A Balance of Economic Terror
“What I see now, the world economy is in a state of a ‘balance of economic terror’ that may all of a sudden plunge into a full-fledged economic depression.” — Turkish President Abdullah Gul
The Dow Theory confirmed a short-term downtrend on 11/21/11 when both Averages closed below previous 4-week lows after making lower highs since peaking on 10/27/11.
Most other stock price indexes and indicators confirmed.
U.S. Treasury Bond prices rose further and remain technically bullish.
TIPs and Junk Bonds are relatively bearish compared with U.S. Treasuries.
U.S. dollar ETF (UUP) rose further above 50-day and 200-day SMAs and remains bullish.
CRB Index absolute price fell below the lows of the previous 4 weeks on 11/21/11, confirming a significant downtrend. It remains bearishly below falling 50-day and 200-day SMAs.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) fell further below the lows of the previous 11 months, thereby confirming a major bearish downtrend in all time frames.
Crude Oil, United States Oil ETF (USO) broke down below the lows of the previous 7 trading days and below its 200-day SMA.
Silver, iShares Silver Trust ETF (SLV) broke down below the lows of the previous 4-weeks.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) broke down below the lows of the previous 4-weeks.
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Stock Market Indicators
The S&P 500 Composite (SPX: 1,192.98) absolute price fell below the lows of the previous 6 weeks on 11/21/11, confirming a significant downtrend. SPX remains bearishly below falling 50-day and 200-day SMAs. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 8/12/11.
Volume on the NYSE rose 11% to confirm the price downturn. The stock market has been falling on heavy volume and rising on light volume in November, which is bearish.
Price momentum oscillators, such as RSI and MACD, have been weaker than price in recent weeks, thereby giving bearish divergence early warning.
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
1406.32, high of 5/29/2008
1381.50, Fibonacci 78.6% of 2007-2009 range
1370.58, high of 5/2/11
1359.44, high of 5/10/11
1356.48, high of 7/7/11
1347.00, high of 7/21/11
1307.28, Fibonacci 78.6% of 2011 range
1292.66, high of 10/27/11
1277.55, high of 11/8/2011
1269.95, 200-day SMA
1263.21, high of 11/3/2011
1258.07, low of 6/16/11
1257.58, Fibonacci 61.8% of 2011 range
1256.55, high of 10/24/11
1249.05, low of 3/16/11
1246.73, high of 12/13/10
1238.81, Fibonacci 78.6% of 1,576.09 high
1234.81, low of 11/3/11
1226.64, low of 11/9/2011
1222.68, Fibonacci 50% of 2011 range
1221.06, low of 10/26/2011
1215.42, low of 11/1/2011
1209.43, low of 11/17/2011
1204.49, Fibonacci 23.6% of 2009-11 range
1187.77, Fibonacci 38.2% of 2011 range
The S&P 500 Composite Potential Support
1183.16, low of 11/21/2011
1144.38, Fibonacci 23.6% of 2011 range
1101.73, Fibonacci 38.2% of 2009-11 range
1074.77, low of 10/4/2011
1039.70, low of 8/27/10
1039.31, Fibonacci 23.6% of June-Aug. 2010 range
1010.91, low of 7/1/2010
1018.69, Fibonacci 50% of 2009-11 range
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
935.64, Fibonacci 61.8% of 2009-11 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
817.40, Fibonacci 78.6% of 2009-11 range
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
The Dow Theory signaled a Primary Tide Bear Market on 8/2/11, when both Dow-Jones Averages, Industrial and Transportation, closed below their closing price lows of the previous 11 months. This Bear Market was confirmed on 10/3/11 by lower closing price lows for both Averages. A short-term downtrend was confirmed on 11/21/11 when both Averages closed below previous 4-week lows after making lower highs since peaking on 10/27/11.
A Dow Theory Primary Tide Bear Market is a powerful beast that must not be underestimated. The median Dow Theory Primary Tide Bear Market in history lasts 16 months and takes stock prices down 34%. In a Dow Theory Primary Tide Bear Market, the big surprises usually come to the downside. Typically, there is no safe place to hide in a Dow Theory Primary Tide Bear Market. Even those stocks that have held up relatively well through most of the Bear Market eventually succumb to the relentless tide of selling.
Given the deep-rooted global fundamental economic problems and the lack of workable solutions, plus the constant attempts of government officials to deny reality and talk the markets up, markets are likely to remain volatile, with a continuing heightened sensitivity to news, and with continuing large daily moves in both directions. Note that very high price volatility is typical of bear markets, while bull markets are much less volatile. Risk appears skewed to the downside.
NASDAQ Composite/S&P 500 Relative Strength Ratio fell below 11-week lows and fell further below its 50-day SMA on 11/21/11. The Ratio has been trending lower since peaking on 9/23/11. This is cause for concern. Absolute price of the NASDAQ Composite fell below the lows of the previous 6 weeks on 11/21/11, confirming a significant downtrend. The long-term price trend turned bearish on 11/17/11, with price below the 50-day SMA and the 200-day SMA, and with the 50-day SMA below the 200-day SMA.
iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF/SPY) fell further after breaking down below its 50-day SMA on 11/17/11, and thereby turning bearish again. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 1/13/11.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) fell further after breaking down below its 50-day SMA on 11/8/11, and thereby turning bearish again. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 2/3/11.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) fell below the lows of the previous 7 years on 11/16/11, reconfirming the preexisting major Bear trend. The 50-day SMA has remained bearishly below the 200-day SMA of the EFA/SPY Ratio every day since 1/14/11.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) is neutral for the short term, stuck between the 50-day SMA and 200-day SMA. Longer term, the 50-day SMA has remained bullishly above the 200-day SMA every day since 8/25/11. Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative safety of large size. 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) remains neutral for the short term, stuck between the 50-day SMA and 200-day SMA. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 8/11/11.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) remains neutral for the short term, stuck between the 50-day SMA and 200-day SMA. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 8/24/11.
Advisory Service Sentiment: There were 67.4% Bulls plus Neutrals versus 32.6% Bears as of 11/16/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. Sentiment has returned to normal: the 20-year median of Bulls plus Neutrals is 69.40 and the mean is 68.32.
VIX Fear Index , now at 32.91, has firmed up from a low of 24.44 on 10/28/11, indicating rising fear again. Previously, VIX had fallen to 24.44 on 10/28/11, down from a high of 48.00 on 8/8/11, suggesting that fear had decreased substantially. 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.
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Fixed-Income Investments
Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) rose further above rising 50-day and 200-day SMAs on 11/21/11, again confirming a significant uptrend. Longer term, the 50-day SMA has remained bullishly above the 200-day SMA every day since 6/24/11. Support 115.21, 109.82, 106.08, 103.20, 102.27, 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance 125.03.
Bond, iShares Barclays 7-10 Year U.S. Treasury ETF (IEF) rose further above 50-day and 200-day SMAs on 11/21/11, again confirming a significant uptrend. Longer term, the 50-day SMA has remained bullishly above the 200-day SMA every day since 6/21/11. Support 103.57, 101.36, 101.11, 99.79, and 97.66. Resistance 106.66.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) fell below its 50-day SMA and fell further below its falling 200-day SMA on 11/21/11, confirming its major downtrend. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 6/20/11. JNK/LQD broke down below the lows of the previous 29-months on 10/3/11. Absolute price of JNK has been weak since 10/27/11 remains bearish.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) fell below its 50-day SMA and fell further below its falling 200-day SMA on 11/21/11, confirming its major downtrend. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 7/15/11.
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) rose further above 50-day and 200-day SMAs on 11/21/11, again confirming a significant uptrend. Longer term, the 50-day SMA has remained bullishly above the 200-day SMA every day since 10/26/11. Support 21.58, 21.07, and 20.84. Resistance 22.32 and 22.62.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) fell further below the lows of the previous 11 months on 11/21/11, again confirming a major bearish downtrend in all time frames.
Crude Oil, United States Oil ETF (USO) broke down below the lows of the previous 7 trading days and below its 200-day SMA on 11/21/11. Previously, USO rose 37% from its October low and appeared overbought by 11/16/11, when it peaked out at 39.74. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 7/14/11. Finally, USO broke down below 2-year lows on 10/4/11 to confirm a major bear market. Support 36.49, 34.54, 32.52, 29.10, 26.28, and 22.74. Resistance 39.74, 40.74, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) fell below its 50-day SMA on 11/21/11, confirming a minor downside price correction. Longer term, GLD remains above its rising 200-day SMA, and the 50-day SMA has remained bullish above the 200-day SMA every day since 2/11/09. Support: 154.19, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: 175.46, 177.40, and 185.85.
Gold Mining Stocks ETF/Gold Shares ETF Relative Strength Ratio (GDX/GLD) remains bearishly below falling 50-day and 200-day SMAs. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 2/22/11. GDX/GLD fell below 29-month lows on 8/8/11, reconfirming a bearish major trend for the long term.
Silver, iShares Silver Trust ETF (SLV) broke down below the lows of the previous 4-weeks on 11/21/11. SLV remains bearishly below 50-day and 200-day SMAs. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 10/27/11. SLV price broke down below the lows of the previous 7 months on 9/26/11, which confirmed a bearish major trend for the long term. Support 29.14, 27.41, 26.03, and 24.44. Resistance: 34.44, 34.51, 40.23, 41.49, 42.30, 42.78, 44.71 and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) remains bearishly below falling 50-day and 200-day SMAs. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 8/30/11. This SLV/GLD downtrend means investors prefer Gold over Silver.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) broke down below the lows of the previous 4-weeks on 11/21/11. JJC remains bearishly below falling 50-day and 200-day SMAs. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 8/8/11. Major trend weakness in Copper suggests serious concerns about the economic outlook.
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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
2.63% , CBE , COOPER INDS STK A
5.03% , NVDA , NVIDIA
2.22% , DOG , Short 100% Dow 30, DOG
2.58% , XBI , Biotech SPDR, XBI
1.97% , JNS , JANUS CAPITAL
4.22% , DXD , Short 200% Dow 30 PS, DXD
3.93% , SIRI , Sirius Satellite
1.92% , SH , Short 100% S&P 500, SH
2.07% , ETFC , E*TRADE FINANCIAL
1.74% , MYY , Short 100% MidCap 400, MYY
1.28% , HSIC , Henry Schein Inc
1.88% , PSQ , Short 100% QQQ, PSQ
3.74% , SDS , Short 200% S&P 500 PS, SDS
3.78% , QID , Short 200% QQQ PS, QID
0.52% , TLH , Bond 10-20 Year US Treas, TLH
0.67% , MHP , MCGRAW HILL
1.50% , FDO , FAMILY DLR STRS
0.74% , JBL , JABIL CIRCUIT
0.42% , CMCSA , COMCAST HOLDINGS STK A
0.62% , URBN , Urban Outfitters Inc.
0.65% , MRO , MARATHON OIL
0.83% , DDS , DILLARD STK A
0.25% , IFF , INTL FLAV & FRAG
0.48% , AN , AUTONATION
0.59% , TLT , Bond, 20+ Years Treasury, TLT
0.29% , NTAP , NETWK APPLIANCE
0.01% , SHV , Bond Treasury Short-Term iS, SHV
1.03% , PDCO , Patterson Dental Company
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-39.49% , FMCN , Focus Media, FMCN
-9.08% , GILD , Gilead Sciences Inc
-1.87% , RFV , Value MidCap S&P 400, RFV
-2.25% , MTK , Technology MS sT, MTK
-1.92% , IGM , Technology GS, IGM
-1.85% , IXP , Telecommunications Global, IXP
-1.28% , FPX , IPOs, First Tr IPOX-100, FPX
-1.71% , DVY , Dividend DJ Select, DVY
-2.57% , EWN , Netherlands Index, EWN
-3.28% , EWI , Italy Index, EWI
-1.88% , PSJ , Software, PSJ
-1.92% , SDY , Dividend SPDR, SDY
-3.54% , IDX , Indonesia MV, IDX
-2.55% , EFG , Growth EAFE MSCI, EFG
-1.90% , IYY , LargeCap Blend Total Market DJ, IYY
-1.32% , FDL , Dividend Leaders, FDL
-1.85% , RFG , Growth MidCap S&P 400, RFG
-4.32% , EIS , Israel MSCI iS, EIS
-1.53% , IYC , Consumer Cyclical DJ, IYC
-1.70% , XLG , LargeCap Rydex Rus Top 50, XLG
-4.28% , DDM , Ultra Dow30 Double, DDM
-2.10% , EWL , Switzerland Index, EWL
-2.05% , IJT , Growth BARRA Small Cap 600, IJT
-4.57% , PIN , India PS, PIN
-6.71% , MTG , MGIC INVESTMENT
-1.46% , PWV , Value LargeCap Dynamic PS, PWV
-2.93% , KWT , Solar Energy MV, KWT
-3.15% , HANS , Hansen Natural, HANS
-2.58% , IJS , Value SmallCap S&P 600 B, IJS
-1.95% , ISI , LargeCap Blend S&P 1500 iS, ISI
-4.09% , RIG , TRANSOCEAN
-2.06% , IYJ , Industrial LargeCap Blend DJ US, IYJ
-9.09% , EK , EASTMAN KODAK
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
2.58% Biotech SPDR, XBI
0.59% Bond, 20+ Years Treasury, TLT
0.28% Bond, 10 Year Treasury, IEF
0.20% Bond Muni ATM-Free S&P iS, MUB
0.01% Bond, 1-3 Year Treasury, SHY
0.01% Bond Treasury Short-Term iS, SHV
-0.02% Bond, Aggregate, AGG
-0.18% Bond, TIPS, TIP
-0.29% Oil Fund PowerShares, DBO
-0.31% Agriculture DB PS, DBA
-0.41% Bond, Corp, LQD
-0.61% Oil, Crude, U.S. Oil Fund, USO
-0.73% Commodity Tracking, DBC
-0.77% Preferred Stock iS, PFF
-0.78% Bond Ex-US Treas, BWX
-0.90% Bond EmrgMkt JPM iS, EMB
-0.97% Financial Preferred, PGF
-1.06% Bond, High-Yield Junk, JNK
-1.13% Bond, High-Yield Corporate, HYG
-1.22% Telecom DJ US, IYZ
-1.24% Utilities SPDR, XLU
-1.29% Utilities VIPERs, VPU
-1.46% Value LargeCap Dynamic PS, PWV
-1.49% Growth MidCap Russell, IWP
-1.56% Consumer Discretionary SPDR, XLY
-1.61% Consumer Staples SPDR, XLP
-1.66% MidCap Russell, IWR
-1.67% Energy DJ, IYE
-1.71% Dividend DJ Select, DVY
-1.73% Energy VIPERs, VDE
-1.74% Materials SPDR, XLB
-1.75% Technology SPDR, XLK
-1.79% Energy SPDR, XLE
-1.79% Dividend Appreciation Vipers, VIG
-1.80% Growth 1000 Russell, IWF
-1.83% Value MidCap Russell, IWS
-1.83% LargeCap VIPERs, VV
-1.84% LargeCap Blend S&P=Weight R, RSP
-1.84% Growth VIPERs, VUG
-1.85% Growth MidCap 400 B, IJK
-1.85% LargeCap 1000 R, IWB
-1.86% Blend Total Market VIPERs, VTI
-1.86% Growth S&P 500/BARRA, IVW
-1.86% Semiconductor iS IGW, SOXX
-1.87% S&P 500 iS LargeCap Blend, IVV
-1.87% LargeCap Blend Russell 3000, IWV
-1.90% S&P 500 SPDRs LargeCap Blend, SPY
-1.90% Energy Global, IXC
-1.91% QQQ Nasdaq 100 Trust, QQQ
-1.91% Info Tech VIPERs, VGT
-1.92% Health Care SPDR, XLV
-1.92% Dividend SPDR, SDY
-1.93% Value 1000 Russell, IWD
-1.94% Value S&P 500 B, IVE
-1.96% Energy & Nat Res iS GS, IGE
-1.97% Japan Index, EWJ
-1.98% LargeCap Blend S&P 100, OEF
-1.99% Growth SmallCap VIPERs, VBK
-2.00% MidCap S&P 400 SPDRs, MDY
-2.01% Basic Materials DJ US, IYM
-2.03% Capital Markets KWB ST, KCE
-2.03% Value SmallCap VIPERS, VBR
-2.04% Silver Trust iS, SLV
-2.04% Value VIPERs, VTV
-2.05% Dividend High Yield Equity PS, PEY
-2.05% Growth BARRA Small Cap 600, IJT
-2.06% Technology DJ US, IYW
-2.07% MidCap S&P 400 iS, IJH
-2.09% Value MidCap S&P 400 B, IJJ
-2.10% Switzerland Index, EWL
-2.10% Small Cap VIPERs, VB
-2.14% Microcap Russell, IWC
-2.15% Brazil Index, EWZ
-2.18% DIAMONDS (DJIA), DIA
-2.19% Singapore Index, EWS
-2.22% Latin Am 40, ILF
-2.24% Emerging 50 BLDRS, ADRE
-2.26% Financial DJ US, IYF
-2.26% Transportation Av DJ, IYT
-2.29% Canada Index, EWC
-2.31% Industrial SPDR, XLI
-2.33% Water Resources, PHO
-2.33% Frontier Markets Guggenheim , FRN
-2.34% Value SmallCap Russell 2000, IWN
-2.37% Growth SmallCap R 2000, IWO
-2.38% Homebuilders SPDR, XHB
-2.39% SmallCap Russell 2000, IWM
-2.40% Dividend International, PID
-2.43% Global 100, IOO
-2.46% Hong Kong Index, EWH
-2.46% Gold Shares S.T., GLD
-2.47% France Index, EWQ
-2.48% Pacific VIPERs, VPL
-2.48% Financial SPDR, XLF
-2.48% Malaysia Index, EWM
-2.48% SmallCap S&P 600, IJR
-2.49% Financials VIPERs, VFH
-2.53% Financial Services DJ, IYG
-2.53% REIT VIPERs, VNQ
-2.53% EAFE Index, EFA
-2.54% Value EAFE MSCI, EFV
-2.55% Spain Index, EWP
-2.55% Growth EAFE MSCI, EFG
-2.57% Europe 350 S&P Index, IEV
-2.57% Netherlands Index, EWN
-2.58% Value SmallCap S&P 600 B, IJS
-2.64% Real Estate US DJ, IYR
-2.65% Global ex US ACWI iS, ACWX
-2.66% REIT Wilshire, RWR
-2.68% Small Cap EAFE MSCI iS, SCZ
-2.68% Networking, IGN
-2.73% Semiconductor SPDR, XSD
-2.75% Realty Cohen & Steers, ICF
-2.75% Belgium Index, EWK
-2.77% Metals & Mining SPDR, XME
-2.79% European VIPERs, VGK
-2.80% South Africa Index, EZA
-2.85% Germany Index, EWG
-2.94% United Kingdom Index, EWU
-3.01% Thailand MSCI iS, THD
-3.04% EMU Europe Index, EZU
-3.05% Pacific ex-Japan, EPP
-3.06% China 25 iS, FXI
-3.09% Chile MSCI iS, ECH
-3.09% Emerging VIPERs, VWO
-3.10% Australia Index, EWA
-3.14% WilderHill Clean Energy PS, PBW
-3.22% Emerging Markets, EEM
-3.23% South Korea Index, EWY
-3.28% Italy Index, EWI
-3.31% Sweden Index, EWD
-3.34% Mexico Index, EWW
-3.40% Taiwan Index, EWT
-3.54% Indonesia MV, IDX
-3.85% China LargeCap Growth G D H USX PS, PGJ
-4.03% Silver Miners Global X, SIL
-4.07% Austria Index, EWO
-4.39% India Earnings WTree, EPI
-4.57% India PS, PIN
-4.81% Turkey MSCI iS, TUR
-5.12% Russia MV, RSX
