Highlights based on trading on Monday, May 21, 2012:
The S&P 500 (SPX: 1,315.99) rose 20.77 points or 1.60% on Monday. It was the price biggest bounce in more than 2 months.
Volume shows bearish divergence compared to the S&P 500 price, however. NYSE total trading volume fell 17% on Monday’s rally. SPDR S&P 500 (SPY) volume fell 45%.
Volume has been increasing when stock prices decline and decreasing when stock prices advance, suggesting that selling pressure is greater than buying pressure.
Despite the price bounce, the smoothed price momentum indicator MACD fell to a lower low.
More sensitive price momentum indicators RSI(14) and Stochastic(14,3) turned moderately higher. They had fallen to levels that some said were “oversold”, but that does not imply a significant or sustainable price recovery.
Trendlines are still pointing down. The market decline is more likely to be over when RSI(14) and Stochastic(14,3) begin to show bullish divergences compared to price, making higher lows while price makes lower lows. That favorable condition is not present now.
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Equity Mutual Funds lost 6% in 2011, according to Lipper Research Services.
Hedge funds lost 5%, according to COO Connect.
Hedge funds suffered their second-worst year on record in 2011, according to an index maintained by Eurekahedge, an independent research firm that specializes in hedge fund data. Some of the world’s largest and best-known hedge funds suffered huge losses, down 20% to 50%.
But not all money managers were down in 2011; see:
Robert W. Colby Asset Management, Inc. (click here).
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Stock Market Indicators
The Dow Theory signaled a Primary Tide Bear Market on 5/17/12 when both Industrials and Transports closed below their closing price lows of the previous 4 months. A potential trend change was suggested as early as 3/6/12, when both Industrials and Transports fell below their lows of the previous 4 weeks. The Averages gave an even earlier warning by diverging after 2/3/12, as the Transports turned corrective and failed to confirm higher highs by the Industrials. Again on 5/1/12, the Industrials rose to a higher closing price high while the Transports failed to rise to a higher closing price high, thereby indicating a non-confirmation and bearish divergence.
NASDAQ Composite/S&P 500 Relative Strength Ratio fell below its lows of the previous 3 months on 5/18/12 after falling below its 50-day SMA on 4/30/12. Confirming this downtrend, absolute price fell below its lows of the previous 3 months on 5/18/12 after falling below its 50-day SMA on 5/3/12.
iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF/SPY) fell below its lows of the previous 3 years on 5/17/12, reconfirming its bearish trend. Systematically, BKF/SPY remains bearish below its 50-day SMA, below its 200-day SMA, and with the 50-day SMA below the 200-day SMA every day since 1/13/11.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) fell below its lows of the previous 3 years on 5/16/12, reconfirming its bearish trend. EEM/SPY remains below its 50-day and 200-day SMAs. Longer term, the 50-day SMA has remained below the 200-day SMA every day since 2/3/11.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) reconfirmed a bearish major trend when it fell below its lows of the previous 8 years on 5/16/12. Systematically, EFA/SPY remains bearish below its 50-day and 200-day SMAs, and the 50-day SMA has remained below the 200-day SMA consistently every day since 1/14/11.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) rose above its highs of the previous 2 years on 5/18/12. Systematically, OEX/SPX remains bullish: above its 50-day SMA, above its 200-day SMA, and with the 50-day SMA above the 200-day SMA. Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative safety of large size. On the other side of the coin, 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) fell below its lows of the previous 5 months on 5/18/12, reconfirming renewed downside momentum. Systematically, IWM/SPY returned to bearish status again on 4/20/12 when the 50-day SMA crossed below the 200-day SMA. Longer term, IWM/SPY has been relatively weak for more than a year, since 4/5/11.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) fell below its lows of the previous 4 months on 5/18/12. Systematically, MDY/SPY is neutral: below its 50-day SMA, below its 200-day SMA, but with the 50-day SMA still slightly above the 200-day SMA.
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Sentiment for Contrary Thinking
Investor sentiment data indicated alarming degrees of optimism and bullish complacency at the 2012 market highs. That is bearish because when the majority of investors has been bullish for some time, investors are already fully invested in the market. Once everyone who is going to buy has already bought, stocks are vulnerable to a downside shakeout. The pendulum of emotion tends to swing too far in one direction, but market mood always reverts to the mean. Some of the most recent data suggests that investors’ sentiment may be beginning to shift away from bullish complacency.
AAII Sentiment: There were 51.64% Bulls and 20.19% Bears, according to the AAII weekly survey reported on 2/9/12. This was the highest level of bullish sentiment in more than a year, since 52.34% Bulls on 1/13/11. As of 5/17/12, however, sentiment had reversed, with only 23.58% Bulls and 45.97% Bears.
Investors Intelligence Sentiment: according to the Investors Intelligence weekly survey of stock market newsletter advisors, there were 54.8% Bulls reported on 2/15/11, the highest since the stock market top in May, 2011. On 5/9/12, there were only 20.4% Bears, the lowest level since 6/1/11. This is still suggesting too many bulls.
VIX Fear Index rose to an intraday peak of 25.14 on 5/18/12, the highest level since 12/19/12, suggesting a beginning of a shift toward skepticism from bullish complacency. VIX fell to 13.66 intraday on 3/16/12, its lowest level since 6/20/07, and down from a peak of 48.00 on 8/8/11. That large drop indicated a shift away from fear 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 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
1422.38, high of 4/2/2012
1415.32, high of 5/1/2012
1388.71, low of 5/3/2012
1380.58, 50-day SMA
1381.50, Fibonacci 78.6% of 2007-2009 range
1340.34, Fibonacci 23.6% R of 2011-12 range
The S&P 500 Composite Potential Support
1289.59, Fibonacci 38.2% R of 2011-12 range
1278.80, 200-day SMA
1277.58, low of 1/13/2012
1265.26, low of 1/5/2012
1262.30, low of 12/27/2011
1257.58, Fibonacci 61.8% of 2011 range
1248.58, Fibonacci 50.0% R of 2011-12 range
1244.80, low of 12/7/2011
1239.73, low of 12/1/2011
1238.81, Fibonacci 78.6% of 1,576.09 high
1234.81, low of 11/3/2011
1231.04, high of 12/16/2011
1226.64, low of 11/9/2011
1222.68, Fibonacci 50% of 2011 range
1224.57, high of 12/19/2011
1215.20, low of 12/16/2011
1207.56, Fibonacci 61.8% R of 2011-12 range
1204.49, Fibonacci 23.6% of 2009-11 range
1202.37, low of 12/19/2011
1187.77, Fibonacci 38.2% of 2011 range
1158.66, low of 11/25/2011
1144.38, Fibonacci 23.6% of 2011 range
1101.73, Fibonacci 38.2% of 2009-11 range
1074.77, low of 10/4/2011
1149.16, Fibonacci 78.6% R of 2011-12 range
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
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Fixed-Income Investments
Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) remains systematically bullish: above its 50-day SMA, above its 200-day SMA, and with the 50-day SMA above the 200-day SMA every day since 6/24/11. Support 120.60, 117.44, 115.69, 114.82, 109.69, 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) remains systematically bullish: above its 50-day SMA, above its 200-day SMA, and with the 50-day SMA above the 200-day SMA every day since 6/21/11. Support 105.85, 105.22, 104.77, 103.90, 102.51, 101.77, 101.36, 101.11, 99.79, and 97.66. Resistance none.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) fell below its lows of the previous 5 months on 5/17/12. Systematically, JNK/LQD remains neutral: below its 50-day SMA, below its 200-day SMA, but the 50-day SMA has been above the 200-day SMA every day since 4/16/12.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) turned down after 3/19/12 and fell below its lows of the previous 3 months on 5/17/12. Systematically, TIP/IEF remains neutral: below its 50-day SMA, above its 200-day SMA, and the 50-day SMA has been above the 200-day SMA every day since 3/14/12.
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) rose above its highs of the previous 4 months on 5/17/12. UUP remains systematically bullish: above its 50-day SMA, above its 200-day SMA, and with the 50-day SMA above the 200-day SMA. Support 22.14, 21.89, 21.74, 21.58, 21.07, and 20.84. Resistance 22.61, 22.85, 23.52, 25.84, 27.19, 28.97.
CRB Commodity Price Index fell below its lows of the previous 19 months on 5/14/12, for another a bearish trend confirmation. Systematically, CRB remains bearish: below its 50-day SMA, below its 200-day SMA, and with the 50-day SMA below the 200-day SMA every day since 8/18/11.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) fell below the lows of the previous 20 months on 5/14/12. Systematically, DBA remains bearish, below both its 50-day SMA and 200-day SMAs, and with the 50-day SMA consistently below the 200-day SMA every day since 8/8/11.
Crude Oil, United States Oil ETF (USO) fell further below its lows of the previous 6 months on 5/18/12. USO still looks bearish on the chart. Systematically, USO remains neutral: below its 50-day SMA, below its 200-day SMA, but the 50-day SMA has remained above the 200-day SMA consistently every day since 1/3/12. Support 32.52, 29.10, 26.28, and 22.74. Resistance 36.97, 40.29, 41.38, 42.30, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) fell below its lows of the previous 4 months on 5/16/12. Systematically, GLD turned bearish on 4/17/12, when its 50-day SMA crossed below its 200-day SMA. Support: 148.27, 147.19, 143.97, 143.42, and 142.55. Resistance: 155.57, 162.18, 163.20, 164.89, 166.57, 174.00, 175.46, 177.40, and 185.85.
Gold Mining Stocks ETF/Gold Shares ETF Relative Strength Ratio (GDX/GLD) fell below its lows of the previous 3 years on 5/15/12, thereby reconfirming a bearish major trend for the long term. Systematically, GDX/GLD remains bearish: below its 50-day and 200-day SMAs, and the 50-day SMA has remained bearishly below the 200-day SMA every day since 2/22/11.
Silver, iShares Silver Trust ETF (SLV) fell below its lows of the previous 4 months on 5/16/12. Systematically, SLV remains bearish: below its 50-day and 200-day SMAs, and with the 50-day SMA below the 200-day SMA every day since 10/27/11. Support 25.65 and 24.44. Resistance: 28.60, 30.52, 31.64, 32.34, 33.44, 36.44, 40.23, 41.49, 42.30, 42.78, 44.71 and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) fell below its lows of the previous 4 months on 5/16/12, reconfirming a downtrend for the medium term. SLV/GLD remains below its 50-day SMA, below its 200-day SMA, and the 50-day SMA has remained bearishly below the 200-day SMA every day since 8/30/11.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) fell below its lows of the previous 4 months on 5/18/12. JJC fell below its 200-day SMA on 5/3/12 and fell below its 50-day SMA on 5/2/12. JJC remains far below its 2011 high at 61.69 and has underperformed the stock market since JJC peaked at 51.41 on 2/9/12. Given that “Dr. Copper” is one of the better indicators of investor confidence (or lack thereof) in the global industrial economy, this weakness may be suggesting rising doubts about prospects going forward.
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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
25.14% , CBE , COOPER INDS STK A
2.84% , EWO , Austria Index, EWO
2.21% , PMR , Retail, PMR
1.99% , DGT , Global Titans, DGT
1.81% , PSTL , Steel Global PS ETF, PSTL
3.46% , IYM , Basic Materials DJ US, IYM
2.09% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
1.98% , IWS , Value MidCap Russell, IWS
1.66% , PKB , Building & Construction, PKB
2.21% , ADRE , Emerging 50 BLDRS, ADRE
2.01% , PZI , Micro Cap Zachs, PZI
2.90% , JKH , MidCap Growth iS M, JKH
2.65% , VO , MidCap VIPERs, VO
1.96% , SCZ , Small Cap EAFE MSCI iS, SCZ
4.63% , MVV , Ultra MidCap400 Double, MVV
3.59% , ERIC.O , LM Ericsson Telephone Company
7.43% , FMCN , Focus Media, FMCN
3.38% , RL , Polo Ralph Lauren
6.66% , CIEN.O , CIENA
2.60% , VGK , European VIPERs, VGK
6.33% , PBI , PITNEY BOWES
2.83% , EWQ , France Index, EWQ
2.16% , IJJ , Value MidCap S&P 400 B, IJJ
8.21% , ODP , OFFICE DEPOT
4.59% , NE , NOBLE
1.32% , IXJ , Healthcare Global, IXJ
1.04% , JKI , Value MidCap iS M, JKI
2.39% , IJK , Growth MidCap 400 B, IJK
1.60% , VPL , Pacific VIPERs, VPL
1.09% , IXP , Telecommunications Global, IXP
2.37% , ICF , Realty Cohen & Steers, ICF
2.32% , IWR , MidCap Russell, IWR
0.34% , FDL , Dividend Leaders, FDL
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-10.11% , LOW , LOWES
-0.73% , ETN , EATON
-2.43% , BLK , BlackRock Inc.
-1.95% , CPB , CAMPBELL SOUP
-2.21% , PEG , PUBL SVC ENTER
-2.25% , MYY , Short 100% MidCap 400, MYY
-0.98% , LNCR , Lincare Holdings Inc
-2.93% , JPM , J P MORGAN CHASE
-2.03% , EXC , EXELON CORP
-0.28% , TLH , Bond 10-20 Year US Treas, TLH
-0.20% , GVI , Bond Interm U.S. Gov, GVI
-1.58% , WPO , Washington Post
-0.76% , BIG , BIG LOTS
-0.37% , IPG , INTERPUBLIC GRP
-0.45% , PETM , PETsMART Inc
-0.51% , ROST , Ross Stores Inc
-1.06% , AVP , AVON
-2.71% , BAC , BANK OF AMERICA
-0.10% , XL , XL CAPITAL STK A
-0.07% , MUB , Bond Muni ATM-Free S&P iS, MUB
-0.24% , KMB , KIMBERLY CLARK
-0.02% , AGG , Bond, Aggregate, AGG
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
4.30% Russia MV, RSX
4.20% Sweden Index, EWD
3.78% Metals & Mining SPDR, XME
3.46% Basic Materials DJ US, IYM
3.39% Biotech SPDR, XBI
3.10% Italy Index, EWI
3.03% Networking, IGN
2.93% Materials SPDR, XLB
2.90% Technology DJ US, IYW
2.87% Info Tech VIPERs, VGT
2.87% Semiconductor SPDR, XSD
2.84% Austria Index, EWO
2.83% France Index, EWQ
2.82% Energy & Nat Res iS GS, IGE
2.80% QQQ Nasdaq 100 Trust, QQQ
2.73% Growth SmallCap R 2000, IWO
2.68% Growth MidCap Russell, IWP
2.66% Transportation Av DJ, IYT
2.61% Growth SmallCap VIPERs, VBK
2.61% China 25 iS, FXI
2.60% European VIPERs, VGK
2.55% Latin Am 40, ILF
2.53% South Africa Index, EZA
2.51% Energy VIPERs, VDE
2.50% Semiconductor iS IGW, SOXX
2.49% Australia Index, EWA
2.48% Technology SPDR, XLK
2.45% Germany Index, EWG
2.45% EMU Europe Index, EZU
2.43% Growth VIPERs, VUG
2.42% Belgium Index, EWK
2.41% China LargeCap Growth G D H USX PS, PGJ
2.39% Europe 350 S&P Index, IEV
2.39% Growth MidCap 400 B, IJK
2.39% South Korea Index, EWY
2.39% Emerging Markets, EEM
2.37% Realty Cohen & Steers, ICF
2.36% Pacific ex-Japan, EPP
2.35% SmallCap Russell 2000, IWM
2.35% Mexico Index, EWW
2.34% MidCap S&P 400 iS, IJH
2.32% MidCap Russell, IWR
2.32% MidCap S&P 400 SPDRs, MDY
2.31% Emerging VIPERs, VWO
2.30% Energy DJ, IYE
2.30% Netherlands Index, EWN
2.30% Energy SPDR, XLE
2.27% Growth 1000 Russell, IWF
2.27% Hong Kong Index, EWH
2.26% Oil Fund PowerShares, DBO
2.25% REIT Wilshire, RWR
2.23% Industrial SPDR, XLI
2.22% Small Cap VIPERs, VB
2.21% Emerging 50 BLDRS, ADRE
2.20% EAFE Index, EFA
2.18% Energy Global, IXC
2.18% REIT VIPERs, VNQ
2.17% United Kingdom Index, EWU
2.16% Value MidCap S&P 400 B, IJJ
2.14% Value EAFE MSCI, EFV
2.14% Water Resources, PHO
2.10% Growth EAFE MSCI, EFG
2.09% Oil, Crude, U.S. Oil Fund, USO
2.08% Brazil Index, EWZ
2.06% Real Estate US DJ, IYR
2.04% Global ex US ACWI iS, ACWX
2.03% Canada Index, EWC
2.03% Homebuilders SPDR, XHB
2.00% Taiwan Index, EWT
2.00% Value SmallCap VIPERS, VBR
2.00% LargeCap Blend S&P=Weight R, RSP
1.99% Growth S&P 500/BARRA, IVW
1.98% Value MidCap Russell, IWS
1.98% Microcap Russell, IWC
1.97% Singapore Index, EWS
1.96% Small Cap EAFE MSCI iS, SCZ
1.90% WilderHill Clean Energy PS, PBW
1.88% India Earnings WTree, EPI
1.86% Capital Markets KWB ST, KCE
1.85% Blend Total Market VIPERs, VTI
1.84% Value SmallCap Russell 2000, IWN
1.83% LargeCap Blend Russell 3000, IWV
1.82% LargeCap 1000 R, IWB
1.82% Financial Preferred, PGF
1.80% LargeCap VIPERs, VV
1.78% Growth BARRA Small Cap 600, IJT
1.76% Consumer Discretionary SPDR, XLY
1.75% Value SmallCap S&P 600 B, IJS
1.72% Indonesia MV, IDX
1.72% SmallCap S&P 600, IJR
1.72% S&P 500 SPDRs LargeCap Blend, SPY
1.70% S&P 500 iS LargeCap Blend, IVV
1.69% Malaysia Index, EWM
1.68% Switzerland Index, EWL
1.60% Pacific VIPERs, VPL
1.53% Preferred Stock iS, PFF
1.48% Global 100, IOO
1.47% Dividend International, PID
1.47% Turkey MSCI iS, TUR
1.45% LargeCap Blend S&P 100, OEF
1.36% India PS, PIN
1.33% Commodity Tracking, DBC
1.28% Chile MSCI iS, ECH
1.24% Spain Index, EWP
1.22% Value 1000 Russell, IWD
1.22% DIAMONDS (DJIA), DIA
1.21% Dividend Appreciation Vipers, VIG
1.20% Value S&P 500 B, IVE
1.16% Dividend SPDR, SDY
1.15% Financial DJ US, IYF
1.13% Financials VIPERs, VFH
1.09% Value VIPERs, VTV
1.07% Dividend DJ Select, DVY
1.04% Bond, High-Yield Corporate, HYG
1.01% Japan Index, EWJ
1.01% Dividend High Yield Equity PS, PEY
0.97% Health Care SPDR, XLV
0.94% Financial SPDR, XLF
0.80% Financial Services DJ, IYG
0.72% Telecom DJ US, IYZ
0.68% Bond, High-Yield Junk, JNK
0.60% Bond EmrgMkt JPM iS, EMB
0.58% Value LargeCap Dynamic PS, PWV
0.53% Bond Ex-US Treas, BWX
0.39% Consumer Staples SPDR, XLP
0.25% Utilities VIPERs, VPU
0.21% Frontier Markets Guggenheim , FRN
0.14% Bond, TIPS, TIP
0.11% Utilities SPDR, XLU
0.11% Bond, Corp, LQD
0.06% Gold Shares S.T., GLD
0.06% Thailand MSCI iS, THD
0.01% Bond, 1-3 Year Treasury, SHY
0.01% Bond Treasury Short-Term iS, SHV
-0.02% Bond, Aggregate, AGG
-0.07% Bond Muni ATM-Free S&P iS, MUB
-0.21% Bond, 20+ Years Treasury, TLT
-0.22% Agriculture DB PS, DBA
-0.26% Bond, 10 Year Treasury, IEF
-0.40% Silver Trust iS, SLV
-1.63% Bear, Short S&P 500, SH
