Highlights based on trading on Friday, May 18, 2012:
Both stocks and commodities have demonstrated trend weakness in recent weeks, while U.S. Treasury Notes and Bonds demonstrated trend strength. Investors have been choosing safety over risk.
With the stock market downtrend well established and powerful bearish price momentum clearly evident, the path of least resistance points to further downside risk.
The S&P 500 (SPX: 1,295.22) fell 9.64 points or 0.74% on Friday to its lowest closing price in 4 months, since 1/17/12. SPX has lost 8.73% over 46 days from its high of 1,419.04 on 4/2/12, based on closing prices.
Volume shows bearish divergence compared to the S&P 500 price. The Cumulative Line of NYSE Volume of Advancing Stocks minus NYSE Volume of Declining Stocks fell below its 200-day SMA and fell below lowest levels in nearly 5 months, since 12/19/11.
NYSE total trading volume has been increasing when stock prices decline and decreasing when stock prices advance, suggesting that selling pressure is greater than buying pressure.
Popular momentum indicators based on the SPX daily close price have been relatively weak and are still falling to lower lows. RSI(14) fell to 26.22 and has been relatively bearish since it closed at 75.38 on 2/9/12. Stochastic(14,3) fell to 0.79, down from 90.04 on 4/30/12. MACD(12,26,9) fell to -18.25, is below its Signal Line, and is down from 19.08 on 2/9/12.
Although RSI(14) and Stochastic(14,3) have fallen to levels that some might say are “oversold”, that has little significance in the context of current market conditions. The first “oversold” reading during a waterfall decline does not stop a runaway freight train move–the downside momentum is just too powerful. And so, an “oversold” condition often gives way to a deeper “oversold” condition as momentum cuts down everything in its path.
This market decline is more likely to be over when RSI(14) and Stochastic(14,3) begin to show bullish divergences compared to price, making higher lows while price makes lower lows. That favorable condition is not present now. On the contrary, RSI(14) is below its low of 10/3/11 while SPX is far above its low of 10/3/11–and that is a bearish momentum divergence.
Net New Highs on the NYSE (Daily New Highs minus Daily New Lows) is now the lowest since October 4, 2011, for another bearish divergence.
SPX is now within striking distance of its 200-day SMA, now standing at 1,278.22. Some traders may be tempted to test those waters with a little bottom fishing near 1,278.22, give or take a couple of percentage points. Traders tried to buy the dip to the 50-day SMA a few weeks ago: SPX traded around its 50-day SMA for nearly a month before giving up. After breaking down below its 50-day SMA on Friday, 5/4/12, SPX has fallen further below its 50-day SMA 8 out of 10 trading days since.
The Dow Theory signaled a Primary Tide Bear Market on 5/17/12 when both Industrials and Transports closed below their closing price lows of the previous 4 months.
The following ETFs, ranked by Relative Strength, with the weakest at the bottom of the list, closed below their closing price lows of the previous 4 months to confirm the Dow Theory Bear Trend:
DIAMONDS (DJIA), DIA
Bond Treasury Short-Term iS, SHV
Dividend Appreciation Vipers, VIG
Dividend High Yield Equity PS, PEY
SmallCap Blend S&P 600 iS, IJR
Dividend SPDR, SDY
Value VIPERs, VTV
LargeCap Value Russell 1000 iS, IWD
LargeCap Value S&P 500 iS, IVE
SmallCap Value S&P 600 iS, IJS
Bond, High Yield Corp iBoxx iS, HYG
MidCap S&P 400 SPDRs, MDY
Preferred Stock iS, PFF
MidCap Blend S&P 400 iS, IJH
Growth MidCap Russell, IWP
MidCap Russell, IWR
LargeCap Blend S&P=Weight R, RSP
Growth SmallCap VIPERs, VBK
Value MidCap Russell, IWS
MidCap Value S&P 400 iS, IJJ
Industrial SPDR, XLI
Small Cap VIPERs, VB
SmallCap Value Russell 2000 iS, IWN
Value SmallCap VIPERS, VBR
SmallCap Blend Russell 2000 iS, IWM
Transportation Av DJ, IYT
Malaysia Index, EWM
SmallCap Growth Russell 2000 iS, IWO
Water Resources, PHO
Telecom DJ US, IYZ
Mexico Index, EWW
Switzerland Index, EWL
Global LargeCap Blend MSCI iS, ACWI
Global 100, IOO
Commodity Tracking, DBC
South Africa Index, EZA
Dividend International, PID
United Kingdom Index, EWU
Hong Kong Index, EWH
Growth EAFE MSCI, EFG
Energy DJ, IYE
Semiconductor iS IGW, SOXX
Materials SPDR, XLB
Indonesia MV, IDX
Energy SPDR, XLE
SmallCap Blend EAFE MSCI iS, SCZ
Japan Index, EWJ
Energy VIPERs, VDE
Chile MSCI iS, ECH
Taiwan Index, EWT
Oil Fund PowerShares, DBO
Pacific VIPERs, VPL
Pacific ex-Japan, EPP
Germany Index, EWG
Capital Markets KWB ST, KCE
Oil, Crude, U.S. Oil Fund, USO
Dividend ex-U.S. DJ iS, IDV
South Korea Index, EWY
Foreign LargeCap EAFE MSCI iS, EFA
Energy Global, IXC
Global ex U.S. LargeCap Blend, ACWX
Europe 350 S&P Index, IEV
Australia Index, EWA
Netherlands Index, EWN
Canada Index, EWC
Emerging Markets MSCI iS, EEM
Emerging VIPERs, VWO
Basic Materials DJ US, IYM
European VIPERs, VGK
Value EAFE MSCI, EFV
Sweden Index, EWD
Emerging 50 BLDRS, ADRE
Energy & Nat Res iS GS, IGE
China 25 iS, FXI
Semiconductor SPDR, XSD
Latin Am 40, ILF
Networking, IGN
China LargeCap Growth G D H USX PS, PGJ
Brazil Index, EWZ
Russia MV, RSX
Metals & Mining SPDR, XME
WilderHill Clean Energy PS, PBW
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Equity Mutual Funds lost 6% in 2011, according to Lipper Research Services.
Hedge funds lost 5%, according to COO Connect.
Hedge funds suffered their second-worst year on record in 2011, according to an index maintained by Eurekahedge, an independent research firm that specializes in hedge fund data. Some of the world’s largest and best-known hedge funds suffered huge losses, down 20% to 50%.
But not all money managers were down in 2011; see:
Robert W. Colby Asset Management, Inc. (click here).
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Stock Market Indicators
The Dow Theory signaled a Primary Tide Bear Market on 5/17/12…
NASDAQ Composite/S&P 500 Relative Strength Ratio fell below its lows of the previous 3 months on 5/18/12 after falling below its 50-day SMA on 4/30/12. Confirming this downtrend, absolute price fell below its lows of the previous 3 months on 5/18/12 after falling below its 50-day SMA on 5/3/12.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) rose above its highs of the previous 2 years on 5/18/12. Systematically, OEX/SPX remains bullish: above its 50-day SMA, above its 200-day SMA, and with the 50-day SMA above the 200-day SMA. Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative safety of large size. On the other side of the coin, Large Caps tend to underperform Mid Caps and Small Caps in bullish general market trends as investors prefer riskier and more volatile stocks.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) fell below its lows of the previous 5 months on 5/18/12, reconfirming renewed downside momentum. Systematically, IWM/SPY returned to bearish status again on 4/20/12 when the 50-day SMA crossed below the 200-day SMA. Longer term, IWM/SPY has been relatively weak for more than a year, since 4/5/11.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) fell below its lows of the previous 4 months on 5/18/12. Systematically, MDY/SPY is neutral: below its 50-day SMA, below its 200-day SMA, but with the 50-day SMA still slightly above the 200-day SMA.
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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
1440.24, high of 5/19/2008
1422.38, high of 4/2/2012
1415.32, high of 5/1/2012
1388.71, low of 5/3/2012
1381.68, 50-day SMA
1381.50, Fibonacci 78.6% of 2007-2009 range
1340.34, Fibonacci 23.6% R of 2011-12 range
The S&P 500 Composite Potential Support
1289.59, Fibonacci 38.2% R of 2011-12 range
1278.22, 200-day SMA
1277.58, low of 1/13/2012
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% R 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
1226.64, low of 11/9/2011
1222.68, Fibonacci 50% of 2011 range
1224.57, high of 12/19/2011
1215.20, low of 12/16/2011
1207.56, Fibonacci 61.8% R of 2011-12 range
1204.49, Fibonacci 23.6% of 2009-11 range
1202.37, low of 12/19/2011
1187.77, Fibonacci 38.2% of 2011 range
1158.66, low of 11/25/2011
1144.38, Fibonacci 23.6% of 2011 range
1101.73, Fibonacci 38.2% of 2009-11 range
1074.77, low of 10/4/2011
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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
2.58% , ININ , Interactive Intelligence ININ
3.70% , YHOO , YAHOO
0.85% , AEP , AM ELEC POWER
1.93% , DLX , DELUXE
1.11% , T , AT&T Corp., T
1.05% , NKE , NIKE STK B
1.25% , OXY , OCCIDENTAL
1.01% , MPEL , Melco Crown Entertainment, MPEL
1.40% , BIG , BIG LOTS
1.25% , DXD , Short 200% Dow 30 PS, DXD
0.77% , D , DOMINION RSCS
0.62% , SO , SOUTHERN
0.37% , KFT , Kraft Foods Inc.
1.17% , IAU , Gold COMEX iS, IAU
0.89% , RSH , RADIOSHACK
0.63% , DBA , Agriculture DB PS, DBA
0.52% , SIL , Silver Miners Global X, SIL
1.19% , TGT , TARGET
0.70% , AM , AMER GREETINGS STK A
0.18% , INTU , INTUIT
0.55% , CTL , CENTURYTEL
2.39% , QID , Short 200% QQQ PS, QID
0.59% , TXT , TEXTRON
0.19% , FE , FIRSTENERGY
0.30% , CTSH , Cognizant Technology Solutions
0.39% , VZ , VERIZON COMMS
0.58% , EWI , Italy Index, EWI
0.19% , ED , CON ED
0.13% , PEG , PUBL SVC ENTER
1.22% , PSQ , Short 100% QQQ, PSQ
0.40% , WYNN , Wynn Resorts L
0.37% , GE , GENERAL ELECTRIC
0.19% , EPI , India Earnings WTree, EPI
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-12.87% , ADSK , AUTODESK
-1.73% , IGN , Networking, IGN
-2.36% , PSJ , Software, PSJ
-1.04% , IXG , Financials Global LargeCap Value, IXG
-9.39% , PWER , POWER ONE
-0.98% , KLD , LargeCap Blend Socially Responsible iS, KLD
-2.74% , XSD , Semiconductor SPDR, XSD
-0.66% , IYK , Consumer Non-Cyclical, IYK
-3.53% , NTAP , NETWK APPLIANCE
-2.44% , ORCL , ORACLE
-0.91% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-4.51% , NVDA , NVIDIA
-0.95% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-9.05% , DYN , DYNEGY
-4.10% , MRVL , MARVELL TECHNOLOGY
-1.58% , THD , Thailand MSCI iS, THD
-3.64% , GOOG , Google
-1.25% , IWP , Growth MidCap Russell, IWP
-1.59% , PBE , Biotech & Genome, PBE
-2.44% , CCE , COCA COLA ENTER
-1.74% , WOR , WORTHINGTON INDS
-2.35% , PSTL , Steel Global PS ETF, PSTL
-1.29% , IGV , Software, IGV
-1.45% , MTK , Technology MS sT, MTK
-0.80% , PWB , Lg Cap Growth PSD, PWB
-1.07% , EFG , Growth EAFE MSCI, EFG
-1.48% , IGM , Technology GS, IGM
-0.44% , RZV , Value SmallCap S&P 600, RZV
-2.26% , OMC , OMNICOM
-0.83% , EFV , Value EAFE MSCI, EFV
-2.72% , HPQ , HEWLETT PACKARD
-1.08% , PBJ , Food & Beverage, PBJ
-1.70% , BMC.O , BMC SOFTWARE
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
2.36% Spain Index, EWP
2.02% Silver Trust iS, SLV
1.15% Gold Shares S.T., GLD
1.00% Austria Index, EWO
0.81% India PS, PIN
0.76% Bear, Short S&P 500, SH
0.63% Agriculture DB PS, DBA
0.58% Italy Index, EWI
0.23% Bond, TIPS, TIP
0.19% India Earnings WTree, EPI
0.19% Bond Ex-US Treas, BWX
0.11% EMU Europe Index, EZU
0.11% France Index, EWQ
0.08% Bond, High-Yield Junk, JNK
0.04% Bond Muni ATM-Free S&P iS, MUB
0.02% Bond, 20+ Years Treasury, TLT
0.01% Bond, 1-3 Year Treasury, SHY
-0.01% Bond, High-Yield Corporate, HYG
-0.01% Bond Treasury Short-Term iS, SHV
-0.03% Bond, Aggregate, AGG
-0.04% Brazil Index, EWZ
-0.05% Telecom DJ US, IYZ
-0.05% Germany Index, EWG
-0.07% Bond, 10 Year Treasury, IEF
-0.08% Commodity Tracking, DBC
-0.09% Switzerland Index, EWL
-0.17% Bond EmrgMkt JPM iS, EMB
-0.19% Hong Kong Index, EWH
-0.20% Utilities SPDR, XLU
-0.21% Utilities VIPERs, VPU
-0.28% Europe 350 S&P Index, IEV
-0.30% Netherlands Index, EWN
-0.31% Frontier Markets Guggenheim , FRN
-0.37% European VIPERs, VGK
-0.39% Bond, Corp, LQD
-0.40% Materials SPDR, XLB
-0.42% Belgium Index, EWK
-0.45% Dividend High Yield Equity PS, PEY
-0.47% Emerging 50 BLDRS, ADRE
-0.50% Industrial SPDR, XLI
-0.51% Value LargeCap Dynamic PS, PWV
-0.55% Latin Am 40, ILF
-0.57% China 25 iS, FXI
-0.59% Consumer Staples SPDR, XLP
-0.59% Canada Index, EWC
-0.61% Dividend DJ Select, DVY
-0.62% Energy SPDR, XLE
-0.63% Water Resources, PHO
-0.64% Emerging VIPERs, VWO
-0.64% Global ex US ACWI iS, ACWX
-0.64% Dividend Appreciation Vipers, VIG
-0.65% Energy Global, IXC
-0.67% Energy & Nat Res iS GS, IGE
-0.69% Global 100, IOO
-0.69% Dividend SPDR, SDY
-0.71% Value S&P 500 B, IVE
-0.72% EAFE Index, EFA
-0.73% Energy DJ, IYE
-0.73% Value VIPERs, VTV
-0.73% Malaysia Index, EWM
-0.75% Value 1000 Russell, IWD
-0.76% Consumer Discretionary SPDR, XLY
-0.77% Energy VIPERs, VDE
-0.77% LargeCap 1000 R, IWB
-0.78% Value SmallCap S&P 600 B, IJS
-0.78% LargeCap Blend S&P 100, OEF
-0.80% LargeCap Blend Russell 3000, IWV
-0.80% LargeCap VIPERs, VV
-0.80% Growth BARRA Small Cap 600, IJT
-0.80% Growth S&P 500/BARRA, IVW
-0.82% Dividend International, PID
-0.83% Value EAFE MSCI, EFV
-0.84% Blend Total Market VIPERs, VTI
-0.86% S&P 500 SPDRs LargeCap Blend, SPY
-0.86% S&P 500 iS LargeCap Blend, IVV
-0.87% SmallCap S&P 600, IJR
-0.87% Microcap Russell, IWC
-0.88% Health Care SPDR, XLV
-0.88% Growth VIPERs, VUG
-0.88% Mexico Index, EWW
-0.90% Russia MV, RSX
-0.91% Value SmallCap Russell 2000, IWN
-0.92% Small Cap VIPERs, VB
-0.92% Basic Materials DJ US, IYM
-0.94% SmallCap Russell 2000, IWM
-0.94% Technology SPDR, XLK
-0.94% Growth 1000 Russell, IWF
-0.95% LargeCap Blend S&P=Weight R, RSP
-0.95% United Kingdom Index, EWU
-0.96% Emerging Markets, EEM
-0.96% Preferred Stock iS, PFF
-0.97% Turkey MSCI iS, TUR
-1.01% DIAMONDS (DJIA), DIA
-1.01% Value MidCap Russell, IWS
-1.03% Real Estate US DJ, IYR
-1.03% Chile MSCI iS, ECH
-1.04% Growth SmallCap VIPERs, VBK
-1.05% Growth SmallCap R 2000, IWO
-1.05% Value SmallCap VIPERS, VBR
-1.07% Growth EAFE MSCI, EFG
-1.08% Financial DJ US, IYF
-1.12% Financials VIPERs, VFH
-1.12% Financial Services DJ, IYG
-1.12% Small Cap EAFE MSCI iS, SCZ
-1.13% South Africa Index, EZA
-1.14% Financial SPDR, XLF
-1.15% MidCap Russell, IWR
-1.18% Value MidCap S&P 400 B, IJJ
-1.19% Pacific ex-Japan, EPP
-1.20% Homebuilders SPDR, XHB
-1.21% REIT VIPERs, VNQ
-1.24% Realty Cohen & Steers, ICF
-1.24% China LargeCap Growth G D H USX PS, PGJ
-1.24% Transportation Av DJ, IYT
-1.25% MidCap S&P 400 iS, IJH
-1.25% MidCap S&P 400 SPDRs, MDY
-1.25% Growth MidCap Russell, IWP
-1.27% Growth MidCap 400 B, IJK
-1.28% Technology DJ US, IYW
-1.29% REIT Wilshire, RWR
-1.30% QQQ Nasdaq 100 Trust, QQQ
-1.32% Taiwan Index, EWT
-1.33% Financial Preferred, PGF
-1.34% Pacific VIPERs, VPL
-1.37% Info Tech VIPERs, VGT
-1.39% Sweden Index, EWD
-1.44% Indonesia MV, IDX
-1.44% Japan Index, EWJ
-1.52% Singapore Index, EWS
-1.55% South Korea Index, EWY
-1.56% Australia Index, EWA
-1.58% Biotech SPDR, XBI
-1.58% Thailand MSCI iS, THD
-1.63% Capital Markets KWB ST, KCE
-1.69% Oil Fund PowerShares, DBO
-1.73% Networking, IGN
-1.74% Oil, Crude, U.S. Oil Fund, USO
-1.92% Semiconductor iS IGW, SOXX
-2.51% Metals & Mining SPDR, XME
-2.74% Semiconductor SPDR, XSD
-2.78% WilderHill Clean Energy PS, PBW
