
-0.50% , BSX , BOSTON SCIENT
-0.43% , DBC , Commodity Tracking, DBC
-0.87% , LO , Lorillard, Inc. LO
-0.61% , WFM.O , Whole Foods Market Inc
-0.47% , GLD , Gold Shares S.T., GLD
-0.26% , XSD , Semiconductor SPDR, XSD
-0.10% , HSIC , Henry Schein Inc
-0.18% , TUR , Turkey MSCI iS, TUR
-0.05% , LQD , Bond, Corp, LQD
-0.16% , AEP , AM ELEC POWER
-0.05% , SCZ , Small Cap EAFE MSCI iS, SCZ
-0.04% , AIV , APT INV MNGMT
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
1.74% Financial Services DJ, IYG
1.69% Capital Markets KWB ST, KCE
1.46% Metals & Mining SPDR, XME
1.39% Spain Index, EWP
1.36% Basic Materials DJ US, IYM
1.33% Italy Index, EWI
1.23% Transportation Av DJ, IYT
1.23% Materials SPDR, XLB
1.20% Financials VIPERs, VFH
1.19% Financial SPDR, XLF
1.18% Financial DJ US, IYF
1.16% Energy & Nat Res iS GS, IGE
1.11% Switzerland Index, EWL
1.11% Energy SPDR, XLE
1.05% Energy DJ, IYE
1.05% Energy VIPERs, VDE
1.03% Energy Global, IXC
1.01% Chile MSCI iS, ECH
0.98% Networking, IGN
0.98% Biotech SPDR, XBI
0.95% Dividend ex-U.S. DJ iS, IDV
0.93% EMU Europe Index, EZU
0.89% Telecom DJ US, IYZ
0.89% Frontier Markets Guggenheim , FRN
0.87% China LargeCap Growth G D H USX PS, PGJ
0.86% Value MidCap Russell, IWS
0.84% European VIPERs, VGK
0.82% Sweden Index, EWD
0.81% LargeCap Blend S&P=Weight R, RSP
0.80% Homebuilders SPDR, XHB
0.78% Netherlands Index, EWN
0.78% SmallCap Value S&P 600 iS, IJS
0.77% LargeCap Value Russell 1000 iS, IWD
0.76% MidCap Russell, IWR
0.76% Small Cap VIPERs, VB
0.75% Industrial SPDR, XLI
0.74% SmallCap Blend Russell 2000 iS, IWM
0.74% MidCap Value S&P 400 iS, IJJ
0.72% Mexico Index, EWW
0.72% Dividend SPDR, SDY
0.72% Dividend High Yield Equity PS, PEY
0.72% United Kingdom Index, EWU
0.71% Europe 350 S&P Index, IEV
0.71% LargeCap Value S&P 500 iS, IVE
0.70% MidCap Blend S&P 400 iS, IJH
0.70% MidCap S&P 400 SPDRs, MDY
0.69% Value SmallCap VIPERS, VBR
0.68% Value VIPERs, VTV
0.68% MidCap Growth S&P 400 iS, IJK
0.68% Global 100, IOO
0.66% Hong Kong Index, EWH
0.65% South Africa Index, EZA
0.65% SmallCap Blend S&P 600 iS, IJR
0.64% France Index, EWQ
0.63% Growth SmallCap VIPERs, VBK
0.63% Value LargeCap Dynamic PS, PWV
0.62% Value EAFE MSCI, EFV
0.62% Growth MidCap Russell, IWP
0.62% Water Resources, PHO
0.61% Real Estate US DJ iS, IYR
0.61% SmallCap Value Russell 2000 iS, IWN
0.58% Belgium Index, EWK
0.58% Dividend U.S. DJ iS, DVY
0.57% Germany Index, EWG
0.56% SmallCap Growth Russell 2000 iS, IWO
0.56% Utilities VIPERs, VPU
0.56% Canada Index, EWC
0.56% Latin Am 40, ILF
0.54% Global ex U.S. LargeCap Blend, ACWX
0.53% Blend Total Market VIPERs, VTI
0.53% LargeCap Blend Russell 1000 iS, IWB
0.52% Indonesia MV, IDX
0.52% Thailand MSCI iS, THD
0.51% LargeCap VIPERs, VV
0.51% Foreign LargeCap EAFE MSCI iS, EFA
0.51% Utilities SPDR, XLU
0.51% Pacific ex-Japan, EPP
0.50% Microcap Russell, IWC
0.50% SmallCap Growth S&P 600 iS, IJT
0.50% Dividend International, PID
0.49% LargeCap Blend S&P 500 iS, IVV
0.49% Financial Preferred, PGF
0.48% LargeCap Blend Russell 3000 iS, IWV
0.46% REIT VIPERs, VNQ
0.46% REIT Wilshire, RWR
0.46% Dividend Appreciation Vipers, VIG
0.45% Preferred Stock iS, PFF
0.44% Health Care SPDR, XLV
0.44% S&P 500 SPDRs LargeCap Blend, SPY
0.43% Australia Index, EWA
0.43% Global LargeCap Blend MSCI iS, ACWI
0.42% Realty Cohen & Steers, ICF
0.41% Oil, Crude, U.S. Oil Fund, USO
0.39% Bond, 20+ Years Treasury, TLT
0.37% Consumer Discretionary SPDR, XLY
0.35% Growth EAFE MSCI, EFG
0.33% Growth VIPERs, VUG
0.33% Austria Index, EWO
0.33% Malaysia Index, EWM
0.32% DIAMONDS (DJIA), DIA
0.30% LargeCap Blend S&P 100, OEF
0.30% Russia MV, RSX
0.28% Consumer Staples SPDR, XLP
0.23% WilderHill Clean Energy PS, PBW
0.20% Silver Trust iS, SLV
0.20% Emerging Markets MSCI iS, EEM
0.19% Emerging 50 BLDRS, ADRE
0.18% LargeCap Growth S&P 500 iS, IVW
0.18% LargeCap Growth Russell 1000 iS, IWF
0.18% Emerging VIPERs, VWO
0.12% Bond, High-Yield Junk, JNK
0.11% Bond, Intermediate US Aggregate iS, AGG
0.08% Oil Fund PowerShares, DBO
0.07% China 25 iS, FXI
0.06% Bond, High Yield Corp iBoxx iS, HYG
0.04% Bond, 10 Year Treasury, IEF
0.01% Bond, 1-3 Year Treasury, SHY
0.00% Pacific VIPERs, VPL
0.00% Bond Treasury Short-Term iS, SHV
-0.04% Bond, TIPS U.S. Treasury iS, TIP
-0.05% SmallCap Blend EAFE MSCI iS, SCZ
-0.05% Bond, Long-Term Corp iBoxx iS, LQD
-0.06% Semiconductor iS IGW, SOXX
-0.07% Singapore Index, EWS
-0.18% Turkey MSCI iS, TUR
-0.20% India Earnings WTree, EPI
-0.22% Bond, Muni S&P ATM-Free iS, MUB
-0.25% Brazil Index, EWZ
-0.26% Semiconductor SPDR, XSD
-0.27% India PS, PIN
-0.30% Bond Ex-US Treas, BWX
-0.31% Bond, Emerg Mkt JPM iS, EMB
-0.33% QQQ Nasdaq 100 Trust, QQQ
-0.37% Taiwan Index, EWT
-0.40% Japan Index, EWJ
-0.41% Technology SPDR, XLK
-0.41% South Korea Index, EWY
-0.43% Commodity Tracking, DBC
-0.44% Info Tech VIPERs, VGT
-0.45% Bear, Short S&P 500, SH
-0.47% Gold Shares S.T., GLD
-0.70% Technology DJ US, IYW
-0.79% Agriculture DB PS, DBA
