By Robert W. Colby, Senior Analyst TraderPlanet.com
Consensus estimates too high?
S&P 500 closed at its lowest closing price level in 14 months, since 11/3/06.
NASDAQ Composite closed at its lowest closing price level in 10 months, since 3/19/07.
Health Care Stock Sector Relative Strength moved up to a new 26-month high.
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
% Price Change, Symbol, Name
18.49% , BEAS , BEA Systems Inc
1.75% , XSD , Semiconductor SPDR, XSD
3.33% , RZV , Value SmallCap S&P 600, RZV
7.09% , DLTR , Dollar Tree Stores Inc
4.37% , IIH , Internet Infrastructure H, IIH
5.06% , LIZ , LIZ CLAIRBORNE
6.17% , NCC , NATIONAL CITY
8.05% , MAT , MATTEL
6.47% , LRCX , LAM RESEARCH CORP
7.35% , AMD , ADV MICRO DEV
5.35% , SWY , SAFEWAY
3.69% , XHB , Homebuilders SPDR, XHB
3.15% , BCR , C R BARD
3.23% , RRD , RR DONNELLEY SON
3.83% , SYMC , SYMANTEC
0.43% , SWH , Software H, SWH
6.21% , HAS , HASBRO
1.70% , HSIC , Henry Schein Inc
3.84% , ZION , ZIONS
3.86% , INTU , INTUIT
6.31% , TER , TERADYNE
12.95% , SANM , SANMINA
5.70% , CMA , COMERICA
2.80% , RKH , Bank Regional H, RKH
4.03% , MLNM , Millennium Pharmaceuticals Inc
3.45% , MTB , M&T BANK
2.75% , FNM , FANNIE MAE
4.55% , MHS , MEDCO HEALTH
2.85% , ORCL , ORACLE
2.43% , MRVL , MARVELL TECHNOLOGY
5.15% , GCI , GANNETT
7.16% , PHM , PULTE HOMES
3.64% , HRB , H&R BLOCK
6.65% , KBH , KB HOME
5.02% , FITB , FIFTH THIRD BANC
3.85% , LLTC , LINEAR TECH
2.73% , LVLT , LEVEL 3 COMMUNICATIONS
5.77% , JPM , J P MORGAN CHASE
6.60% , JCP , JC PENNEY
4.69% , BSX , BOSTON SCIENT
2.61% , MYL , MYLAN LABS
1.60% , UNM , UNUMPROVIDENT
3.31% , SLM , SLM CORP
2.96% , DISCA , Discovery Holding Co.
4.68% , NVLS , NOVELLUS SYS
5.29% , KLAC , KLA TENCOR
0.73% , JKI , Value MidCap iS M, JKI
6.50% , FDO , FAMILY DLR STRS
1.37% , IYG , Financial Services DJ, IYG
4.78% , SOV , SOVEREIGN BANC
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-38.65% , ABK , AMBAC FINL GRP
-16.51% , MBI , MBIA
-3.64% , RFG , Growth MidCap S&P 400, RFG
-12.38% , INTC , INTEL
-6.67% , FLEX , Flextronics International Ltd
-3.61% , IXC , Energy Global, IXC
-8.12% , ATI , ALLEGHENY TECH
-11.30% , NVDA , NVIDIA
-8.63% , MON , MONSANTO
-6.64% , NIHD , NII Holdings, Inc.
-6.23% , FLR , FLUOR
-3.25% , PXE , Energy Exploration & Prod, PXE
-6.55% , FCX , FREEPRT MCMORAN STK B
-7.18% , MTG , MGIC INVESTMENT
-4.48% , EWK , Belgium Index, EWK
-2.71% , EWC , Canada Index, EWC
-3.82% , ADRE , Emerging 50 BLDRS, ADRE
-1.41% , PWER , POWER ONE
-2.21% , IYW , Technology DJ US, IYW
-3.93% , ILF , Latin Am 40, ILF
-4.06% , S , SPRINT NEXTEL
-4.91% , PX , PRAXAIR
-3.73% , MHP , MCGRAW HILL
-3.60% , IGE , Natural Resource iS GS, IGE
-3.01% , RHT , Red Hat Inc.
-4.13% , WOR , WORTHINGTON INDS
-2.45% , EWN , Netherlands Index, EWN
-1.19% , IGN , Networking, IGN
-4.28% , XME , Metals & Mining SPDR, XME
-4.78% , APA , APACHE
-4.94% , AES , AES
-2.06% , EZU , EMU Europe Index, EZU
-4.88% , EZA , South Africa Index, EZA
-4.10% , IYM , Basic Materials DJ US, IYM
-3.65% , PXJ , Oil & Gas, PXJ
-0.76% , PWC , LargeCap Blend Dynamic PS, PWC
-3.40% , GOOG , Google
-2.93% , ERTS , ELECTRONIC ARTS
-1.88% , VGT , Info Tech VIPERs, VGT
-3.84% , VWO , Emerging VIPERs, VWO
-0.28% , PSJ , Software, PSJ
-3.16% , TBH , Telebras HOLDRS, TBH*
-6.12% , NOV , NATIONAL OILWELL VARC0
-5.36% , FMCN , Focus Media, FMCN
-1.90% , DGT , Global Titans, DGT
-1.78% , EWS , Singapore Index, EWS
-0.70% , JKG , MidCap Blend Core iS M, JKG
-3.24% , HPC , HERCULES
-0.66% , VBK , Growth SmallCap VIPERs, VBK
-1.51% , JKE , Growth LargeCap iS M, JKE
Sectors: among the 9 major U.S. sectors, 3 rose and 6 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.57% Consumer Discretionary
0.25% Health Care
-0.36% Consumer Staples
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
Utilities (XLU) Bullish, Overweight. This defensive sector performs best when investors worry about a recession. Relative Strength made a new all-time high on 1/9/08, and Price made a new all-time high on 12/10/07.
Energy (XLE) Bullish, Overweight. On 1/3/08, both XLE Price and Relative Strength made new all-time highs. XLE has been strong compared to the S&P since 3/12/03.
Health Care (XLV) Bullish, Overweight. XLV price moved up to a new 6-month high on 12/3/07. Relative Strength moved up to a new 26-month high on 1/16/08.
Consumer Staples (XLP) Bullish, Overweight. This defensive sector performs best when investors worry about a recession. Price made a new all-time high on 12/10/07, and Relative Strength made a new 3-year high on 1/9/08.
Materials (XLB) Bullish, Overweight. The XLB/SPY Relative Strength Ratio made a new all-time high on 1/14/08. Price made new all-time high on 10/29/07. The long-term Relative Strength trend has strongly outperformed since 9/27/2000.
Industrial (XLI) Bearish, Underweight. On 1/16/08, price made a new 9-month low. On 1/11/08, Relative Strength made a new 6-month low. XLI/SPY has underperformed since 8/3/07.
Technology (XLK) Bearish, Underweight. On 1/16/08, price made a new 9-month low. On 1/16/08, Relative Strength made a new 4-month low. XLK/SPY has underperformed since 11/5/07.
Consumer Discretionary (XLY) Bearish, Underweight. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to its lowest level in 6 years. On 1/9/08, XLY price made a new 41-month low. Relative Strength has been trending down since 1/5/05.
Financial (XLF) Bearish, Underweight. On 1/8/08, Relative Strength fell to a new 7-year low, and Price fell to a new 3-year low, thereby confirming a Bearish major trend.
Foreign stock indexes fell to another new 5-month price low. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) underperformed since 11/27/07. Previously, EFA outperformed from 2002 to 11/27/07.
NASDAQ Composite price fell to a new 10-month low on 1/16/08. Relative Strength underperformed the S&P since 11/7/07.
Growth Stock/Value Stock Relative Strength Ratio broke sharply lower and has been weakening since the peak on 11/7/07. It may be an intermediate-term correction. The Growth/Value ratio (IWF/IWD) was in a rising trend from 8/8/06 to 1/7/07.
The Small Cap/Large Cap Relative Strength Ratio broke down to a new 2.5-year low on 1/11/07. It has been trending down since 4/19/06. The main long-term trend is Relatively Bearish for Small Caps.
Crude Oil Futures fell again but found support at 89.26. Oil’s short-term trend might be oversold, and its main long-term trend remains Bullish. The U.S. OIL FUND ETF (AMEX: USO) is not a pure play on Crude Oil, although it generally moves in the same direction.
The Energy stock sector has underperformed Crude Oil since 12/10/07.
February Gold Futures broke down below previous 3-day lows, following Tuesday’s downside reversal. A minor correction seems about due. Gold’s main trend remains obviously Bullish.
Silver’s main trend is Bearish compared to Gold. The iShares Silver Trust (AMEX: SLV) has been relatively weak since 12/7/06.
The Gold Miners ETF (GDX) fell steeply for 2 days and has underperformed Gold futures since 10/31/07.
Inflation expectations fell to a new 5-week low. They have been weak since the peak on 11/12/07, based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bond prices reversed to the downside. Bonds’ short-term trend has been Bullish since 12/26/07, and the main long-term trend remains Bullish. Bonds remain reactive to news about the credit crisis: the worse the credit crisis, the higher the Bond prices; the better the credit crisis, the lower the Bond prices.
The U.S. dollar bounced sharply upward, for its best gain in nearly 5 weeks. The dollar seemed to find support above the oversold low at 74.65 set on 11/23/07. There could be overhead resistance at the 77.86 high of 12/20/07. The main trend remains Bearish.
The Art of Contrary Thinking: The mood has been moving away from optimism as stock prices move lower. Sentiment is far from a level associated with extreme pessimism. So, crowd psychology could get more Bearish before it is over. The business and financial news has flipped from Bearish to Bullish and back again. Investors’ moods and stock volatility have jumped up and down abruptly with the latest news. When everything shifts so dramatically from one day to the next, risk control becomes more important than aggressive profit seeking. Stay flexible.
Sentiment/Contrary Opinion: Bullish opinion is moderately below normal. According to the weekly Investors Intelligence newsletter survey as of 1/16/08, there were 45.6% Bulls and 26.7% Bears. The ratio of Bullish advisors to Bearish advisors fell to 1.71 to 1, which below its 4-year simple moving average at 2.14 and its 4-year median at 2.17. The ratio’s 4-year range is 1.00 to 3.46.
VIX “Fear Index”, now at 24.38, down from 25.43 on 1/8/08, is relatively normal by Bear Market standards (around 20 to 40), but relatively high by Bull Market standards (around 10 to 20). VIX peaked at 31.09 on 11/12/07 and bottomed at 18.47 on 12/21/07. Longer term, VIX has been in a rising trend since it hit a 13-year low of 9.89 on 1/24/07. The all-time high was 45.74 on 10/8/98. 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.
VXN “Fear Index”, now at 28.87, down from 30.77 on 1/8/08, is relatively low by Bear Market standards (around 35 to 80), but relatively high by Bull Market standards (around 12 to 26). VXN peaked at 34.94 on 11/12/07 and bottomed at 20.90 on 12/21/07. Longer term, VXN has been in a rising trend since it hit its all-time low of 12.61 on 7/29/05. The all-time high was 114.23 on 10/8/98. VXN measures Nasdaq Volatility using a method comparable to that used for VIX.
CBOE Put/Call Ratio rose to 1.05 on 1/15/07, indicating pessimistic sentiment. It is above its 4-year simple moving average and median at 0.62. That means there was more trading activity in put options and less in call options than normal. Its 4-year range is 0.35 to 1.28.
ISEE Call/Put Ratio fell to 0.72 on 1/9/07, indicating pessimistic sentiment. It is below its 4-year simple moving average at 1.50 and its 4-year median at 1.47. That means customers opened fewer long call options and more long put options than normal. Its 4-year range is 0.51 to 3.04.
Fundamentals: The 2003-2007 Bull Market was fed by abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and the net balance of positive earnings surprises. The unfolding fallout from the subprime credit market crisis appears to have derailed that engine. Economic statistics are weakening and at the same time inflation is rising, suggesting Stagflation.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
1.39% Broker Dealers
1.10% Health Care Products
0.83% US Dollar Index
0.75% Dow Transports
0.68% Health Care
0.57% Consumer Discretionary
0.48% Value Line
0.42% S&P Small Caps
0.36% Russell 2000
0.32% 30Y T-Bond
0.25% Health Care
0.01% British Pound
-0.16% Japanese Yen
-0.28% Dow Industrial
-0.28% Dow Composite
-0.36% Consumer Staples
-0.48% S&P Mid Caps
-0.50% Russell 3000
-0.50% Wilshire 5000
-0.56% S&P 500
-0.57% Russell 1000
-0.62% Swiss Franc
-0.71% S&P 100
-0.71% Canadian Dollar
-0.95% Nasdaq Composite
-0.97% Australian Dollar
-1.01% Euro Index
-1.05% AMEX Composite
-1.08% NYSE Composite
-1.15% Nasdaq 100
-1.53% Dow Utilities
-1.97% United Kingdom
-2.16% South Korea
-2.59% Computer Tech
-2.61% Disk Drives
-3.12% Hong Kong
-3.24% Commodity Related
-3.24% Natural Gas
-3.38% Oil Services
-4.98% Gold Mining