The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) rose above its highs of the previous 2 years, reconfirming its preexisting major bullish trend. Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative safety of large size.

The S&P 500 (SPX: 1,356.78) closed up 22.02 points or 1.65% on Friday.

NYSE volume fell 13% on the price bounce. For months, I have been noting here a general tendency for rising volume on price declines and shrinking volume on price advances. This is a divergence that suggests a bearish demand-supply balance for stocks.

Stock prices bounced off the 50-day SMA, where they often try to make a stand, if only temporarily. Nevertheless, downside risk still may exceed upside potential for the stock market looking out weeks ahead.

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Hedge funds and equity mutual funds both lost money last year, 2011, and some are down again this year as well.

Meanwhile, one money manager made gains for 5 consecutive quarters; see:
Robert W. Colby Asset Management, Inc. (click here).

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Sentiment for Contrary Thinking

Investor sentiment data indicated alarming degrees of optimism and bullish complacency at the February to May 2012 market highs. That was bearish because when the majority of investors has been bullish for some time, 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 market mood always reverts to the mean, as it did during the April-June downside stock market correction. In recent weeks investors have been growing more confident again, as they usually do when stock prices bounce back.

AAII Sentiment has moderated to a fairly even balance. According to the AAII weekly survey of individual investors reported on 7/12/12, there were 30.23% Bulls, up from a low of 23.58 on 5/17/12. There were 34.73% Bears, down from 42.06 on 5/10/12. Individual investors have grown less pessimistic in recent weeks as stock prices recovered.

Investors Intelligence Sentiment has shifted toward bullish confidence since May. According to the Investors Intelligence weekly survey of stock market newsletter advisors reported on 7/11/12, there were 44.7% Bulls, which was the largest proportion in 3 months, since 4/11/12. There were 24.5% Bears, which was the lowest since 5/30/12.

Hulbert Stock Newsletter Sentiment Index showed that the average recommended equity exposure among a subset of the shortest-term stock market timers jumped 24 percentage points (in just one week) to 47.0% as stocks ran up to their highs of 7/3/12. That was greater bullish exposure than at the May high and “is a worrisome sign”, according to Mark Hulbert.

Corporate Insiders Are Bearish. Insiders sold 5.5 shares for each share bought. This is up from 1.6-to-1 in May and an long-term average of 2.25-to-1. This data is as of 7/6/12 and was reported by Vickers Weekly Insider Report, published by Argus Research, and Mark Hulbert.

NYSE Short Interest fell by more than 0.5 billion shares, the largest drop since January. This source of short-covering, potential demand for stocks has diminished.

The ICI reported $62.6 billion has been withdrawn from domestic equity mutual funds so far in 2012. This is another confirmation that supply is greater than demand for stocks.

VIX Fear Index fell to 16.27 intraday on 7/3/12, its lowest level since 5/1/12. VIX fell from an intraday peak of 27.73 on 6/4/12. This large drop suggests a rapid shift from worried concern to 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
1498.85, high of 12/26/2007
1440.24, high of 5/19/2008
1422.38, high of 4/2/2012
1415.32, high of 5/1/2012
1389.07, Fibonacci 78.6% of April-June 2012 range
1388.71, low of 5/3/2012
1381.50, Fibonacci 78.6% of 2007-2009 range
1374.81, high of 7/3/2012
1370.58, high of 5/2/2011
1363.49, high of 6/19/2012
1362.93, Fibonacci 61.8% of April-June 2012 range
1357.38, low of 4/10/2012

The S&P 500 Composite Potential Support
1355.70, low of 7/2/2012
1344.56, Fibonacci 50% of April-June 2012 range
1340.34, Fibonacci 23.6% of 2011-12 range
1340.03, low of 3/6/2012
1335.52, high of 6/11/2012
1334.93, high of 5/31/2012
1333.64, 50-day SMA
1329.05, high of 6/7/2012
1328.49, high of 5/22/2012
1326.19, Fibonacci 38.2% of April-June 2012 range
1325.41, low of 7/12/2012
1306.62, low of 6/12/2012
1307.51, 200-day SMA
1303.47, Fibonacci 23.6% of April-June 2012 range
1291.98, low of 5/18/2012
1289.59, Fibonacci 38.2% of 2011-12 range
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
1248.58, Fibonacci 50.0% of 2011-12 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
1207.56, Fibonacci 61.8% of 2011-12 range
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
1149.16, Fibonacci 78.6% R of 2011-12 range
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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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
2.42% , KCE , Capital Markets KWB ST, KCE
1.28% , JKG , MidCap Blend Core iS M, JKG
1.52% , JKD , LargeCap Blend Core iS M, JKD
3.75% , MHP , MCGRAW HILL
1.44% , JKK , Growth SmallCap iS M, JKK
1.35% , EIS , Israel MSCI iS, EIS
2.83% , MVV , Ultra MidCap400 Double, MVV
1.26% , IJT , Growth BARRA Small Cap 600, IJT
1.37% , ISI , LargeCap Blend S&P 1500 iS, ISI
1.29% , DBO , Oil Fund PowerShares, DBO
5.96% , JPM , J P MORGAN CHASE
1.02% , SCZ , Small Cap EAFE MSCI iS, SCZ
1.21% , PIC , Insurance, PIC
5.76% , THC , TENET HEALTHCARE
2.16% , PXE , Energy Exploration & Prod, PXE
2.07% , RPV , Value S&P 500, RPV
1.37% , JKE , Growth LargeCap iS M, JKE
2.00% , RYAAY , Ryanair Holdings plc
1.71% , JKF , Value LargeCap iS M, JKF
1.42% , IVW , Growth S&P 500/BARRA, IVW
1.08% , JKI , Value MidCap iS M, JKI
1.52% , IXG , Financials Global LargeCap Value, IXG
1.78% , PWV , Value LargeCap Dynamic PS, PWV
4.55% , BAC , BANK OF AMERICA
1.32% , VB , Small Cap VIPERs, VB
4.25% , STI , SUNTRUST BANKS
1.45% , EWQ , France Index, EWQ
1.79% , PPA , Aerospace & Defense, PPA
1.67% , XLG , LargeCap Rydex Rus Top 50, XLG
1.64% , JKJ , SmallCap Core iS M, JKJ
1.45% , RZV , Value SmallCap S&P 600, RZV
2.58% , EXC , EXELON CORP
1.01% , KLD , LargeCap Blend Socially Responsible iS, KLD

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-16.25% , LXK , LEXMARK INTL STK A
-1.49% , DV , DeVry, Inc.
-1.76% , XRX , XEROX
-1.64% , SH , Short 100% S&P 500, SH
-1.91% , HPQ , HEWLETT PACKARD
-1.00% , DE , DEERE & CO
-0.55% , HSP , HOSPIRA
-0.66% , APOL , APOLLO GROUP
-0.27% , MDT , MEDTRONIC
-0.73% , SIRI , Sirius Satellite
-0.05% , PGF , Financial Preferred, PGF
-0.33% , AVP , AVON
-0.06% , ERIC.O , LM Ericsson Telephone Company
-0.24% , SPLS , STAPLES
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
3.03% Financial Services DJ, IYG
2.76% Financial SPDR, XLF
2.66% Thailand MSCI iS, THD
2.42% Financials VIPERs, VFH
2.42% Capital Markets KWB ST, KCE
2.30% Financial DJ US, IYF
2.22% South Korea Index, EWY
2.22% India PS, PIN
2.19% Germany Index, EWG
2.18% Transportation Av DJ, IYT
2.04% Indonesia MV, IDX
1.99% Latin Am 40, ILF
1.95% Basic Materials DJ US, IYM
1.93% Industrial SPDR, XLI
1.92% Emerging Markets, EEM
1.86% Emerging VIPERs, VWO
1.82% Energy & Nat Res iS GS, IGE
1.81% Value S&P 500 B, IVE
1.80% India Earnings WTree, EPI
1.79% United Kingdom Index, EWU
1.79% Homebuilders SPDR, XHB
1.79% Materials SPDR, XLB
1.78% Value LargeCap Dynamic PS, PWV
1.77% Australia Index, EWA
1.77% Energy DJ, IYE
1.77% Brazil Index, EWZ
1.76% European VIPERs, VGK
1.75% Energy SPDR, XLE
1.74% Russia MV, RSX
1.74% Value 1000 Russell, IWD
1.73% Water Resources, PHO
1.72% Energy VIPERs, VDE
1.71% Energy Global, IXC
1.70% S&P 500 iS LargeCap Blend, IVV
1.70% Global 100, IOO
1.69% Mexico Index, EWW
1.68% S&P 500 SPDRs LargeCap Blend, SPY
1.68% Emerging 50 BLDRS, ADRE
1.65% EMU Europe Index, EZU
1.64% Value VIPERs, VTV
1.63% DIAMONDS (DJIA), DIA
1.63% Consumer Discretionary SPDR, XLY
1.63% South Africa Index, EZA
1.60% LargeCap Blend Russell 3000, IWV
1.60% LargeCap Blend S&P 100, OEF
1.60% LargeCap Blend S&P=Weight R, RSP
1.59% Singapore Index, EWS
1.59% Europe 350 S&P Index, IEV
1.58% MidCap S&P 400 SPDRs, MDY
1.57% Dividend Appreciation Vipers, VIG
1.56% Blend Total Market VIPERs, VTI
1.56% LargeCap 1000 R, IWB
1.54% Pacific ex-Japan, EPP
1.53% MidCap S&P 400 iS, IJH
1.53% China 25 iS, FXI
1.52% QQQ Nasdaq 100 Trust, QQQ
1.51% Growth 1000 Russell, IWF
1.51% Value MidCap S&P 400 B, IJJ
1.51% LargeCap VIPERs, VV
1.50% Value MidCap Russell, IWS
1.49% MidCap Russell, IWR
1.49% Oil, Crude, U.S. Oil Fund, USO
1.49% Growth MidCap Russell, IWP
1.47% Technology DJ US, IYW
1.47% Sweden Index, EWD
1.47% Growth VIPERs, VUG
1.47% Austria Index, EWO
1.46% Growth MidCap 400 B, IJK
1.45% France Index, EWQ
1.45% Value SmallCap S&P 600 B, IJS
1.44% Value SmallCap VIPERS, VBR
1.42% Growth S&P 500/BARRA, IVW
1.42% Info Tech VIPERs, VGT
1.42% EAFE Index, EFA
1.38% Global ex US ACWI iS, ACWX
1.38% Metals & Mining SPDR, XME
1.37% Telecom DJ US, IYZ
1.37% Dividend SPDR, SDY
1.36% Growth EAFE MSCI, EFG
1.35% Italy Index, EWI
1.34% Dividend DJ Select, DVY
1.34% Realty Cohen & Steers, ICF
1.33% Value EAFE MSCI, EFV
1.33% Technology SPDR, XLK
1.32% Growth SmallCap VIPERs, VBK
1.32% Chile MSCI iS, ECH
1.32% Small Cap VIPERs, VB
1.29% Oil Fund PowerShares, DBO
1.28% SmallCap S&P 600, IJR
1.27% Growth SmallCap R 2000, IWO
1.26% Growth BARRA Small Cap 600, IJT
1.25% Microcap Russell, IWC
1.25% Dividend International, PID
1.25% SmallCap Russell 2000, IWM
1.23% REIT VIPERs, VNQ
1.22% Canada Index, EWC
1.21% Commodity Tracking, DBC
1.20% Value SmallCap Russell 2000, IWN
1.17% REIT Wilshire, RWR
1.15% Netherlands Index, EWN
1.13% Malaysia Index, EWM
1.13% Pacific VIPERs, VPL
1.12% Utilities VIPERs, VPU
1.12% Consumer Staples SPDR, XLP
1.11% Health Care SPDR, XLV
1.09% Real Estate US DJ, IYR
1.08% Switzerland Index, EWL
1.02% Small Cap EAFE MSCI iS, SCZ
1.02% Gold Shares S.T., GLD
1.01% Hong Kong Index, EWH
0.99% Japan Index, EWJ
0.99% Belgium Index, EWK
0.98% Spain Index, EWP
0.95% WilderHill Clean Energy PS, PBW
0.91% Biotech SPDR, XBI
0.89% Utilities SPDR, XLU
0.78% Semiconductor SPDR, XSD
0.76% Taiwan Index, EWT
0.75% Agriculture DB PS, DBA
0.71% China LargeCap Growth G D H USX PS, PGJ
0.71% Semiconductor iS IGW, SOXX
0.68% Networking, IGN
0.66% Frontier Markets Guggenheim , FRN
0.64% Dividend High Yield Equity PS, PEY
0.48% Bond EmrgMkt JPM iS, EMB
0.38% Turkey MSCI iS, TUR
0.38% Bond, High-Yield Junk, JNK
0.36% Bond Ex-US Treas, BWX
0.34% Silver Trust iS, SLV
0.31% Bond, High-Yield Corporate, HYG
0.26% Preferred Stock iS, PFF
0.08% Bond Muni ATM-Free S&P iS, MUB
0.05% Bond, TIPS, TIP
0.04% Bond, Aggregate, AGG
0.03% Bond, Corp, LQD
0.02% Bond, 1-3 Year Treasury, SHY
0.01% Bond Treasury Short-Term iS, SHV
-0.05% Financial Preferred, PGF
-0.08% Bond, 10 Year Treasury, IEF
-0.26% Bond, 20+ Years Treasury, TLT
-1.64% Bear, Short S&P 500, SH