Stocks reverted to the mean, the 50-day SMA

U.S. dollar ETF (UUP) price rose above its highs of the past 18 months, thereby confirming its preexisting uptrend.

NASDAQ Composite/S&P 500 Relative Strength Ratio whipsawed back down below its 200-day SMA again.

Financial stock sector price whipsawed back down to systematically neutral.

The S&P 500 (SPX: 1,334.76) closed down 6.69 points or 0.50% on Thursday.

NYSE volume rose 7% to confirm the bearish trend. 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 have reverted to the mean, 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
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

The S&P 500 Composite Potential Support
1334.54, 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
1306.62, low of 6/12/2012
1306.60, 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
3.80% , DGX , QUEST DIAG
6.71% , MBI , MBIA
0.40% , PWC , LargeCap Blend Dynamic PS, PWC
4.13% , MRK , MERCK & CO
3.75% , PG , PROCTER & GAMBLE
3.03% , HOLX , Hologic, Inc., HOLX
6.28% , FAST , Fastenal Company
0.63% , MZZ , Short 200% MidCap 400 PS, MZZ
2.39% , PKB , Building & Construction, PKB
3.66% , AZO , AUTOZONE
3.17% , TDC , Teradata Corporation, TDC
3.73% , KBH , KB HOME
2.74% , DHI , D.R. HORTON, DHI
2.68% , MCD , MCDONALDS
2.31% , APC , ANADARKO PETRO
1.72% , SIRI , Sirius Satellite
1.48% , PFE , PFIZER
1.65% , PETM , PETsMART Inc
0.41% , TLH , Bond 10-20 Year US Treas, TLH
0.16% , FDL , Dividend Leaders, FDL
1.92% , YUM , YUM BRANDS
1.28% , MTG , MGIC INVESTMENT
2.42% , ADSK , AUTODESK
2.85% , PHM , PULTE HOMES
0.63% , WPI , WATSON PHARM
0.86% , RIG , TRANSOCEAN
3.82% , CROX , CROCS Inc., CROX
1.90% , URBN , Urban Outfitters Inc.
1.38% , ROST , Ross Stores Inc
1.32% , CVS , CVS
0.80% , NSC , NORFOLK SOUTHERN
1.17% , VLO , VALERO ENERGY
1.48% , PBE , Biotech & Genome, PBE

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-49.15% , SVU , SUPERVALU
-2.33% , PXN , Nanotech Lux, PXN
-12.51% , SWY , SAFEWAY
-7.53% , LXK , LEXMARK INTL STK A
-5.29% , HOT , STARWOOD HOTELS
-1.21% , PEJ , Leisure & Entertainment, PEJ
-0.91% , PGJ , China LargeCap Growth G D H USX PS, PGJ
-1.41% , ADRE , Emerging 50 BLDRS, ADRE
-4.96% , PGR , PROGRESSIVE OHIO
-3.73% , KR , KROGER
-7.89% , NIHD , NII Holdings, Inc.
-1.03% , EZU , EMU Europe Index, EZU
-0.58% , RSP , LargeCap Blend S&P=Weight R, RSP
-2.07% , CTSH , Cognizant Technology Solutions
-3.65% , WYN , Wyndham Worldwide
-0.78% , PXQ , Networking, PXQ
-2.91% , ISIL , INTERSIL CORP
-6.44% , MAR , MARRIOTT INTL STK A
-0.89% , EWK , Belgium Index, EWK
-3.42% , PBI , PITNEY BOWES
-0.45% , NYC , LargeCap Blend NYSE Composite iS, NYC
-1.73% , PSI , Semiconductors, PSI
-2.33% , HSIC , Henry Schein Inc
-1.68% , SYY , SYSCO
-5.14% , SHLD , SEARS HOLDINGS
-1.91% , EPI , India Earnings WTree, EPI
-2.22% , FMCN , Focus Media, FMCN
-2.82% , RSH , RADIOSHACK
-2.16% , CCL , CARNIVAL STK A
-1.17% , IGM , Technology GS, IGM
-0.85% , FEZ , Euro STOXX 50, FEZ
-1.14% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
-2.14% , F , FORD MOTOR
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
1.43% Homebuilders SPDR, XHB
0.85% Biotech SPDR, XBI
0.71% Bond, 20+ Years Treasury, TLT
0.51% Bond, Corp, LQD
0.46% Bear, Short S&P 500, SH
0.44% Real Estate US DJ, IYR
0.38% Silver Trust iS, SLV
0.34% Bond EmrgMkt JPM iS, EMB
0.34% REIT Wilshire, RWR
0.30% REIT VIPERs, VNQ
0.28% Realty Cohen & Steers, ICF
0.24% Health Care SPDR, XLV
0.23% Bond, 10 Year Treasury, IEF
0.23% Commodity Tracking, DBC
0.23% Bond Muni ATM-Free S&P iS, MUB
0.20% Bond, TIPS, TIP
0.18% Bond, Aggregate, AGG
0.17% Financial Preferred, PGF
0.14% Utilities SPDR, XLU
0.09% Consumer Staples SPDR, XLP
0.07% Utilities VIPERs, VPU
0.05% Metals & Mining SPDR, XME
0.02% Bond, 1-3 Year Treasury, SHY
0.00% Water Resources, PHO
0.00% Bond Treasury Short-Term iS, SHV
-0.03% Growth BARRA Small Cap 600, IJT
-0.05% Preferred Stock iS, PFF
-0.07% SmallCap S&P 600, IJR
-0.07% Dividend Appreciation Vipers, VIG
-0.12% Bond Ex-US Treas, BWX
-0.12% Value SmallCap S&P 600 B, IJS
-0.14% Dividend DJ Select, DVY
-0.16% Microcap Russell, IWC
-0.16% Oil Fund PowerShares, DBO
-0.19% Growth MidCap 400 B, IJK
-0.21% Agriculture DB PS, DBA
-0.21% Growth SmallCap VIPERs, VBK
-0.22% Bond, High-Yield Corporate, HYG
-0.22% Growth SmallCap R 2000, IWO
-0.22% Growth MidCap Russell, IWP
-0.23% Consumer Discretionary SPDR, XLY
-0.26% Gold Shares S.T., GLD
-0.27% Small Cap VIPERs, VB
-0.27% DIAMONDS (DJIA), DIA
-0.30% Frontier Markets Guggenheim , FRN
-0.33% Growth S&P 500/BARRA, IVW
-0.33% MidCap S&P 400 iS, IJH
-0.33% Energy SPDR, XLE
-0.34% SmallCap Russell 2000, IWM
-0.36% MidCap S&P 400 SPDRs, MDY
-0.37% LargeCap Blend Russell 3000, IWV
-0.37% Value 1000 Russell, IWD
-0.38% LargeCap VIPERs, VV
-0.38% Industrial SPDR, XLI
-0.38% Bond, High-Yield Junk, JNK
-0.39% Blend Total Market VIPERs, VTI
-0.39% Energy DJ, IYE
-0.40% Value VIPERs, VTV
-0.40% Dividend SPDR, SDY
-0.40% Oil, Crude, U.S. Oil Fund, USO
-0.41% Value SmallCap Russell 2000, IWN
-0.43% MidCap Russell, IWR
-0.45% LargeCap 1000 R, IWB
-0.45% LargeCap Blend S&P 100, OEF
-0.46% Value MidCap S&P 400 B, IJJ
-0.46% S&P 500 iS LargeCap Blend, IVV
-0.47% Growth 1000 Russell, IWF
-0.47% Transportation Av DJ, IYT
-0.48% S&P 500 SPDRs LargeCap Blend, SPY
-0.48% Value SmallCap VIPERS, VBR
-0.49% Value LargeCap Dynamic PS, PWV
-0.49% Growth VIPERs, VUG
-0.50% Materials SPDR, XLB
-0.50% Value MidCap Russell, IWS
-0.53% Telecom DJ US, IYZ
-0.53% Dividend High Yield Equity PS, PEY
-0.56% Energy VIPERs, VDE
-0.57% Germany Index, EWG
-0.57% Energy & Nat Res iS GS, IGE
-0.58% LargeCap Blend S&P=Weight R, RSP
-0.66% Latin Am 40, ILF
-0.66% Financial DJ US, IYF
-0.67% Basic Materials DJ US, IYM
-0.68% Small Cap EAFE MSCI iS, SCZ
-0.68% Financials VIPERs, VFH
-0.69% Russia MV, RSX
-0.69% France Index, EWQ
-0.70% Malaysia Index, EWM
-0.70% Value S&P 500 B, IVE
-0.72% Netherlands Index, EWN
-0.73% Brazil Index, EWZ
-0.76% Global 100, IOO
-0.79% Singapore Index, EWS
-0.89% Switzerland Index, EWL
-0.89% Chile MSCI iS, ECH
-0.89% Dividend International, PID
-0.89% Belgium Index, EWK
-0.91% China LargeCap Growth G D H USX PS, PGJ
-0.92% Energy Global, IXC
-0.94% QQQ Nasdaq 100 Trust, QQQ
-0.94% WilderHill Clean Energy PS, PBW
-0.95% Indonesia MV, IDX
-0.97% Canada Index, EWC
-0.98% Value EAFE MSCI, EFV
-0.99% Capital Markets KWB ST, KCE
-0.99% Technology SPDR, XLK
-1.00% EAFE Index, EFA
-1.00% Thailand MSCI iS, THD
-1.00% Financial Services DJ, IYG
-1.00% Info Tech VIPERs, VGT
-1.02% Networking, IGN
-1.03% EMU Europe Index, EZU
-1.03% Europe 350 S&P Index, IEV
-1.04% Financial SPDR, XLF
-1.10% European VIPERs, VGK
-1.10% Growth EAFE MSCI, EFG
-1.15% Global ex US ACWI iS, ACWX
-1.16% United Kingdom Index, EWU
-1.24% Technology DJ US, IYW
-1.25% Mexico Index, EWW
-1.29% Turkey MSCI iS, TUR
-1.30% Austria Index, EWO
-1.35% Pacific VIPERs, VPL
-1.41% Emerging 50 BLDRS, ADRE
-1.41% Sweden Index, EWD
-1.47% Pacific ex-Japan, EPP
-1.47% Australia Index, EWA
-1.50% Semiconductor SPDR, XSD
-1.51% Hong Kong Index, EWH
-1.52% Japan Index, EWJ
-1.58% Semiconductor iS IGW, SOXX
-1.58% Emerging VIPERs, VWO
-1.67% Emerging Markets, EEM
-1.74% Taiwan Index, EWT
-1.79% South Africa Index, EZA
-1.84% China 25 iS, FXI
-1.91% India Earnings WTree, EPI
-2.06% India PS, PIN
-2.07% Italy Index, EWI
-2.26% Spain Index, EWP
-2.32% South Korea Index, EWY