By Robert W. Colby, Senior Analyst TraderPlanet.com
Actual performance is below consensus estimates.
Energy and Materials Relative Price moved down to new 4-5 month lows.
Technology and Industrial price moved down to new 9-10 month lows.
Consumer Discretionary and Financial price moved down to new 3-4 year lows.
Underlying fundamental trends appear hostile to stocks. More relatively weak economic and corporate earnings reports appear probable for the weeks ahead.
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
5.54% , MZZ , Short 200% MidCap 400 PS, MZZ
3.14% , MMC , MARSH & MCLENNAN
3.87% , ACV , Alberto-Culver Co.
2.68% , SH , Short 100% S&P 500, SH
2.79% , URBN , Urban Outfitters Inc.
1.84% , BBT , BB&T
4.97% , DXD , Short 200% Dow 30 PS, DXD
3.36% , CTSH , Cognizant Technology Solutions
2.49% , BSX , BOSTON SCIENT
1.47% , TJX , TJX
1.74% , PPG , PPG INDUSTRIES
2.68% , JCI , JOHNSON CONTROLS
1.77% , BIIB , BIOGEN IDEC
1.76% , GENZ , GENZYME GEN
5.46% , SDS , Short 200% S&P 500 PS, SDS
0.74% , HSP , HOSPIRA
0.81% , IEF , Bond, 10 Year Treasury, IEF
1.74% , DHI , D.R. HORTON, DHI
1.53% , PSQ , Short 100% QQQ, PSQ
2.19% , MU , MICRON TECH
0.51% , TIF , TIFFANY
0.82% , TEVA , Teva Pharmaceutical Industries Limited
1.33% , ROST , Ross Stores Inc
0.43% , HSY , HERSHEY FOODS
0.54% , EMC , EMC
0.49% , RSH , RADIOSHACK
0.38% , HANS , Hansen Natural, HANS
0.30% , WAG , WALGREEN
0.17% , SHY , Bond, 1-3 Year Treasury, SHY
0.79% , LOW , LOWES
0.47% , SPLS , STAPLES
1.80% , LSI , LSI LOGIC
0.12% , ZMH , ZIMMER HLDGS
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
27.21% , ABK , Millennium Pharmaceuticals Inc
5.18% , MBI , BEA Systems Inc
31.84% , RFG , EXPRESS SCRIPTS
32.46% , INTC , Activision Inc.
58.20% , FLEX , MONSANTO
26.87% , IXC , APOLLO GROUP
23.29% , ATI , MEDCO HEALTH
26.80% , NVDA , HUMANA
40.43% , MON , AMERADA HESS
12.09% , NIHD , Short 200% MidCap 400 PS, MZZ
25.29% , FLR , Gold COMEX iS, IAU
22.25% , PXE , Invitrogen Corporation
25.31% , FCX , Gold Shares S.T., GLD
16.44% , MTG , GENZYME GEN
19.19% , EWK , Stericycle, SRCL
21.10% , EWC , Silver Trust iS, SLV
21.84% , ADRE , WATERS
21.77% , PWER , Gilead Sciences Inc
33.91% , IYW , DEERE & CO
21.30% , ILF , DENTSPLY International Inc
16.06% , S , C R BARD
5.49% , PX , Short 200% S&P 500 PS, SDS
25.56% , MHP , APPLE COMPUTER
17.44% , IGE , BAXTER INTL
15.57% , RHT , Teva Pharmaceutical Industries Limited
16.72% , WOR , BECTON DICKINSON
18.03% , EWN , Oil, Crude, U.S. Oil Fund, USO
18.63% , IGN , NEWMONT MINING
19.77% , XME , AFLAC
22.40% , APA , Malaysia Index, EWM
16.36% , AES , Commodity Tracking, DBC
20.52% , EZU , ARCHER DANIELS
13.55% , EZA , SIGMA ALDRICH
14.68% , IYM , MCKESSON CORP
15.87% , PXJ , COCA COLA
21.18% , PWC , Hologic, Inc., HOLX
15.48% , GOOG , AETNA
3.74% , ERTS , Short 200% Dow 30 PS, DXD
13.21% , VGT , Amazoncom Inc
21.50% , VWO , TRANSOCEAN
15.31% , PSJ , Human Genome Sciences Inc
13.09% , TBH , ABBOTT LABS
5.94% , NOV , Short 100% MidCap 400, MYY
19.42% , FMCN , OCCIDENTAL
8.44% , DGT , Henry Schein Inc
18.16% , EWS , PPL
10.49% , JKG , ALLERGAN
16.63% , HPC , PUBL SVC ENTER
19.48% , VBK , CONSTELL ENERGY
13.89% , JKE , ALTRIA GROUP
Sectors: among the 9 major U.S. sectors, all 9 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
-0.72% Consumer Staples
-1.66% Consumer Discretionary
-1.92% Health Care
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.
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 1/17/08.
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 1/17/08.
Energy (XLE) Bullish, Overweight. Price hit a new 4-month low on 1/17/08. 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.
Materials (XLB) Bullish, Overweight. The XLB/SPY Relative Strength Ratio made a new all-time high on 1/14/08. Price hit a new 5-month low on 1/17/08 but made new all-time high on 10/29/07. The long-term Relative Strength trend has strongly outperformed since 9/27/2000.
Technology (XLK) Bearish, Underweight. On 1/17/08, 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.
Industrial (XLI) Bearish, Underweight. On 1/17/08, price made a new 10-month low. On 1/11/08, Relative Strength made a new 6-month low. XLI/SPY has underperformed since 8/3/07.
Consumer Discretionary (XLY) Bearish, Underweight. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to its lowest level in 6 years. On 1/17/08, XLY price made a new 41-month low. Relative Strength has been trending down since 1/5/05.
Financial (XLF) Bearish, Underweight. On 1/17/08, price fell to a new 4-year low. On 1/8/08, Relative Strength fell to a new 7-year low. These confirmed 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 has underperformed moderately since the peak on 11/7/07. It may be an intermediate-term consolidation or correction phase. 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 above Wednesday’s low of 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 consolidated with an Inside Day. A minor correction could prove to be limited. 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 closed at new 2-year highs. 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 eased slightly lower. On 1/15/08, 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. br>
VIX “Fear Index”, now at 28.46, up from 18.47 on 12/21/08, 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 31.16, up from 20.90 on 12/21/08, 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 0.60 on 1/17/07, 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.
The Primary Tide Major Trend turned Bearish, and that is a strong force. The Dow Theory confirmed a Primary Bear Market on 11/21/07 when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their respective closing price lows of August, 2007. On 11/7/07, the Transports closed below their August low. Then on 11/21/07, the Dow-Jones Industrial Average closed below its 8/16/07 closing price low of 12,845.78, thereby turning the Primary Tide Bearish.
1.37% 30Y T-Bond
0.39% British Pound
0.35% Japanese Yen
0.09% Australian Dollar
0.02% Euro Index
-0.01% Swiss Franc
-0.09% US Dollar Index
-0.52% Canadian Dollar
-0.58% South Korea
-0.72% Consumer Staples
-1.42% United Kingdom
-1.43% Health Care Products
-1.61% Nasdaq 100
-1.61% Computer Tech
-1.66% Consumer Discretionary
-1.87% AMEX Composite
-1.92% Health Care
-1.95% Health Care
-1.99% Nasdaq Composite
-2.20% Disk Drives
-2.46% Dow Industrial
-2.56% Dow Transports
-2.62% S&P Small Caps
-2.66% Value Line
-2.74% S&P 100
-2.76% Russell 2000
-2.78% Dow Composite
-2.78% Wilshire 5000
-2.80% NYSE Composite
-2.90% S&P Mid Caps
-2.91% S&P 500
-2.91% Russell 3000
-2.92% Russell 1000
-3.11% Gold Mining
-3.17% Hong Kong
-3.73% Dow Utilities
-4.21% Commodity Related
-4.32% Oil Services
-4.38% Natural Gas
-5.53% Broker Dealers