Judging by the price action of a variety of financial instruments, it appears that traders are anticipating a third round of quantitative easing at the next Federal Open Market Committee (FOMC) meeting on September 20-21, 2011. After the second round of quantitative easing announced a year ago, stocks and commodities rallied for several months, while the U.S. dollar and bonds fell. This year, however, no “ceteris paribus”, that is, “all other things may NOT be equal or held constant.” Conditions seem different enough that a repeat performance may not be guaranteed–even if there is some form of quantitative easing ahead.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) broke down below 15-month lows on 8/29/11 and remains bearish.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell below the lows of the previous 3 weeks on 8/29/11, suggesting a minor downtrend. Longer term, OEX/SPX fell below 28-year lows on 5/26/11, confirming a bearish major trend.
The S&P 500 Composite (SPX, 1,210.08) rose 33.28 points or 2.83% on Monday, August 29, 2011.
SPX rose above the highs of the previous 3 weeks, suggesting a minor uptrend within a larger downtrend.
SPX rose 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.
NYSE volume fell 19%, casting doubt on the price upswing.
Minor price consolidations and corrections against the trend are normal and expected. Playing minor counter trend bounces is risky, however. They can be ephemeral , 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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Includes Top Ten ETFs and Major Trend Relative Strength Rankings.
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Stock Market Indicators
NASDAQ Composite/S&P 500 Relative Strength Ratio rose above the highs of the previous 3 weeks on 8/29/11, suggesting a minor uptrend. 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 8/29/11, 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) broke down below 15-month lows on 8/29/11 and remains bearish. The EFA/SPY Ratio has been in a major long-term downtrend since peaking on 11/27/07. EFA/SPY 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 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 3 weeks on 8/29/11, suggesting 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 33.3% Bears as of 8/24/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio was 1.23, down from 1.95 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, 1,210.08) rose 33.28 points or 2.83% on Monday, August 29, 2011.
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
1227.08, high of 11/5/10
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 in recent days 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 108.10, 103.20, 102.27, 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance 116.92, and 123.15.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) rose above the highs of the previous 3 weeks on 8/29/11, possibly suggesting a 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 21.41, 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 7 trading days intraday on 8/29/11, possibly suggesting a minor rally attempt. Oil fell below the lows of the previous 2 years on 8/9/11, confirming a major downtrend. Support 31.45, 30.31, 26.28, 22.74. Resistance 34.63, 35.14, 39.25, 40.74, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) turned choppy and corrective in recent days 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 in recent days 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 11 days on 8/26/11, possibly suggesting a minor recovery attempt. But JJC fell below the lows of the previous 8 months on 8/10/11, again confirming a significant downtrend. Weakness in Copper suggests doubts about the economic outlook, while strength in Copper suggests confidence. Support 50.59 and 49.00. Resistance: 54.29, 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
2.29% , ADRD , Developed 100 BLDRS, ADRD
4.31% , FDV , Value 40 Large Low P/E FT DB, FDV
5.25% , KWT , Solar Energy MV, KWT
2.86% , FEZ , Euro STOXX 50, FEZ
3.80% , PMR , Retail, PMR
3.57% , PBJ , Food & Beverage, PBJ
3.51% , BDH , Broadband H, BDH
2.57% , IIH , Internet Infrastructure H, IIH
3.09% , IYY , LargeCap Blend Total Market DJ, IYY
2.67% , IYH , Healthcare DJ, IYH
2.15% , IDU , Utilities DJ, IDU
4.27% , RFG , Growth MidCap S&P 400, RFG
2.82% , ADRA , Asia 50 BLDRS, ADRA
3.92% , IJK , Growth MidCap 400 B, IJK
1.65% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
8.44% , JNY , JONES APPAREL
2.19% , IYK , Consumer Non-Cyclical, IYK
2.83% , IYC , Consumer Cyclical DJ, IYC
3.43% , VCR , Consumer D. VIPERs, VCR
9.75% , RFMD , RF Micro Devices Inc
2.72% , IXN , Technology Global, IXN
3.81% , VO , MidCap VIPERs, VO
3.86% , HHH , Internet H, HHH
3.50% , VAW , Materials VIPERs, VAW
3.17% , RPG , Growth S&P 500, RPG
3.26% , PWC , LargeCap Blend Dynamic PS, PWC
4.09% , IJJ , Value MidCap S&P 400 B, IJJ
3.93% , PSTL , Steel Global PS ETF, PSTL
11.36% , SNV , SYNOVUS
2.16% , BBH , Biotech H, BBH
3.31% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
2.45% , UIS , UNISYS
3.71% , IYM , Basic Materials DJ US, IYM
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-3.93% , MYY , Short 100% MidCap 400, MYY
-1.27% , MON , MONSANTO
-0.11% , AGG , Bond, Aggregate, AGG
-0.66% , IEF , Bond, 10 Year Treasury, IEF
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
4.93% Value SmallCap S&P 600 B, IJS
4.82% Homebuilders SPDR, XHB
4.78% Value SmallCap Russell 2000, IWN
4.73% SmallCap Russell 2000, IWM
4.68% Water Resources, PHO
4.64% Growth SmallCap R 2000, IWO
4.64% Value SmallCap VIPERS, VBR
4.63% Small Cap VIPERs, VB
4.60% Capital Markets KWB ST, KCE
4.59% SmallCap S&P 600, IJR
4.57% Growth SmallCap VIPERs, VBK
4.54% Microcap Russell, IWC
4.46% WilderHill Clean Energy PS, PBW
4.33% Growth BARRA Small Cap 600, IJT
4.28% Networking, IGN
4.22% South Korea Index, EWY
4.20% India PS, PIN
4.15% Financial SPDR, XLF
4.13% Semiconductor SPDR, XSD
4.09% Value MidCap S&P 400 B, IJJ
4.00% Financials VIPERs, VFH
3.97% Financial DJ US, IYF
3.92% Growth MidCap 400 B, IJK
3.91% MidCap S&P 400 SPDRs, MDY
3.90% Financial Services DJ, IYG
3.88% India Earnings WTree, EPI
3.86% Biotech SPDR, XBI
3.85% MidCap S&P 400 iS, IJH
3.81% South Africa Index, EZA
3.80% Metals & Mining SPDR, XME
3.71% Basic Materials DJ US, IYM
3.70% Growth MidCap Russell, IWP
3.63% MidCap Russell, IWR
3.63% Value MidCap Russell, IWS
3.60% Transportation Av DJ, IYT
3.49% Semiconductor iS IGW, SOXX
3.46% LargeCap Blend S&P=Weight R, RSP
3.42% REIT VIPERs, VNQ
3.34% REIT Wilshire, RWR
3.32% Russia MV, RSX
3.27% Realty Cohen & Steers, ICF
3.26% Spain Index, EWP
3.23% Emerging Markets, EEM
3.23% Value 1000 Russell, IWD
3.22% Emerging VIPERs, VWO
3.19% LargeCap Blend Russell 3000, IWV
3.18% Real Estate US DJ, IYR
3.17% Industrial SPDR, XLI
3.15% Value VIPERs, VTV
3.15% Brazil Index, EWZ
3.13% Blend Total Market VIPERs, VTI
3.11% Info Tech VIPERs, VGT
3.10% Energy VIPERs, VDE
3.09% Small Cap EAFE MSCI iS, SCZ
3.08% Dividend High Yield Equity PS, PEY
3.07% Mexico Index, EWW
3.06% European VIPERs, VGK
3.06% Sweden Index, EWD
3.03% Energy DJ, IYE
3.02% Materials SPDR, XLB
3.01% LargeCap 1000 R, IWB
2.99% Value S&P 500 B, IVE
2.98% Austria Index, EWO
2.96% Latin Am 40, ILF
2.95% LargeCap VIPERs, VV
2.93% Technology DJ US, IYW
2.92% Energy SPDR, XLE
2.91% Value LargeCap Dynamic PS, PWV
2.91% EMU Europe Index, EZU
2.91% Consumer Discretionary SPDR, XLY
2.87% S&P 500 SPDRs LargeCap Blend, SPY
2.86% Australia Index, EWA
2.85% S&P 500 iS LargeCap Blend, IVV
2.84% Italy Index, EWI
2.83% Emerging 50 BLDRS, ADRE
2.82% Growth 1000 Russell, IWF
2.81% Taiwan Index, EWT
2.79% Energy Global, IXC
2.79% Growth VIPERs, VUG
2.79% QQQ Nasdaq 100 Trust, QQQ
2.78% France Index, EWQ
2.76% Dividend DJ Select, DVY
2.76% Germany Index, EWG
2.74% Dividend SPDR, SDY
2.74% Telecom DJ US, IYZ
2.73% China 25 iS, FXI
2.72% Energy & Nat Res iS GS, IGE
2.71% Frontier Markets Guggenheim , FRN
2.70% Global ex US ACWI iS, ACWX
2.67% Europe 350 S&P Index, IEV
2.65% China LargeCap Growth G D H USX PS, PGJ
2.60% United Kingdom Index, EWU
2.60% Pacific ex-Japan, EPP
2.56% Growth S&P 500/BARRA, IVW
2.55% Dividend Appreciation Vipers, VIG
2.55% Value EAFE MSCI, EFV
2.54% Health Care SPDR, XLV
2.54% Global 100, IOO
2.54% LargeCap Blend S&P 100, OEF
2.52% Technology SPDR, XLK
2.44% Oil, Crude, U.S. Oil Fund, USO
2.38% EAFE Index, EFA
2.34% Indonesia MV, IDX
2.31% Dividend International, PID
2.28% Growth EAFE MSCI, EFG
2.17% DIAMONDS (DJIA), DIA
2.16% Netherlands Index, EWN
2.14% Utilities VIPERs, VPU
2.14% Belgium Index, EWK
2.14% Thailand MSCI iS, THD
2.12% Singapore Index, EWS
2.06% Canada Index, EWC
1.98% Utilities SPDR, XLU
1.91% Silver Miners Global X, SIL
1.88% Hong Kong Index, EWH
1.88% Chile MSCI iS, ECH
1.82% Pacific VIPERs, VPL
1.80% Oil Fund PowerShares, DBO
1.79% Consumer Staples SPDR, XLP
1.56% Turkey MSCI iS, TUR
1.54% Financial Preferred, PGF
1.54% Switzerland Index, EWL
1.30% Japan Index, EWJ
1.29% Preferred Stock iS, PFF
1.27% Bond, High-Yield Junk, JNK
1.14% Malaysia Index, EWM
1.01% Bond, High-Yield Corporate, HYG
0.68% Agriculture DB PS, DBA
0.34% Commodity Tracking, DBC
0.32% Bond, Corp, LQD
0.16% Bond Ex-US Treas, BWX
0.14% Bond EmrgMkt JPM iS, EMB
0.03% Bond Treasury Short-Term iS, SHV
-0.02% Bond, 1-3 Year Treasury, SHY
-0.08% Bond Muni ATM-Free S&P iS, MUB
-0.11% Bond, Aggregate, AGG
-0.59% Bond, TIPS, TIP
-0.66% Bond, 10 Year Treasury, IEF
-1.38% Bond, 20+ Years Treasury, TLT
-1.71% Silver Trust iS, SLV
-2.02% Gold Shares S.T., GLD
