Dow-Jones Averages: A Non-Confirmation and Insignificant Minor Ripple
The Dow-Jones Industrial Average closed above the closing price highs of the previous 4 weeks on 8/31/11 but the Dow-Jones Transportation Average failed to confirm that minor higher high. The bounce over the past 8 trading days is only an insignificant Minor Ripple.
After the bounce over the past 8 trading days, which has recovered a normal fraction (about half) of the July-August plunge, the stock market might be overbought on a short-term trading basis and, therefore, due for a setback.
The S&P 500 Composite (SPX, 1,218.89) rose 5.97 points or 0.49% on Wednesday, August 31, 2011. SPX fell 5.68% for the month of August.
Upside price momentum has slowed over the past 2 trading days.
SPX rose further above its 20-day SMA but remains below its more significant 50- and 200-day SMAs (simple moving averages), so trends are still bearish in medium- and long-term time frames.
Minor price consolidations and corrections against the trend are normal and expected. Playing minor counter trend bounces is risky, however. The mood can switch from “risk on” to “risk off” overnight, leaving the too-clever trader suddenly holding the bag.
We keep in mind that the dominant trend remains persistently bearish. That is the bias. In a bear market, surprises 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.
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Stock Market Indicators
NASDAQ Composite/S&P 500 Relative Strength Ratio rose above the highs of the previous 2 weeks on 8/30/11, suggesting a minor uptrend. On 8/29/11, the Ratio crossed slightly above 20-, 50-, and 200-day SMAs, which have converged together. Absolute price rose above the highs of the previous 3 weeks on 8/30/11, suggesting a minor uptrend within a larger downtrend. Closing price broke down below 10-month closing price lows on 8/19/11.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) remains bearish. The EEM/SPY Ratio has been in a downtrend since peaking on 10/14/10. EEM/SPY broke down below 6-month lows on 8/25/11, remains below its 50- and 200-day SMAs, and the 50-day SMA remains below the 200-day SMA. Absolute price has been weak since 5/2/11 and broke down below 13-month lows on 8/8/11.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) remains bearish. The EFA/SPY Ratio broke down below 6-year lows on 8/30/11. Absolute price has been weak since 5/2/11 and broke down below 11-month lows on 8/8/11.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell below the lows of the previous 4 weeks on 8/31/11, confirming a minor downtrend. Longer term, OEX/SPX fell below 28-year lows on 5/26/11, confirming a bearish major trend.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) remains bearish for the major trend. IWM/SPY fell below 11-month lows on 8/22/11.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) remains bearish for the major trend. MDY/SPY fell below 11-month lows on 8/8/11, confirming a bearish major trend.
Advisory Service Sentiment: There were 40.9% Bulls versus 36.6% Bears as of 8/31/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio was 1.12, down from 1.23 the previous week. The 20-year median is 1.56 and the mean is 1.64.
VIX Fear Index rose to 48.00 on 8/8/11, its highest level in 14 months, since 5/21/10. VIX is in an uptrend, and it is possible for VIX to rise much higher: VIX was 89.53 on 10/24/08 during the financial crisis. Options players tend to grow more fearful as stock prices decline, and the trend of stock prices is down. 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 Bear Market on 8/2/11, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their closing price lows of June, 2011.
The S&P 500 Composite (SPX, 1,218.89) rose 5.97 points or 0.49% on Wednesday, August 31, 2011. SPX fell 5.68% for the month of August.
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
1370.58, 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
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
1234.56, low of 8/3/11
1232.85, low of 12/16/10
1228.74, Fibonacci 61.8% of 2007-2009 range
1230.71, high of 8/31/11
S&P 500 Cash Index Potential Support
1101.54, low of 8/9/2010
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
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Fixed-Income Investments
Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) turned choppy and corrective since 8/18/11 and looks uncertain for the short term. Longer term, TLT rose above the highs of the previous 2 years on 8/18/11, confirming a major uptrend. Although minor price consolidations and corrections are to be expected in bullish price trends, the dominant trend remains bullish. Support 106.15, 103.20, 102.27, 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance 112.14, 116.92, and 123.15.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) rose above the highs of the previous 4 weeks on 8/31/11, confirming a minor short-term recovery attempt. JNK/LQD fell below 2-year lows and below its 50-, and 200-day simple moving averages on 8/10/11, confirming a bearish major trend.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) fell below 10-month lows on 8/24/11. TIP/IEF has been weak since peaking on 4/8/11 and remains below 3 key SMAs, of 20, 50, and 200 days. This means fixed-income investors have been choosing the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) over the inflation-protected TIPs. Fixed-income investors are not worried about inflation.
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) fell below 3-month lows on 8/17/11, suggesting a medium-term downtrend. The sideways Continuation Pattern (which suggests that the previous major long-term downtrend may resume) since the low of 20.84 on 5/4/11 recently appeared to be “rolling over”, that is, showing a bearish bias. Support 20.84. Resistance 21.16, 21.41, 21.74, 21.86, and 22.21.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) rose above the highs of the previous 3 months on 8/29/11, confirming a short-term uptrend. Keep in mind that on 8/9/11, DBA traded below 8-month lows, confirming a medium-term downtrend. Too many whipsaw reversals make this a difficult market to trade.
Crude Oil, United States Oil ETF (USO) rose above the highs of the previous 3 weeks on 8/31/11, suggesting a minor bounce. Oil fell below the lows of the previous 2 years on 8/9/11, however, confirming a major downtrend. Support 33.69, 33.25, 32.24, 31.45, 30.31, 26.28, 22.74. Resistance 34.76, 35.14, 39.25, 40.74, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) turned choppy and corrective since 8/22/11 and looks uncertain for the short term. Gold rose above all-time highs on 8/22/11, confirming its major long-term uptrend. Although minor price consolidations and corrections are to be expected in any trend, the dominant trend remains persistently bullish. In a world of too much debt, weak currencies, and self-serving politicians running amok, investors around the globe seek the safety of gold as the only forever-true money. Support: 165.88. 159.68, 156.11, 154.10, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: 184.82.
Gold Mining Stocks ETF/ Gold Shares ETF Relative Strength Ratio (GDX/GLD) rose above 3-week highs on 8/29/11, suggesting a minor rally attempt for the short term. GDX/GLD fell below 29-month lows on 8/8/11, confirming a bearish major trend for the long term.
Silver, iShares Silver Trust ETF (SLV) turned choppy and corrective since 8/22/11 and looks uncertain for the short term. Silver rose above 3-month highs on 8/22/11, confirming a medium-term price uptrend. Support 38.05, 36.04, 35.29, 34.02, and 31.97. Resistance: 42.78, 44.71 and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) has been mostly weak since peaking on 4/28/11. This means investors prefer Gold over Silver.
Copper, iPath DJ-UBS Copper TR Sub-Idx ETN (JJC ) rose above the highs of the previous 3 weeks on 8/31/11, suggesting a minor recovery attempt. But JJC fell below the lows of the previous 8 months on 8/10/11, confirming a more significant downtrend. Weakness in Copper suggests doubts about the economic outlook, while strength in Copper suggests confidence. Support 52.88, 50.59, and 49.00. Resistance: 56.64, 57.48, 59.06, 60.04, and 61.69.
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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
1.58% , ACWX , Global ex US ACWI iS, ACWX
2.36% , ECH , Chile MSCI iS, ECH
9.18% , DYN , DYNEGY
5.92% , S , SPRINT NEXTEL
6.51% , DISH , EchoStar Communications
0.98% , ADRU , Europe 100 BLDRS, ADRU
2.41% , EWO , Austria Index, EWO
7.38% , ETFC , E*TRADE FINANCIAL
3.80% , EWW , Mexico Index, EWW
2.00% , FEZ , Euro STOXX 50, FEZ
1.11% , RYAAY , Ryanair Holdings plc
4.44% , RHT , Red Hat Inc.
1.64% , PIN , India PS, PIN
2.14% , THD , Thailand MSCI iS, THD
2.89% , ROK , ROCKWELL AUTOMAT
0.59% , VHT , Health Care VIPERs, VHT
0.60% , IGE , Energy & Nat Res iS GS, IGE
1.68% , VPL , Pacific VIPERs, VPL
1.25% , IYG , Financial Services DJ, IYG
2.19% , NCR , NCR
2.75% , HMA , HEALTH MGMT STK A
0.59% , IDU , Utilities DJ, IDU
2.89% , EWP , Spain Index, EWP
2.45% , GWW , WW GRAINGER
1.25% , FDV , Value 40 Large Low P/E FT DB, FDV
2.17% , AFL , AFLAC
0.46% , JKF , Value LargeCap iS M, JKF
1.15% , EWC , Canada Index, EWC
2.13% , EWQ , France Index, EWQ
2.67% , BHI , BAKER HUGHES
1.32% , DGX , QUEST DIAG
1.42% , RKH , Bank Regional H, RKH
1.19% , KMX , CarMax
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-2.41% , KWT , Solar Energy MV, KWT
-3.85% , T , AT&T Corp., T
-4.76% , HANS , Hansen Natural, HANS
-2.34% , TTH , Telecom H, TTH
-0.70% , PKB , Building & Construction, PKB
-3.95% , HGSI , Human Genome Sciences Inc
-1.65% , MHS , MEDCO HEALTH
-3.27% , ALTR , ALTERA
-1.35% , BLK , BlackRock Inc.
-7.14% , MTG , MGIC INVESTMENT
-3.01% , CIEN.O , CIENA
-0.63% , KLD , LargeCap Blend Socially Responsible iS, KLD
-0.61% , SLE , SARA LEE
-1.68% , DDS , DILLARD STK A
-0.19% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
-1.06% , FII , FED INVESTORS STK B
-2.64% , WOR , WORTHINGTON INDS
-1.69% , TLAB , TELLABS
-0.75% , PHO , Water Resources, PHO
-0.53% , CAG , CONAGRA FOODS
-1.56% , PETM , PETsMART Inc
-1.20% , GPS , GAP
-1.49% , LTD , LIMITED BRANDS
-0.20% , VOX , Telecom Services VIPERs, VOX
-0.29% , IWO , Growth SmallCap R 2000, IWO
-1.31% , TER , TERADYNE
-1.49% , THC , TENET HEALTHCARE
-0.38% , PEJ , Leisure & Entertainment, PEJ
-0.64% , PLL , PALL
-1.04% , EXPD , Expeditors International WA
-1.14% , PM , Philip Morris, PM
-0.89% , WAT , WATERS
-0.40% , VZ , VERIZON COMMS
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
3.80% Mexico Index, EWW
3.01% Switzerland Index, EWL
2.91% Turkey MSCI iS, TUR
2.89% Spain Index, EWP
2.79% South Korea Index, EWY
2.78% Netherlands Index, EWN
2.73% Sweden Index, EWD
2.41% Austria Index, EWO
2.41% Italy Index, EWI
2.36% Indonesia MV, IDX
2.36% Chile MSCI iS, ECH
2.27% South Africa Index, EZA
2.16% Emerging VIPERs, VWO
2.14% Thailand MSCI iS, THD
2.14% European VIPERs, VGK
2.13% France Index, EWQ
2.12% Brazil Index, EWZ
2.05% Emerging Markets, EEM
1.97% EMU Europe Index, EZU
1.96% Singapore Index, EWS
1.94% Europe 350 S&P Index, IEV
1.90% Latin Am 40, ILF
1.88% India Earnings WTree, EPI
1.85% Emerging 50 BLDRS, ADRE
1.83% Russia MV, RSX
1.82% EAFE Index, EFA
1.82% China 25 iS, FXI
1.81% Small Cap EAFE MSCI iS, SCZ
1.79% Growth EAFE MSCI, EFG
1.76% Japan Index, EWJ
1.68% Pacific VIPERs, VPL
1.68% United Kingdom Index, EWU
1.64% India PS, PIN
1.64% Value EAFE MSCI, EFV
1.61% Hong Kong Index, EWH
1.58% Global ex US ACWI iS, ACWX
1.40% Taiwan Index, EWT
1.31% Bond, High-Yield Junk, JNK
1.29% Belgium Index, EWK
1.29% Bond, High-Yield Corporate, HYG
1.29% Financial SPDR, XLF
1.25% Financial Services DJ, IYG
1.17% REIT Wilshire, RWR
1.16% Germany Index, EWG
1.15% Canada Index, EWC
1.13% Pacific ex-Japan, EPP
1.12% REIT VIPERs, VNQ
1.11% Realty Cohen & Steers, ICF
1.08% Real Estate US DJ, IYR
1.07% Energy Global, IXC
1.04% Financials VIPERs, VFH
1.01% Financial DJ US, IYF
0.96% China LargeCap Growth G D H USX PS, PGJ
0.93% Global 100, IOO
0.92% Malaysia Index, EWM
0.91% Australia Index, EWA
0.91% Dividend International, PID
0.80% Value 1000 Russell, IWD
0.75% Energy SPDR, XLE
0.72% Bond Muni ATM-Free S&P iS, MUB
0.71% LargeCap Blend S&P=Weight R, RSP
0.69% Health Care SPDR, XLV
0.68% Value MidCap Russell, IWS
0.68% Industrial SPDR, XLI
0.67% MidCap Russell, IWR
0.67% Utilities VIPERs, VPU
0.65% Utilities SPDR, XLU
0.64% Capital Markets KWB ST, KCE
0.62% Dividend SPDR, SDY
0.62% Consumer Discretionary SPDR, XLY
0.61% Value S&P 500 B, IVE
0.60% Energy & Nat Res iS GS, IGE
0.58% Financial Preferred, PGF
0.54% Dividend Appreciation Vipers, VIG
0.52% DIAMONDS (DJIA), DIA
0.51% Energy DJ, IYE
0.50% LargeCap VIPERs, VV
0.49% Telecom DJ US, IYZ
0.49% S&P 500 iS LargeCap Blend, IVV
0.49% Energy VIPERs, VDE
0.48% Value MidCap S&P 400 B, IJJ
0.47% Value VIPERs, VTV
0.45% Dividend DJ Select, DVY
0.44% S&P 500 SPDRs LargeCap Blend, SPY
0.41% LargeCap 1000 R, IWB
0.40% Blend Total Market VIPERs, VTI
0.40% Growth MidCap Russell, IWP
0.39% MidCap S&P 400 iS, IJH
0.39% LargeCap Blend Russell 3000, IWV
0.37% Growth 1000 Russell, IWF
0.33% LargeCap Blend S&P 100, OEF
0.32% Consumer Staples SPDR, XLP
0.32% MidCap S&P 400 SPDRs, MDY
0.31% Growth S&P 500/BARRA, IVW
0.30% Bond, Corp, LQD
0.27% Bond EmrgMkt JPM iS, EMB
0.26% Growth VIPERs, VUG
0.26% Value SmallCap VIPERS, VBR
0.26% Materials SPDR, XLB
0.24% Dividend High Yield Equity PS, PEY
0.20% Oil, Crude, U.S. Oil Fund, USO
0.19% Frontier Markets Guggenheim , FRN
0.17% Growth MidCap 400 B, IJK
0.17% Commodity Tracking, DBC
0.16% QQQ Nasdaq 100 Trust, QQQ
0.14% Silver Miners Global X, SIL
0.14% Basic Materials DJ US, IYM
0.13% Small Cap VIPERs, VB
0.12% Silver Trust iS, SLV
0.06% Value LargeCap Dynamic PS, PWV
0.05% Technology DJ US, IYW
0.03% SmallCap S&P 600, IJR
0.02% Info Tech VIPERs, VGT
0.00% Value SmallCap S&P 600 B, IJS
0.00% Bond, 1-3 Year Treasury, SHY
0.00% Agriculture DB PS, DBA
-0.01% Bond Treasury Short-Term iS, SHV
-0.02% Value SmallCap Russell 2000, IWN
-0.03% Metals & Mining SPDR, XME
-0.09% Bond, Aggregate, AGG
-0.14% Growth BARRA Small Cap 600, IJT
-0.16% Growth SmallCap VIPERs, VBK
-0.21% SmallCap Russell 2000, IWM
-0.21% Preferred Stock iS, PFF
-0.22% Microcap Russell, IWC
-0.24% Technology SPDR, XLK
-0.28% Biotech SPDR, XBI
-0.29% Growth SmallCap R 2000, IWO
-0.33% Transportation Av DJ, IYT
-0.36% Bond, 10 Year Treasury, IEF
-0.38% Oil Fund PowerShares, DBO
-0.45% Bond, TIPS, TIP
-0.51% Semiconductor iS IGW, SOXX
-0.55% WilderHill Clean Energy PS, PBW
-0.60% Networking, IGN
-0.66% Homebuilders SPDR, XHB
-0.68% Bond Ex-US Treas, BWX
-0.75% Water Resources, PHO
-0.77% Gold Shares S.T., GLD
-1.06% Semiconductor SPDR, XSD
-1.55% Bond, 20+ Years Treasury, TLT
