By Robert W. Colby, Senior Analyst TraderPlanet.com
An uncertain start for the New Year.
Last week, the S&P 500 crossed below its popular 50-day and 200-day simple moving averages.
The 50-day crossed below the 200-day simple moving average for the first time in 17 months.
The Advance-Decline Lines remain Bearish for both the NYSE and the NASDAQ.
The Dow-Jones Transports broke down to a new 4-week closing price low.
Bond prices challenged a 5-week downtrend line.
On Monday, major stock price indexes opened lower and fell further in the morning hours. They attempted to recover in the afternoon, only to fall steeply and break the morning lows in the final half-hour. Volume on the NYSE rose by 3%, with more downside volume than upside volume.
The Breadth of the Market remains Bearish. The Cumulative Daily Advance-Decline lines remain relatively weak for the NYSE and especially for the NASDAQ. New Lows have outnumbered New Highs since October.
The stock market appears to be reactive to news reports, and that has led to choppy price action. Relatively weak economic reports appear probable for the days ahead. On Wednesday, there will be reports on construction spending, the ISM Index on the manufacturing sector, and the minutes of the FMOC December meeting. On Thursday, initial unemployment claims, factory orders, and auto and truck sales. On Friday, nonfarm payrolls report for December and ISM Services. Buckle your seatbelts.
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
1.26% , SNV , SYNOVUS
2.01% , LTR , LOEWS
2.54% , XHB , Homebuilders SPDR, XHB
2.82% , CIT , CIT GROUP
4.28% , FNM , FANNIE MAE
3.01% , CAR , Avis Budget Group, Inc. (CAR)
2.19% , DISH , EchoStar Communications Corporation
4.13% , WM , WASHINGTON MUT
2.70% , LM , LEGG MASON
1.53% , NIHD , NII Holdings, Inc.
1.91% , EWH , Hong Kong Index, EWH
2.47% , KBH , KB HOME
1.00% , URBN , Urban Outfitters Inc.
1.26% , FDO , FAMILY DLR STRS
3.12% , XMSR , XM Satellite R
1.08% , IVGN , Invitrogen Corporation
2.13% , PHM , PULTE HOMES
0.52% , RKH , Bank Regional H, RKH
1.90% , ODP , OFFICE DEPOT
1.23% , AN , AUTONATION
0.99% , LIZ , LIZ CLAIRBORNE
1.13% , STI , SUNTRUST BANKS
1.71% , SCHW.O , CHARLES SCHWAB
2.23% , LEN , Lennar Corp. (LEN)
2.32% , AXP , AMERICAN EXPRESS
2.01% , GCI , GANNETT
1.69% , LAMR , Lamar Advertising Company
1.47% , GS , GOLDMAN SACHS
1.15% , NYT , NY TIMES STK A
1.10% , SUN , SUNOCO
1.57% , HOT , STARWOOD HOTELS
1.69% , SBUX , STARBUCKS
0.25% , RPV , Value S&P 500, RPV
0.91% , ROST , Ross Stores Inc
1.20% , CC , CIRCUIT CITY STR
2.05% , HMA , HEALTH MGMT STK A
0.98% , LEG , LEGGETT & PLATT
1.34% , MER , MERRILL LYNCH
1.50% , MZZ , Short 200% MidCap 400 PS, MZZ
1.48% , COF , CAPITAL ONE FNCL
0.96% , BBBY , BED BATH BEYOND
0.47% , CCU , CLEAR CHANNEL
1.04% , MV , METAVANTE TECHNOLOGIES, MV
0.32% , DISCA , Discovery Holding Co.
0.50% , QLGC , QLOGIC
0.89% , AZO , AUTOZONE
1.31% , KSS , KOHLS
1.15% , VC , VISTEON
0.62% , AIG , AMER INTL GROUP
0.87% , BJS , BJ SERVICES
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-1.11% , PIV , Value Line Timeliness MidCap Gr, PIV
-0.65% , PKB , Building & Construction, PKB
-5.40% , UIS , UNISYS
-1.94% , EWI , Italy Index, EWI
-4.52% , BHH , Internet B2B H, BHH
-0.49% , FDV , Value 40 Large Low P/E FT DB, FDV
-1.32% , HHH , Internet H, HHH
-1.99% , TTH , Telecom H, TTH
-0.92% , BDH , Broadband H, BDH
-0.36% , PFM , Dividend Achievers PS, PFM
-1.92% , WFMI , Whole Foods Market Inc
-0.63% , PMR , Retail, PMR
-1.91% , FRX , FOREST LABS STK A
-1.11% , IYZ , Telecom DJ US, IYZ
-1.26% , IGM , Technology GS, IGM
-2.85% , BC , BRUNSWICK
-3.50% , EZA , South Africa Index, EZA
-1.29% , EWP , Spain Index, EWP
-0.94% , PPH , Pharmaceutical H, PPH
-2.26% , MVV , Ultra MidCap400 Double, MVV
-0.89% , IIH , Internet Infrastructure H, IIH
-0.37% , XLY , Consumer Discretionary SPDR, XLY
-1.58% , SSCC , Smurfit-Stone Container Corporation
-1.34% , IPG , INTERPUBLIC GRP
-0.83% , RZV , Value SmallCap S&P 600, RZV
-1.47% , CMS , CMS ENERGY
-0.54% , FDL , Dividend Leaders, FDL
-1.56% , FEZ , Euro STOXX 50, FEZ
-0.79% , XLP , Consumer Staples SPDR, XLP
-1.29% , EWK , Belgium Index, EWK
-0.61% , RSP , LargeCap Blend S&P=Weight R, RSP
-2.62% , XTO , XTO ENERGY INC
-0.77% , ADRU , Europe 100 BLDRS, ADRU
-0.89% , UTH , Utilities H, UTH
-1.63% , EWQ , France Index, EWQ
-2.67% , APD , AIR PRODS & CHEM
-1.89% , RFMD , RF Micro Devices Inc
-0.95% , PXN , Nanotech Lux, PXN
-2.81% , CTSH , Cognizant Technology Solutions
-1.59% , BIIB , BIOGEN IDEC
-1.59% , GPC , GENUINE PARTS
-1.83% , GAS , NICOR
-1.32% , MWV , MEADWESTVACO
-0.68% , IWZ , Growth LargeCap Russell 3000, IWZ
-0.89% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
-1.82% , BMC , BMC SOFTWARE
-1.47% , PEP , PEPSICO
-1.76% , DELL , DELL
-1.27% , HAS , HASBRO
-0.39% , IWP , Growth MidCap Russell, IWP
Sectors: among the 9 major U.S. sectors, all 9 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
-0.03% Financial
-0.37% Health Care
-0.37% Consumer Discretionary
-0.46% Industrial
-0.60% Materials
-0.74% Technology
-0.79% Consumer Staples
-1.27% Energy
-1.37% Utilities
Energy (XLE) Bullish, Overweight. Relative Strength made a new all-time high on 12/28/07. XLE made an all-time price high on 12/26/07. XLE has been strong compared to the S&P since 3/12/03.
Utilities (XLU) Bullish, Overweight. This defensive sector’s Relative Strength made a new 6-year high on 12/5/07, and price made a new all-time high on 12/10/07.
Materials (XLB) Bullish, Overweight. The XLB/SPY Relative Strength Ratio made a new all-time high on 11/8/07. Price made new all-time high on 10/29/07. The long-term Relative Strength trend has strongly outperformed since 9/27/2000.
Consumer Staples (XLP) Bullish, Overweight. This defensive sector’s price made a new all-time high on 12/10/07, and Relative Strength made a new 6-year high on 11/26/07.
Technology (XLK) Neutral, Market Weight. Relative Strength turned up from a low on 11/30/07. And, long term, XLK has been relatively strong compared to the S&P since its low on 7/24/06.
Industrial (XLI) Neutral, Market Weight. Price and Relative Strength have been chopping sideways since 8/3/07. Longer-term trends appear Bullish.
Health Care (XLV) Neutral, Market Weight. XLV price moved up to a new 6-month high on 12/3/07. Relative Strength moved up to a new 13-month high on 11/27/07.
Consumer Discretionary (XLY) Bearish, Underweight. On 12/21/07, the XLY/SPY Relative Strength Ratio fell to its lowest level in 6 years. Relative Strength has been trending down since 1/5/05. XLY price made a new 14-month low on 11/27/07.
Financial (XLF) Bearish, Underweight. On 12/27/07, the XLF/SPY Relative Strength Ratio fell to its lowest level in 7 years. Relative Strength has been trending down since 2/20/07. XLF price hit a new 2.5-year low on 11/26/07.
Foreign stock indices have underperformed U.S. stock indices short term, since 11/27/07. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) made a new price high on 10/31/07 and a new relative strength high on 11/27/07. EFA has substantially outperformed long term, since the Bull market started in 2002, and the secular trend is still Bullish. My Top 10 ETF Relative Strength Ranks have been mostly Foreign for many months.
NASDAQ Composite and NASDAQ 100 outperformed the S&P since 12/17/07. Longer term, NASDAQ outperformed from 8/8/06 to 11/7/07, including a new 6-year Relative Strength high on 11/7/07 and a new price high on 10/31/07.
Growth Stock/Value Stock Relative Strength Ratio has been in a moderately rising trend since 11/30/07. The long-term, the main trend for the Growth/Value ratio (IWF/IWD) has been rising since 8/8/06.
The Small Cap/Large Cap Relative Strength Ratio fell sharply since 11/26/07. Year end and early January often has been good for Small Caps. But the main long-term trend is Relatively Bearish for Small Caps. The ratio fell to a new 2.5-year low on 12/17/07. Small Caps substantially underperformed Large Caps since 4/19/06.
Crude Oil Futures now look uncertain. Crude broke its previous 2 days’ lows, Oil reversed below its 11/21/07 high of 98.12. Oil found support at the 12/6/07 low of 85.60. 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 outperformed the USO since 11/26/07. Previously, over the 6 months from 5/30/07 to 11/26/07, XLE lagged oil the commodity.
February Gold Futures are challenging the top end of their range. The 8-week price range is between 855.00 set on 11/7/07 and 780.40 set on 11/20/07. The main trend is 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) has underperformed Gold Futures since 10/31/07. Price made a new 13-week low on 12/18/07.
Inflation expectations turned down since 12/26/07. The short-term trend appears down, based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bond prices challenged a 5-weeek downtrend line. Bonds could be ending their intermediate-term correction phase since their price top on 11/26/07. 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 reversed to the upside. It broke above its high for the previous trading day. The short-term price trend now appears uncertain. Support is at the oversold low at 74.65 on 11/23/07. There could be overhead resistance at the 77.86 high of 12/20/07. The main trend remains Bearish.
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.
The Art of Contrary Thinking: The business and financial news has flipped from Bullish to Bearish and back again. Investors’ moods and stock volatility have jumped up and down abruptly with the 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 slightly above normal. According to the weekly Investors Intelligence newsletter survey as of 12/26/07, there were 54.9% Bulls and 23.1% Bears. The ratio of Bullish advisors to Bearish advisors fell to 2.38 to 1, which is slightly above its 3-year median of 2.32 to 1 and up from a low of 1.63 to 1 as of 11/28/07.
VIX “Fear Index”, now at 22.50 and rising, remains below its 50-day simple moving average but above its 200-day simple moving average. 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 25.90 and rising, remains below its 50-day simple moving average but above its 200-day simple moving average. VXN measures Nasdaq Volatility using a method comparable to that used for VIX.
CBOE Put/Call Ratio rose to 0.67, indicating moderately pessimistic sentiment. It is above its 1-year simple moving average (now at 0.65) and its 4-year median of 0.62. Its 4-year range is 0.35 to 1.28.
ISEE Call/Put Ratio fell to 1.42, indicating moderately pessimistic sentiment. It is below its 5-year median of 1.47, and that means that customers opened more long put options and fewer long call options than normal.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day: 2.76% Singapore1.91% Hong Kong
1.21% Taiwan
1.05% Japanese Yen
0.84% REITs
0.60% 30Y T-Bond
0.55% US Dollar Index
0.48% Broker Dealers
0.33% Australian Dollar
0.32% Banks
0.31% Hospitals
0.24% Malaysia
0.23% Japan
0.22% Insurance
-0.03% Financial
-0.04% Retailers
-0.26% Disk Drives
-0.32% Airlines
-0.37% Health Care
-0.37% Consumer Discretionary
-0.43% British Pound
-0.46% Industrial
-0.48% Semiconductors
-0.50% Paper
-0.51% Value Line
-0.51% Swiss Franc
-0.57% S&P Mid Caps
-0.60% Materials
-0.62% Wilshire 5000
-0.64% Russell 1000
-0.65% NYSE Composite
-0.65% Russell 3000
-0.69% S&P 500
-0.72% S&P Small Caps
-0.74% Russell 2000
-0.74% Technology
-0.76% Dow Industrial
-0.77% AMEX Composite
-0.78% Biotechs
-0.79% Consumer Staples
-0.80% Euro Index
-0.82% S&P 100
-0.83% Nasdaq Composite
-0.86% Dow Utilities
-0.89% Health Care
-0.89% South Korea
-0.91% Dow Composite
-0.91% Health Care Products
-0.97% Chemicals
-0.99% Netherlands
-1.01% Network
-1.03% Australia
-1.03% Germany
-1.05% Nasdaq 100
-1.05% Austria
-1.09% Commodity Related
-1.11% Natural Gas
-1.13% Oil
-1.15% Mexico
-1.16% Drugs
-1.18% Switzerland
-1.19% Dow Transports
-1.20% Hardware
-1.26% Computer Tech
-1.27% Energy
-1.27% United Kingdom
-1.29% Belgium
-1.29% Canada
-1.29% Spain
-1.31% Brazil
-1.32% Internet
-1.32% DOT
-1.33% Canadian Dollar
-1.37% Utilities
-1.54% Sweden
-1.60% Oil Services
-1.63% France
-1.71% Gold Mining
-1.94% Italy
