Stock indexes bounced nearly 6% over the past 5 days, rising above their highs of the previous 4 weeks, as traders swung toward aggressive risk seeking and away from defensive risk avoidance. Short sellers were caught by surprise and were squeezed mercilessly.
VIX Fear Index collapsed below the lows of the previous 8-weeks, plunging to 15.12 intraday on 7/1/11, in a surprisingly rapid swing to bullish complacency.
The Dow Theory suggests a divergence and non-confirmation as the Dow-Jones Transportation Average closed above all previous closing price highs but the Dow-Jones Industrial Average failed to confirm. The Industrials currently suggest nothing more than an insignificant Minor Ripple.
S&P 500 Composite (SPX, 1,339.67) shows substantial chart Resistance in a 3% band from 1331 to 1371. Support 1249 to 1279.
Trading volume on the NYSE fell 11% below the previous day’s pace and still was 17% below the 200-day SMA. Low and falling volume raises doubts about the significance of any rally attempt.
The stock market is overbought. An immediate price pullback appears probable.
Last weeks’ stock market bounce appears highly improbable, even in hindsight. We need to humbly recognize that, sometimes, the markets defy and make a mockery of our best efforts at analysis and strategizing, especially over the short term, which is more subject to random news events, as seen last week.
“Markets can remain irrational longer than you can remain solvent.”–John Maynard Keynes
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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
1.36% , PUI , Utilities, PUI
1.60% , PJP , Pharmaceuticals, PJP
1.54% , JKG , MidCap Blend Core iS M, JKG
1.51% , FDV , Value 40 Large Low P/E FT DB, FDV
1.43% , JKK , Growth SmallCap iS M, JKK
1.53% , PXE , Energy Exploration & Prod, PXE
1.49% , RFG , Growth MidCap S&P 400, RFG
1.89% , RZV , Value SmallCap S&P 600, RZV
1.78% , IYJ , Industrial LargeCap Blend DJ US, IYJ
1.49% , TMW , Wilshire 5000 ST TM, TMW
1.73% , EWP , Spain Index, EWP
1.08% , NYC , LargeCap Blend NYSE Composite iS, NYC
6.36% , APOL , APOLLO GROUP
4.33% , THC , TENET HEALTHCARE
6.09% , DRI , DARDEN REST
1.38% , OEF , LargeCap Blend S&P 100, OEF
1.26% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
0.82% , NY , Value LargeCap NYSE 100 iS, NY
4.84% , OMX , OFFICEMAX INC., OMX
1.63% , VGT , Info Tech VIPERs, VGT
1.11% , EIS , Israel MSCI iS, EIS
1.00% , ACWX , Global ex US ACWI iS, ACWX
4.61% , WYN , Wyndham Worldwide
1.58% , VB , Small Cap VIPERs, VB
1.65% , IYZ , Telecom DJ US, IYZ
3.63% , BDX , BECTON DICKINSON
1.44% , FEZ , Euro STOXX 50, FEZ
4.24% , LAMR , Lamar Advertising Company
4.37% , MBI , MBIA
1.58% , IJT , Growth BARRA Small Cap 600, IJT
0.85% , IGE , Energy & Nat Res iS GS, IGE
0.41% , SWH , Software H, SWH
4.90% , BC , BRUNSWICK
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-14.25% , EK , EASTMAN KODAK
-1.75% , HSP , HOSPIRA
-1.57% , PSQ , Short 100% QQQ, PSQ
-3.07% , QID , Short 200% QQQ PS, QID
-1.41% , EOG , EOG RESOURCES
-1.41% , DOG , Short 100% Dow 30, DOG
-3.00% , SDS , Short 200% S&P 500 PS, SDS
-1.44% , SH , Short 100% S&P 500, SH
-1.56% , SIL , Silver Miners Global X, SIL
-0.85% , ATI , ALLEGHENY TECH
-0.88% , FLR , FLUOR
-0.09% , KWT , Solar Energy MV, KWT
-0.60% , MUB , Bond Muni ATM-Free S&P iS, MUB
-0.73% , GLD , Gold Shares S.T., GLD
-0.38% , LQD , Bond, Corp, LQD
-2.48% , SLV , Silver Trust iS, SLV
-0.25% , AGG , Bond, Aggregate, AGG
-0.03% , DBO , Oil Fund PowerShares, DBO
-0.48% , PFF , Preferred Stock iS, PFF
-0.10% , EL , Estee Lauder
-0.34% , PEP , PEPSICO
-2.74% , DXD , Short 200% Dow 30 PS, DXD
-0.11% , SHY , Bond, 1-3 Year Treasury, SHY
-0.43% , NEM , NEWMONT MINING
-0.25% , AM , AMER GREETINGS STK A
-0.11% , NYT , NY TIMES STK A
-0.06% , DVN , DEVON ENERGY
-0.12% , AMGN , AMGEN
-0.24% , USO , Oil, Crude, U.S. Oil Fund, USO
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9 Major U.S. Stock Sectors
ranked in order of long-term relative strength
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Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) has been trading with a bearish bias since peaking on 10/14/10. The Ratio remains below the 200-day SMA, below the 50-day SMA, and the 50-day SMA remains below the 200-day SMA. Absolute price broke down below 14-week lows on 6/23/11.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) has been trading with a bearish bias since peaking on 11/27/07. The Ratio remains below the 200-day SMA, below the 50-day SMA, and the 50-day SMA remains below the 200-day SMA. Absolute price broke down below 14-week lows on 6/23/11.
NASDAQ Composite/S&P 500 Relative Strength Ratio entered a correction since peaking on 1/18/11. The Ratio fell below 8-month lows on 6/20/11.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell further below 28-year lows on 5/26/11, again reconfirming its preexisting bearish major trend.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) broke down further below 4-month lows on 6/13/11 and has been in a downside correction since 4/5/11.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) rose above 11-week highs on 6/24/11. Price, however, remains stuck in a neutral trading range.
Crude Oil nearest futures contract price rose slightly on 6/30/11 to test its falling 9-week trendline, where may find resistance. Oil broke down below the lows of the past 4 months on 6/27/11, reconfirming a significant downtrend. Recent data from the Commodity Futures Trading Commission showed hedge-fund and other money managers increased net long positions in Oil–which could prove to be bearish when this hot money rushes for the exits. On 5/3/11, when Crude Oil was 111.56, I wrote, “Crude Oil nearest futures contract price fell below the lows of the previous 7 trading days on 5/3/11, suggesting a short-term price pullback.” Support 87.09, 83.85, 83.55, 80.28, 80.06, 79.84, 79.25, 78.86, 73.52, 72.63, 70.76, 70.35, 69.51, 68.59, 67.15, 65.05, and 64.24. Resistance 95.84, 103.39, 104.60, 105.16, 114.83, 115.27, 120.42, 130.0, and 147.27.
Gold nearest futures contract price broke down below the lows of the past 6 weeks on 7/1/11, reconfirming a preexisting short-term downtrend. The Bears still have momentum on their side. On 6/9/11, when Gold was 1542.7, I noted that Gold “appears to have stalled out since 6/6/11. Gold’s 5-week countertrend bounce might be weakening. Reward/Risk does not appear attractive. It seems possible that Gold has finally topped out at 1577.4 after rising 132% from 681 in October, 2008.” Support: 1462.5, 1445.0, 1411.5, 1380.7, 1419.5, 1351.4, 1309.1, 1307.7, 1297.0, 1274.8, 1270.5, 1232.4, 1210.9, 1191.5, and 1155.6. Resistance: 1559.3 and 1577.4.
Gold Mining Stocks ETF (GDX) Relative Strength Ratio (relative to the Gold bullion ETF, GDX/GLD) fell further below 27-month lows on 6/17/11. The Ratio has been falling steeply since 4/8/11 and remains bearish. GDX is offering a bearish divergence relative to GLD, and that might be taken as a warning about prospects for GLD, Gold futures, bullion, and coins.
Silver nearest futures contract price broke down below the lows of the past 5 weeks on 6/27/11, confirming a short-term downtrend. The Bears now have momentum on their side. Silver fell 35% from 49.82 on 4/25/11 to 32.3 on 5/12/11, breaking down below 10-week lows. On 5/2/11, when Silver was 46.084, I wrote, “Silver nearest futures contract price broke sharply below the lows of the previous 2 weeks. The short-term price trend has turned down. If this downtrend continues, it could have implications for inflation expectations.” Support 32.3, 31.695, 31.61, 30.265, 29.635, 26.30, 24.98, and 22.84. Resistance: 36.77, 37.86, 38.845, 39.38, 39.47, 49.82, 49.845 and 50.35.
Silver/Gold Ratio fell below the lows of the previous 4 months in 6/27/11, reconfirming a preexisting downtrend for the medium term. The Ratio entered a steep downtrend since the peak on 4/28/11 and remains bearish.
Copper nearest futures contract price rose above 2-month highs on 7/1/11, confirming a short-term bounce. Longer term, Copper broke down below previous 5-month lows on 5/12/11. Weakness in Copper suggests doubts about the economic outlook, while strength suggests confidence in the future. Support 3.9505, 3.8535, 3.846, 3.6065, 3.3930, 3.1775, 2.9285, 2.8555, 2.8445, and 2.72. Resistance: 4.402, 4.533, 4.554, 4.6495, 4.6535, and 4.6575.
U.S. Treasury Bond nearest futures contract price formed an “Inside Day” on 7/1/11 after falling below the lows of the previous 7 weeks on 6/30/11. Traders switched from defensive risk avoidance to aggressive risk seeking last week. The Bond broke out above the highs of the previous 7 months on 6/24/11, thereby reconfirming a significant uptrend. In its favor, nearly everyone has been talking bearish on Bonds this year, so the Bond is rising up off an extreme oversold condition. Support 120.20, 119.15, 117.28, 117.04, 116.26, 115.15, 114.06, 113.04, and 112.15. Resistance 127.19, 128.00 129.14, 129.27, 132.26, 133.00, 135.12, 135.19, 136.31, 137.31, and 142.31.
Junk/Investment-Grade Corporate Bonds Relative Strength Ratio (JNK/LQD) bounced back to the neutral zone after breaking down below 9-month lows on 6/16/11. Absolute price of JNK also bounced back after breaking down below 9-month lows on 6/16/11.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year Relative Strength Ratio (TIP/IEF) fell below the lows of the previous 6 months on 6/20/11, again reconfirming a significant downtrend. TIP/IEF entered a downtrend after peaking on 4/8/11. This downtrend means that fixed-income investors prefer the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) over the inflation-protected TIPs.
The U.S. dollar nearest futures contract price pulled back moderately over the past week but stayed within its larger pattern, which could be base building. USD has been stabilizing over the past 2 months after making a low at 73.325 on 5/2/11. Support 74.505, 73.88, 73.515, 73.325, 72.86, and 70.80. Resistance 76.59, 76.87, 76.98, 77.675, 78.98, 79.34, 81.635, 81.935, 82.02, 83.64, 84.73, 85.36, 86.71, 88.80, 89.22, 89.71, and 92.53.
Advisory Service Sentiment: There were 39.8% Bulls versus 26.9% Bears as of 6/29/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio fell to 1.48, which is moderately below normal, with a 20-year range of 0.41 to 3.74, a median of 1.56, and a mean of 1.64. Note that Advisory Service Sentiment as of 4/6/11 peaked at 3.65, its highest level in 8 years. The market has been working off that excess since 5/2/11 by correcting to the downside.
VIX Fear Index collapsed below the lows of the previous 8-weeks, plunging to 15.12 intraday on 7/1/11, in a surprisingly rapid swing 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 Dow Theory signaled a Primary Tide Bull Market on 7/23/09, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above their closing price highs of the previous 6 months.
As of the close on June 6, 2011, the Dow Theory confirmed a Secondary Reaction (a significant downside correction) for the general stock market, as the Dow Industrials and Transports both closed below 10-week lows. Previously, as of June 1, 2011, the Dow Theory gave a warning of a significant downside correction for the general stock market, as the Dow Industrials and Transports both closed below 5-week lows.
As of the close on July 1, 2011, the Dow Theory suggested a divergence and non-confirmation as the Dow-Jones Transportation Average closed above all previous closing price highs but the Dow-Jones Industrial Average failed to confirm. The Dow Industrials currently suggest nothing more than an insignificant Minor Ripple.
On 5/2/11, when the S&P 500 Composite (SPX) was 1,358.59, I warned, “The majority of major stock price indexes opened higher on gaps but reversed to close with losses on the day. This may signal exhaustion of the short-term uptrend. Sentiment indicators have been suggesting that the stock market may be over loved and overbought. And in view of the sharp reversals in the metal commodities, the so-called “inflation trade”, when speculators buy stocks and sell fixed-income instruments based on expectations of rising price levels for goods and services, may be on thin ice.”
Based on the daily SPX, momentum indicators gave bearish divergence warnings in April; that is, they never made it back to their February peaks when the price indexes rose to higher highs.
S&P 500 Composite (SPX, 1,339.67) rose 19.03 points or 1.44% on 7/1/11. SPX shows substantial chart Resistance in a 3% band from 1331 to 1371.
S&P 500 Cash Index 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
1406.32, high of 5/29/2008
1381.50, Fibonacci 78.6% of 2007-2009 range
1370.50, high of 5/2/11
1359.44, high of 5/10/11
1346.82, high of 5/19/11
S&P 500 Cash Index Potential Support
1258.07, low of 6/16/11
1249.05, low of 3/16/11
1246.73, high of 12/13/10
1238.81, Fibonacci 78.6% of 1,576.09 high
1235.05, high of 12/7/10
1232.85, low of 12/16/10
1228.74, Fibonacci 61.8% of 2007-2009 range
1227.08, high of 11/5/10
1173.00, low of 11/16/10
1171.70, low of 10/27/10
1166.74, low of 10/20/10
1159.71, low of 10/19/10
1,151.41, low of 10/7/10
1,131.87, low of 10/4/10
1122.79, low of 9/23/2010
1114.63, low of 9/15/2010
1110.88, low of 9/10/2010
1091.15, low of 9/7/2010
1039.70, low of 8/27/10
1039.31, Fibonacci 23.6% of June-Aug. 2010 range
1010.91, low of 7/1/2010
1008.55, Fibonacci 38.2% of 2009-2010 range
991.97, low of 9/2/2009
978.51, low of 8/17/2009
956.23, high of 6/11/2009
943.29, Gann 50.0% of 2009-2010 range
878.04, Fibonacci 61.8% of 2009-2010 range
874.17, Gann 62.5% of 2009-2010 range
869.32, low of 7/8/2009
805.17, Gann 75.0% of 2009-2010 range
785.13, Fibonacci 78.6% of 2009-2010 range
666.79, intraday low of 3/6/2009
One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
2.28% Transportation Av DJ, IYT
2.16% Homebuilders SPDR, XHB
2.16% Indonesia MV, IDX
2.14% Semiconductor iS IGW, SOXX
2.05% Financial Services DJ, IYG
2.01% Consumer Discretionary SPDR, XLY
1.92% Capital Markets KWB ST, KCE
1.92% Realty Cohen & Steers, ICF
1.89% Semiconductor SPDR, XSD
1.89% REIT Wilshire, RWR
1.83% Networking, IGN
1.82% Financial SPDR, XLF
1.80% Industrial SPDR, XLI
1.79% Real Estate US DJ, IYR
1.77% Financial DJ US, IYF
1.75% MidCap S&P 400 SPDRs, MDY
1.74% Value MidCap Russell, IWS
1.73% Spain Index, EWP
1.71% REIT VIPERs, VNQ
1.71% MidCap S&P 400 iS, IJH
1.69% Growth MidCap 400 B, IJK
1.68% Value SmallCap S&P 600 B, IJS
1.65% Telecom DJ US, IYZ
1.65% South Korea Index, EWY
1.64% Value MidCap S&P 400 B, IJJ
1.64% MidCap Russell, IWR
1.63% Technology SPDR, XLK
1.63% Info Tech VIPERs, VGT
1.62% Financials VIPERs, VFH
1.61% Growth SmallCap VIPERs, VBK
1.60% Value SmallCap VIPERS, VBR
1.60% SmallCap S&P 600, IJR
1.59% Italy Index, EWI
1.59% Growth MidCap Russell, IWP
1.58% Technology DJ US, IYW
1.58% Growth BARRA Small Cap 600, IJT
1.58% Small Cap VIPERs, VB
1.56% SmallCap Russell 2000, IWM
1.54% Austria Index, EWO
1.52% LargeCap Blend S&P=Weight R, RSP
1.51% Growth S&P 500/BARRA, IVW
1.51% Value 1000 Russell, IWD
1.51% QQQ Nasdaq 100 Trust, QQQ
1.50% Water Resources, PHO
1.48% Growth 1000 Russell, IWF
1.48% S&P 500 SPDRs LargeCap Blend, SPY
1.48% LargeCap 1000 R, IWB
1.46% LargeCap Blend Russell 3000, IWV
1.46% Value VIPERs, VTV
1.46% Value SmallCap Russell 2000, IWN
1.46% S&P 500 iS LargeCap Blend, IVV
1.45% Growth VIPERs, VUG
1.45% LargeCap VIPERs, VV
1.44% Dividend SPDR, SDY
1.44% Dividend DJ Select, DVY
1.44% Value S&P 500 B, IVE
1.43% Blend Total Market VIPERs, VTI
1.43% Russia MV, RSX
1.42% Growth SmallCap R 2000, IWO
1.41% DIAMONDS (DJIA), DIA
1.40% Value LargeCap Dynamic PS, PWV
1.39% Latin Am 40, ILF
1.39% Dividend Appreciation Vipers, VIG
1.38% Taiwan Index, EWT
1.38% LargeCap Blend S&P 100, OEF
1.36% Dividend High Yield Equity PS, PEY
1.34% Netherlands Index, EWN
1.32% Agriculture DB PS, DBA
1.31% Singapore Index, EWS
1.28% Utilities VIPERs, VPU
1.21% Health Care SPDR, XLV
1.21% Turkey MSCI iS, TUR
1.20% Emerging 50 BLDRS, ADRE
1.19% Utilities SPDR, XLU
1.18% Emerging Markets, EEM
1.17% Global 100, IOO
1.16% Biotech SPDR, XBI
1.16% EMU Europe Index, EZU
1.15% Emerging VIPERs, VWO
1.13% Microcap Russell, IWC
1.12% Malaysia Index, EWM
1.12% Mexico Index, EWW
1.10% Brazil Index, EWZ
1.10% China LargeCap Growth G D H USX PS, PGJ
1.10% EAFE Index, EFA
1.07% Sweden Index, EWD
1.07% Energy DJ, IYE
1.07% Energy VIPERs, VDE
1.07% Frontier Markets Guggenheim , FRN
1.01% Value EAFE MSCI, EFV
1.01% United Kingdom Index, EWU
1.01% European VIPERs, VGK
1.01% Energy Global, IXC
1.00% WilderHill Clean Energy PS, PBW
1.00% Global ex US ACWI iS, ACWX
1.00% Basic Materials DJ US, IYM
0.96% Small Cap EAFE MSCI iS, SCZ
0.94% Energy SPDR, XLE
0.94% France Index, EWQ
0.93% Germany Index, EWG
0.91% Materials SPDR, XLB
0.90% Growth EAFE MSCI, EFG
0.88% Europe 350 S&P Index, IEV
0.87% Hong Kong Index, EWH
0.87% Dividend International, PID
0.87% Pacific VIPERs, VPL
0.86% Japan Index, EWJ
0.85% Energy & Nat Res iS GS, IGE
0.84% Pacific ex-Japan, EPP
0.81% China 25 iS, FXI
0.80% South Africa Index, EZA
0.77% Consumer Staples SPDR, XLP
0.73% Australia Index, EWA
0.73% Canada Index, EWC
0.72% Metals & Mining SPDR, XME
0.71% Belgium Index, EWK
0.45% Chile MSCI iS, ECH
0.38% Thailand MSCI iS, THD
0.25% India Earnings WTree, EPI
0.15% Bond, High-Yield Junk, JNK
0.14% Commodity Tracking, DBC
0.11% Financial Preferred, PGF
-0.01% Bond Treasury Short-Term iS, SHV
-0.03% Oil Fund PowerShares, DBO
-0.09% India PS, PIN
-0.10% Bond Ex-US Treas, BWX
-0.11% Bond, 1-3 Year Treasury, SHY
-0.11% Bond, High-Yield Corporate, HYG
-0.12% Bond EmrgMkt JPM iS, EMB
-0.24% Oil, Crude, U.S. Oil Fund, USO
-0.25% Bond, Aggregate, AGG
-0.26% Switzerland Index, EWL
-0.38% Bond, Corp, LQD
-0.48% Preferred Stock iS, PFF
-0.49% Bond, 10 Year Treasury, IEF
-0.50% Bond, 20+ Years Treasury, TLT
-0.57% Bond, TIPS, TIP
-0.60% Bond Muni ATM-Free S&P iS, MUB
-0.73% Gold Shares S.T., GLD
-1.56% Silver Miners Global X, SIL
-2.48% Silver Trust iS, SLV
