U.S. stocks jumped higher on Tuesday morning after the Bank of Japan signaled overnight that it would cut interest rates further and purchase assets to help stimulate the economy. Stock prices were up substantially before the 9:30 a.m. ET U.S. stock market open and added further to gains after the 10:00 a.m. news that the September ISM Service Index was stronger than expected.
Strong positive reaction of stocks prices to good news suggests that good news may not be fully discounted yet, and that expectations are lagging behind actual conditions. Markets more typically anticipate the future, and expectations typically run ahead of current conditions, rather than lag them. So, when stocks turned down on 10/4/10, we assumed they knew something. But this time it was a fake out.
Although momentum indicators appear mixed, and sentiment seems a bit complacent, actual price is the most important indicator. In other words, the bulls have possession of the ball. Now let’s see what they can do with it.
Analysis of market forces may offer a sense of probabilities. But the many variables that can impact market prices are notoriously difficult to predict. And, market analysis is something less than an exact science. So, sound trading tactics are always recommended. See my Money Management Rules.
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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
3.20% , IXG , Financials Global LargeCap Value, IXG
6.77% , ABK , AMBAC FINL GRP
2.04% , ELV , Value Large Cap DJ, ELV
2.45% , TMW , Wilshire 5000 ST TM, TMW
2.62% , PWJ , Growth Mid Cap Dynamic PS, PWJ
2.85% , DSG , Growth Small Cap DJ, DSG
3.22% , ITF , Japan LargeCap Blend TOPIX 150, ITF
3.27% , SNV , SYNOVUS
2.81% , EWO , Austria Index, EWO
2.67% , MTK , Technology MS sT, MTK
2.49% , IGN , Networking, IGN
7.74% , BC , BRUNSWICK
3.10% , PZJ , SmallCap PS Zacks, PZJ
3.28% , EWN , Netherlands Index, EWN
3.31% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
2.32% , IOO , Global 100, IOO
1.33% , PMR , Retail, PMR
9.08% , HOG , HARLEY DAVIDSON
5.87% , MI , MARSHAL & ILSLEY
2.26% , PWP , Value MidCap Dynamic PS, PWP
2.56% , IGW , Semiconductor iS GS, IGW
2.36% , WAT , WATERS
2.61% , PXJ , Oil & Gas, PXJ
5.13% , FITB , FIFTH THIRD BANC
3.69% , PBE , Biotech & Genome, PBE
3.10% , KCE , Capital Markets KWB ST, KCE
4.75% , JCI , JOHNSON CONTROLS
4.61% , JNS , JANUS CAPITAL
4.55% , SUN , SUNOCO
7.86% , MBI , MBIA
1.32% , PEY , Dividend High Yield Equity PS, PEY
4.65% , CCL , CARNIVAL STK A
2.18% , DGT , Global Titans, DGT
2.09% , KLD , LargeCap Blend Socially Responsible iS, KLD
2.15% , PIC , Insurance, PIC
3.42% , R , RYDER SYSTEM
2.09% , IWS , Value MidCap Russell, IWS
1.75% , RAI , Reynolds American
1.99% , VV , LargeCap VIPERs, VV
4.12% , EXPD , Expeditors International WA
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-1.70% , DOG , Short 100% Dow 30, DOG
-1.94% , MRVL , MARVELL TECHNOLOGY
-1.96% , CL , COLGATE
-1.28% , DHI , D.R. HORTON, DHI
-3.49% , DXD , Short 200% Dow 30 PS, DXD
-4.03% , SDS , Short 200% S&P 500 PS, SDS
-3.98% , MZZ , Short 200% MidCap 400 PS, MZZ
-1.97% , AXP , AMERICAN EXPRESS
-2.04% , SH , Short 100% S&P 500, SH
-0.44% , THC , TENET HEALTHCARE
-0.72% , BIG , BIG LOTS
-0.86% , MU.O , MICRON TECH
-0.35% , BMC.O , BMC SOFTWARE
-0.60% , TLT , Bond, 20+ Years Treasury, TLT
-0.25% , TLH , Bond 10-20 Year US Treas, TLH
-4.92% , QID , Short 200% QQQ PS, QID
-0.34% , ACV , Alberto-Culver Co.
-0.35% , ROST , Ross Stores Inc
-2.37% , PSQ , Short 100% QQQ, PSQ
-0.46% , PHM , PULTE HOMES
-0.06% , DUK , DUKE ENERGY
-0.03% , PST , 200% Short Bond 7-10 Yr T, PST
9 major U.S. stock sectors ranked in order of long-term relative strength:
Consumer Discretionary (XLY) Bullish, Over Weight. The Relative Strength Ratio (XLY/SPY) rose to another new 3-month high on 9/28/10 and remains bullish. The Ratio remains above both SMAs and the 50-day SMA remains above the 200-day SMA. Absolute price rose to a new 4-month high on 10/5/10 and remains bullish, with the rising 50-day SMA above the rising 200-day SMA. Support 32.66, 31.70, 29.80, 28.64, 28.21, and 26.62. Resistance 34.39, 36.13, 38.25 and 39.09.
Industrial (XLI) Bullish, Over Weight. The Relative Strength Ratio (XLI/SPY) rose further above rising 50-day and 200-day SMAs on 9/29/10 and remains bullish. Absolute price rose to a new 4-month high on 10/5/10 and remains bullish, with the rising 50-day SMA above the rising 200-day SMA. Support 30.79, 30.51, 30.32, 29.77, and 27.67. Resistance 32.00, 33.04, 35.00, and 36.16.
Technology (XLK) Neutral, Market Weight. The Relative Strength Ratio (XLK/SPY) turned bullish on 9/27/10 as the 50-day SMA crossed above the 200-day SMA. Absolute price of XLK rose to a new 4-month high on 9/27/10, although price remains neutral, with the 50-day SMA below the 200-day SMA. Support 22.53, 21.60, 20.01, and 19.51. Resistance 23.37, 24.16, 24.68, and 25.69.
Materials (XLB) Neutral, Market Weight. The Relative Strength Ratio (XLB/SPY) crossed back below its rising 50-day SMA on 9/27/10, hereby turning neutral again. Absolute price rose to a new 5-month high on 10/5/10 and is bullish, with the rising 50-day SMA above the rising 200-day SMA. Support 32.36, 29.88, 29.43, and 27.67. Resistance 34.80, 35.47, and 37.56.
Utilities (XLU) Neutral, Market Weight. The Relative Strength Ratio (XLU/SPY) fell to a 3-month low on 9/21/10 and remains neutral. Absolute price of XLU rose to a new 10-month high on 10/5/10 and remains bullish, with the rising 50-day SMA above the rising 200-day SMA. Support 31.27, 30.76, 30.15, 29.66, 27.91, 27.44, and 25.76. Resistance 32.08.
Consumer Staples (XLP) Neutral, Market Weight. The Relative Strength Ratio (XLP/SPY) remains neutral, consolidating gains between its 50-day and 200-day SMAs. Absolute price rose to a new 5-month high on 9/30/10 and remains bullish. Support 27.76, 27.63, 27.46, 26.34, 25.30, and 24.95. Resistance 28.28, 28.75, 29.29 and 30.29.
Energy (XLE) Neutral, Market Weight. The Relative Strength Ratio (XLE/SPY) has recovered somewhat from its 3-month low set on 9/17/10 and is technically neutral. Longer term, the ratio has been bearish most of the time since peaking more than 2 years ago on 7/1/08. Absolute price rose to a new 4-month high on 10/5/10 and remains neutral, with the rising 50-day SMA below the falling 200-day SMA. Price peaked at 62.30 on 4/26/10. Support 55.68, 53.22, 50.33, 48.56, 46.16, and 43.66. Resistance 58.11, 59.84, 62.30, 62.73, 69.95, and 78.10.
Health Care (XLV) Bearish, Under Weight. The Relative Strength Ratio (XLV/SPY) has been bearish most of the time since peaking on 2/23/09. Absolute price of XLV remains neutral. Price peaked at 33.16 on 1/20/10. Support 30.19, 29.87, 28.00, 27.49. Resistance 30.88, 32.05, 32.18, 32.42, 32.69, 33.16, 33.37 and 33.74.
Financial (XLF) Bearish, Under Weight. The Relative Strength Ratio (XLF/SPY) fell to a new 17-month low on 9/29/10 and remains bearish. Absolute price of XLF is neutral, below its 200-day SMA and with the 50-day SMA below the 200-day SMA. XLF has been bearish most days after peaking at 17.12 on 4/15/10. Support 13.29 and 13.08. Resistance 15.09, 15.67, 16.13, 16.90, 17.12, 17.16, and 17.87.
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Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) rose further above 7-year highs on 10/4/10, again confirming a secular (major) bullish trend. Absolute price rose above 2-year highs to confirm RS.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) rose above 8-month highs on 10/5/10 and remains bullish, with the rising 50-day SMA above the falling 200-day SMA. Absolute price rose above 5-month highs on 10/5/10 but remains technically neutral, with the rising 50-day SMA slightly below the falling 200-day SMA.
NASDAQ Composite/S&P 500 Relative Strength Ratio has been technically neutral most of the time since peaking on 5/17/10. The 50-day SMA remains below the 200-day SMA.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell further below 3-month lows on 9/30/10. The ratio has been trending lower since 8/3/10. Longer term, big caps have been relatively out of favor for more than 10 years, since 3/29/2000.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) rose further above 2-month highs on 1/10/10 but remains technically neutral, with the rising 50-day SMA moderately below the rising 200-day SMA.
The S&P MidCap 400/Large Cap Relative Strength Ratio (MDY/SPY) rose above 15-year highs on 9/30/10 and remains bullish. Absolute price rose above 5-month highs on 10/5/10 and remains bullish, with the rising 50-day SMA above the rising 200-day SMA.
Crude Oil nearest futures contract rose above 8-week highs on 10/5/10, again confirming a bullish trend for the short term. Longer term, Oil has been consolidating more or less sideways/neutral in a choppy trading range since topping at 87.15 on 5/3/10. Support 72.63, 70.76, 70.35, 69.51, 68.59, 67.15, 65.05, and 64.24. Resistance 82.79, 83.40, 84.55, 87.15, 90.51, 98.65, and 102.84.
Gold nearest futures contract rose to another new all-time high of 1341.7 on 10/5/10. The secular trend remains bullish. Support 1274.8, 1270.5, 1232.4, 1210.9, 1191.5, 1155.6, 1124.3, 1120.9, 1084.8, 1045.2, 1026.9, and 989.3. Resistance: none.
Gold Mining Stocks ETF (GDX) Relative Strength Ratio (relative to the Gold bullion ETF, GDX/GLD) rose above 8-month highs on 9/22/10, signaling a bullish trend.
Silver/Gold Ratio rose further above 11-month highs on 10/5/10, again confirming a bullish trend. Silver has outperformed Gold significantly since 8/20/10.
Copper nearest futures contract price rose above 2-year highs on 10/5/10, confirming a major uptrend. Strength in Copper suggests confidence about prospects for the world economy, while weakness in Copper suggests doubts. Support 3.1775, 2.9285, 2.8555, 2.8445, and 2.72. Resistance 3.68, 3.795, 4.0825, and 4.27.
U.S. Treasury Bond nearest futures contract price rose above 4-week highs on 9/28/10. The short-term trend appears to be up. The Bond rose to its highest level in 19-months on 8/25/10, again confirming that the major trend remained bullish. Support 131.21, 129.05, 126.01, 125.07, 124.19, 123.03, 121.28, 119.26, 118.24, 118.12, 115.15, 114.06. 113.04, and 112.15. Resistance 135.19, 136.31, 137.31, and 142.31.
Junk/Investment-Grade Corporate Bonds Relative Strength Ratio (JNK/LQD) has been technically neutral to negative much of the time since peaking on 1/8/10. The falling 50-day SMA remains below the falling 200-day SMA.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year Relative Strength Ratio (TIP/IEF) has been RELATIVELY bearish most of the time since peaking on 1/8/10—even though absolute price of TIP has moved higher. This implies that fixed-income investors have been choosing less inflation protection.
The U.S. dollar nearest futures contract price fell below 9-month lows on 10/5/10, again confirming a bearish trend for the short term and intermediate term. Long term, USD may be in a secular downtrend and merely consolidating losses since bottoming at 70.805 in March 2008. Support 76.74 and 75.90, 74.27, and 70.805. Resistance 82.335, 83.315, 83.64, 83.96, 85.36, 86.71, 88.80, 89.22, 89.71, and 92.53.
Advisory Service Sentiment: There were 43.3% Bulls versus 27.8% Bears as of 9/29/10, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio rose to 1.56, up from 0.78 on 9/1/10, which was the lowest level of bullish sentiment in 17 months, since 3/25/09. The ratio has fallen substantially from its peak at 3.36 set on 1/13/10, which was the highest bullish sentiment in 6 years. The 20-year range is 0.41 to 3.74, the median is 1.51, and the mean is 1.57.
VIX Fear Index plunged to 21 in September from 48 in May. Hovering in the low 20s, VIX remains at the lower end of its 5-month range. A low and falling VIX suggests increasing 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 suggests a Primary Tide Bull Market, in my interpretation. The Dow Theory last confirmed a Bullish Major Trend on 4/26/10, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above their closing price highs of the previous 18 months. The Dow Theory signaled the current 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. That 7/23/09 bullish signal reversed the previous bearish signal: the two Averages signaled a Primary Tide Bear Market on 11/21/07, when both Averages closed below their closing price lows of August 2007. On Friday 9/24/10, the Dow-Jones Industrial Average rose to a new 4-month closing price high and on Tuesday 9/28/10 the Dow-Jones Transportation Average confirmed by making a new 4-month closing price high. This signals an intermediate-term Secondary uptrend, according to The Dow Theory.
S&P 500 Composite (SPX, 1,160.75) jumped up 23.72 points or 2.09% to close above 5-month highs on “Turnaround Tuesday” 10/5/10. Volume rose significantly to confirm the upside price reversal. The SPX close price crossed back above the uptrend line rising from 1040.88, the low of 8/31/10. On Balance Volume based on SPY sill shows a bearish divergence: OBV turned upward on Tuesday but remains technically bearish, below both 50-day and 200-day SMAs, and with the falling 50-day SMA below the 200-day SMA. In addition, despite Tuesday’s sharp rally, Chaikin Money Flow based on SPY fell further below 3-week lows following a bearish divergence: a lower high in September compared to a higher high in August. Pure price momentum indicators, which had been bearish, reversed upward but did not move above 5-month highs—far from it. RSI 14 moved above 5-day highs on 10/5/10 after falling below 3-week lows the previous day, on 10/4/10. MACD Histogram based on SPY crossed back into plus territory on but remains far below its peak set on 9/15/10. Longer term, absolute price of SPX remains neutral, above the 50-day and 200-day SMAs, but with the 50-day SMA below the 200-day SMA. Although momentum indicators appear mixed, actual price is the most important indicator. In other words, the bulls have possession of the ball. Now let’s see what they can do with it.
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
1366.59, high of 6/17/2008
1335.63, high of 6/25/2008
1313.15, high of 8/11/2008
1274.42, high of 9/8/2008
1255.09, high of 9/12/2008
1238.81, Fibonacci 78.6% of 1,576.09 high
1228.74, Fibonacci 61.8% of 2007-2009 range
1220.03, high of 9/25/2008
1219.80, high of 4/26/2010
1173.57, high of 5/13/2010
1,162.76, high of 10/5/10
S&P 500 Cash Index Potential Support
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
4.86% Spain Index, EWP
4.10% Turkey MSCI iS, TUR
4.06% Italy Index, EWI
3.86% Silver Trust iS, SLV
3.80% France Index, EWQ
3.79% Sweden Index, EWD
3.61% EMU Europe Index, EZU
3.28% Netherlands Index, EWN
3.26% European VIPERs, VGK
3.19% Japan Index, EWJ
3.10% Capital Markets KWB ST, KCE
3.06% Value SmallCap S&P 600, RZV
3.00% Value EAFE MSCI, EFV
2.93% Basic Materials DJ US, IYM
2.92% Microcap Russell, IWC
2.92% Europe 350 S&P Index, IEV
2.92% Growth SmallCap R 2000, IWO
2.89% Value SmallCap S&P 600 B, IJS
2.88% Water Resources, PHO
2.84% SmallCap Russell 2000, IWM
2.84% EAFE Index, EFA
2.82% Materials SPDR, XLB
2.81% Austria Index, EWO
2.81% SmallCap S&P 600, IJR
2.77% Growth BARRA Small Cap 600, IJT
2.75% Metals & Mining SPDR, XME
2.71% Germany Index, EWG
2.68% Industrial SPDR, XLI
2.65% Belgium Index, EWK
2.65% Natural Resource iS GS, IGE
2.63% Value SmallCap Russell 2000, IWN
2.57% Global ex US ACWI iS, ACWX
2.56% Semiconductor iS GS, IGW
2.55% Growth SmallCap VIPERs, VBK
2.54% Financial Services DJ, IYG
2.49% Networking, IGN
2.48% Value SmallCap VIPERS, VBR
2.47% Pacific VIPERs, VPL
2.44% Growth EAFE MSCI, EFG
2.44% Transportation Av DJ, IYT
2.43% Growth LargeCap NASDAQ 100, QQQQ
2.43% Small Cap VIPERs, VB
2.43% South Africa Index, EZA
2.35% Energy SPDR, XLE
2.32% Energy VIPERs, VDE
2.32% Global 100, IOO
2.31% Russia MV, RSX
2.31% Growth MidCap Russell, IWP
2.29% Financial SPDR, XLF
2.29% Energy DJ, IYE
2.27% Australia Index, EWA
2.25% Latin Am 40, ILF
2.24% Dividend International, PID
2.17% Energy Global, IXC
2.17% Technology DJ US, IYW
2.16% Agriculture DB PS, DBA
2.16% MidCap Russell, IWR
2.14% Growth MidCap 400 B, IJK
2.13% LargeCap Blend S&P=Weight R, RSP
2.12% Info Tech VIPERs, VGT
2.12% China 25 iS, FXI
2.12% Financials VIPERs, VFH
2.10% Emerging 50 BLDRS, ADRE
2.10% LargeCap Blend Russell 3000, IWV
2.10% Consumer Discretionary SPDR, XLY
2.09% MidCap S&P 400 iS, IJH
2.09% Financial DJ US, IYF
2.09% Value MidCap Russell, IWS
2.08% Blend Total Market VIPERs, VTI
2.06% Biotech SPDR, XBI
2.06% Switzerland Index, EWL
2.04% MidCap S&P 400 SPDRs, MDY
2.03% Commodity Tracking, DBC
2.02% Canada Index, EWC
2.01% Growth VIPERs, VUG
2.01% S&P 500 SPDRs LargeCap Blend, SPY
2.00% Value VIPERs, VTV
2.00% Growth S&P 500/BARRA, IVW
1.99% Value S&P 500 B, IVE
1.99% LargeCap 1000 R, IWB
1.99% LargeCap VIPERs, VV
1.98% Growth 1000 Russell, IWF
1.97% S&P 500 iS LargeCap Blend, IVV
1.97% Technology SPDR, XLK
1.97% Gold Shares S.T., GLD
1.97% WilderHill Clean Energy PS, PBW
1.95% Value 1000 Russell, IWD
1.95% LargeCap Blend S&P 100, OEF
1.94% Brazil Index, EWZ
1.94% United Kingdom Index, EWU
1.93% Dividend Appreciation Vipers, VIG
1.93% Dividend SPDR, SDY
1.92% Value MidCap S&P 400 B, IJJ
1.90% Small Cap EAFE MSCI iS, SCZ
1.88% Telecom DJ US, IYZ
1.85% Health Care SPDR, XLV
1.85% China LargeCap Growth G D H USX PS, PGJ
1.82% Value LargeCap Dynamic PS, PWV
1.81% Emerging Markets, EEM
1.75% Dividend DJ Select, DVY
1.72% Semiconductor SPDR, XSD
1.72% REIT Wilshire, RWR
1.70% DIAMONDS (DJIA), DIA
1.68% Indonesia MV, IDX
1.66% Pacific ex-Japan, EPP
1.60% Thailand MSCI iS, THD
1.59% REIT VIPERs, VNQ
1.56% Realty Cohen & Steers, ICF
1.52% Mexico Index, EWW
1.48% Homebuilders SPDR, XHB
1.47% Emerging VIPERs, VWO
1.40% Oil, Crude, U.S. Oil Fund, USO
1.38% Malaysia Index, EWM
1.32% Dividend High Yield Equity PS, PEY
1.32% India Earnings WTree, EPI
1.31% Real Estate US DJ, IYR
1.19% Singapore Index, EWS
1.11% India PS, PIN
1.11% Utilities SPDR, XLU
1.08% South Korea Index, EWY
1.06% Bond Ex-US Treas, BWX
1.05% Utilities VIPERs, VPU
0.94% Consumer Staples SPDR, XLP
0.68% Bond EmrgMkt JPM iS, EMB
0.65% Hong Kong Index, EWH
0.64% Bond, TIPS, TIP
0.44% Taiwan Index, EWT
0.36% Bond, High-Yield Corporate, HYG
0.30% Financial Preferred, PGF
0.22% Chile MSCI iS, ECH
0.20% Bond, Corp, LQD
0.15% Preferred Stock iS, PFF
0.05% Bond, 1-3 Year Treasury, SHY
0.02% Bond, 10 Year Treasury, IEF
0.00% Bond, Aggregate, AGG
-0.02% Bond Muni ATM-Free S&P iS, MUB
-0.60% Bond, 20+ Years Treasury, TLT