By Robert W. Colby, Senior Analyst TraderPlanet.com
Bearish Reversal. Rate cut already discounted.
The market seems to be quite reactive to the news of the day. In the longer-term picture, major underlying technical trends remain Bearish for stocks. In addition, underlying fundamental trends appear difficult, at best. There is a sense that problems are already baked into the cake, in the pipeline. Trouble is coming, and it is too late to prevent it, no matter what governments or the Fed may do.
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
17.68% , TUP , TUPPERWARE
12.60% , RHI , ROBERT HALF
0.90% , MYY , Short 100% MidCap 400, MYY
12.51% , FLEX , Flextronics International Ltd
1.03% , FPX , IPOs, First Tr IPOX-100, FPX
10.14% , ETFC.O , E*TRADE FINANCIAL
0.56% , RFG , Growth MidCap S&P 400, RFG
6.93% , DOV , DOVER
6.18% , CHRW.O , CH Robinson Worldwide Inc, CHRWD
3.27% , MZZ , Short 200% MidCap 400 PS, MZZ
3.61% , WM , WASHINGTON MUT
2.40% , PXQ , Networking, PXQ
3.50% , SEE , SEALED AIR
3.20% , WFMI , Whole Foods Market Inc
3.01% , ESRX , EXPRESS SCRIPTS
3.67% , NYT , NY TIMES STK A
1.24% , RPV , Value S&P 500, RPV
4.47% , XMSR , XM Satellite R
0.91% , SMH , Semiconductor H, SMH
3.57% , NKE , NIKE STK B
1.28% , GS , GOLDMAN SACHS
6.06% , UIS , UNISYS
3.96% , PLL , PALL
2.59% , CMA , COMERICA
2.28% , SDS , Short 200% S&P 500 PS, SDS
2.23% , BLL , BALL
2.26% , TBH , Telebras HOLDRS, TBH*
1.15% , RPG , Growth S&P 500, RPG
2.09% , A , AGILENT TECH
2.90% , RIMM , RESEARCH IN MOTION LTD
0.29% , XSD , Semiconductor SPDR, XSD
2.96% , BCR , C R BARD
1.81% , EOG , EOG RESOURCES
1.11% , EXPD , Expeditors International WA
1.22% , PH , PARKER HANNIFIN
1.36% , AMAT , APPLIED MATERIAL
1.80% , GPC , GENUINE PARTS
0.57% , PSQ , Short 100% QQQ, PSQ
1.78% , CA , COMPUTER ASSOC
1.41% , DXD , Short 200% Dow 30 PS, DXD
1.50% , CTL , CENTURYTEL
1.74% , GENZ , GENZYME GEN
0.51% , IGM , Technology GS, IGM
0.99% , D , DOMINION RSCS
1.29% , WLP , WELLPOINT HEALTH
2.67% , CPWR , COMPUWARE
3.08% , MCHP , Microchip Technology Incorporated
2.22% , ZION , ZIONS
1.13% , ADBE , ADOBE SYS
1.60% , IYT , Transportation Av DJ, IYT
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-10.55% , HANS , Hansen Natural, HANS
-9.24% , IFF , INTL FLAV & FRAG
-8.40% , BHI , BAKER HUGHES
-9.89% , PWER , POWER ONE
-8.97% , CTX , CENTEX
-3.73% , CEPH , Cephalon Inc
-4.45% , PNW , PINNACLE WEST
-4.72% , TIF , TIFFANY
-0.82% , JKH , MidCap Growth iS M, JKH
-7.20% , ALL , ALLSTATE
-0.98% , IJK , Growth MidCap 400 B, IJK
-0.60% , XLG , LargeCap Rydex Rus Top 50, XLG
-3.76% , SBUX , STARBUCKS
-0.60% , ELV , Value Large Cap DJ, ELV
-5.35% , XHB , Homebuilders SPDR, XHB
-8.46% , YHOO , YAHOO
-3.27% , WYE , WYETH
-2.59% , EWH , Hong Kong Index, EWH
-4.40% , DLTR , Dollar Tree Stores Inc
-3.12% , EWY , South Korea Index, EWY
-4.66% , FXI , China 25 iS, FXI
-0.53% , DSG , Growth Small Cap DJ, DSG
-2.66% , EPP , Pacific ex-Japan, EPP
-1.22% , PSI , Semiconductors, PSI
-2.54% , MVV , Ultra MidCap400 Double, MVV
-4.21% , PGR , PROGRESSIVE OHIO
-0.79% , JKG , MidCap Blend Core iS M, JKG
-0.82% , IYK , Consumer Non-Cyclical, IYK
-5.41% , FNM , FANNIE MAE
-0.23% , IXN , Technology Global, IXN
-3.24% , WB , WACHOVIA
-0.68% , JKI , Value MidCap iS M, JKI
-3.45% , PGJ , China LargeCap Growth G D H USX PS, PGJ
-0.59% , JKD , LargeCap Blend Core iS M, JKD
-3.96% , PAYX , PAYCHEX
-3.42% , EK , EASTMAN KODAK
-2.03% , XLF , Financial SPDR, XLF
-8.62% , PHM , PULTE HOMES
-1.62% , VMC , VULCAN MATERIALS
-3.46% , JWN , NORDSTROM
-3.63% , BSC , BEAR STEARNS
-3.82% , KBH , KB HOME
-0.94% , LNCR , Lincare Holdings Inc
-2.46% , EWA , Australia Index, EWA
-2.40% , MER , MERRILL LYNCH
-2.61% , MCO , MOODYS CORP
-0.78% , ISI , LargeCap Blend S&P 1500 iS, ISI
-1.22% , IYF , Financial DJ US, IYF
-0.69% , MMC , MARSH & MCLENNAN
-2.91% , LRCX , LAM RESEARCH CORP
Sectors: among the 9 major U.S. sectors, 1 rose and 8 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
-0.64% Consumer Discretionary
-0.70% Consumer Staples
-1.16% Health Care
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
Energy (XLE) Bullish, Overweight. Price hit a new 5-month low on 1/22/08. 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. Price touched a new 5-month low on 1/23/08. The XLB/SPY Relative Strength Ratio made a new all-time high on 1/14/08. The long-term Relative Strength trend has strongly outperformed since 9/27/2000.
Consumer Staples (XLP) Bullish, Overweight. Price touched a new 15-month low on 1/22/08. Price made a new all-time high on 12/10/07, and Relative Strength made a new 3-year high on 1/17/08.
Industrial (XLI) Bullish, Overweight. Price touched a new 16-month low on 1/22/08. On 1/30/08, Relative Strength made a new all-time high.
Utilities (XLU) Neutral, Market Weight. Price touched a new 12-month low on 1/22/08. 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. Price touched a new 18-month low on 1/22/08. Relative Strength moved up to a new 26-month high on 1/17/08.
Technology (XLK) Bearish, Underweight. Price touched a new 17-month low on 1/22/08. On 1/28/08, Relative Strength made a new 7-month low. XLK/SPY has underperformed since 11/5/07.
Consumer Discretionary (XLY) Bearish, Underweight. Price touched a new 4-year low on 1/22/08. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to its lowest level in 6 years.
Financial (XLF) Bearish, Underweight. Price touched a new 4-year low on 1/22/08. On 1/8/08, Relative Strength fell to a new 7-year low. These confirmed a Bearish major trend.
Foreign stock indexes remain in downtrends. EFA price fell to a new 17-month low on 1/23/08. 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 touched a new 15-month low on 1/23/08. Relative Strength underperformed the S&P since 11/7/07.
Growth Stock/Value Stock Relative Strength Ratio made a new 3-month low and has underperformed since the peak on 11/7/07. The Growth/Value ratio (IWF/IWD) appears to be in an intermediate-term correction phase.
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 (March) rose above the highs of the previous 9 trading days, again confirming the short-term uptrend. Last week, Oil found support just above December’s low at 85.37. Previously, Oil fell steeply from 99.77 on 1/3/08 to 85.42 on 1/22/08. 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.
Gold Futures eased slightly lower, but all of Gold’s trends remain Bullish.
Silver’s main trend is Bearish compared to Gold. The iShares Silver Trust (AMEX: SLV) has been rising in price but has been relatively weak compared to Gold since 12/7/06.
The Gold Miners ETF (GDX) has underperformed Gold futures since 10/31/07.
Inflation expectations are rising, based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bond prices moved lower over the past 5 trading days but the long-term trend is up. The day-to-day action has been erratic. But the major 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 fell below the lows of the previous 9 weeks, confirming a significant downtrend. The dollar could retest support down toward 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 1/30/08, there were 40.2% Bulls and 32.2% Bears. The ratio of Bullish advisors to Bearish advisors fell to 1.25 to 1, which below its 38-year median at 1.47. The ratio’s 38-year range is 0.28 to 17.51.
VIX “Fear Index”, now at 27.62 and rising, is relatively normal by Bear Market standards (around 20 to 40) but relatively high by Bull Market standards (around 10 to 20). 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 31.80 and falling, is relatively low by Bear Market standards (around 35 to 80) but relatively high by Bull Market standards (around 12 to 26). 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 eased lower to a near-normal 0.63, down from a peak of 1.05 on 1/15/07, which indicated pessimistic sentiment. Its 4-year simple moving average and median are 0.62, and its 4-year range is 0.35 to 1.28.
ISEE Call/Put Ratio is 1.06, up from a low of 0.60 on 1/17/07, which indicated pessimistic sentiment. It is still 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 has derailed that engine. Economic statistics and corporate earnings have been weakening.
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.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
1.06% Gold Mining
0.97% Australian Dollar
0.89% Canadian Dollar
0.85% Dow Transports
0.82% Broker Dealers
0.77% Natural Gas
0.61% Euro Index
0.43% Swiss Franc
0.14% British Pound
0.06% Dow Composite
0.05% Nasdaq 100
-0.06% Computer Tech
-0.12% Japanese Yen
-0.22% Dow Utilities
-0.23% AMEX Composite
-0.30% Dow Industrial
-0.30% Commodity Related
-0.38% Nasdaq Composite
-0.41% S&P 100
-0.48% S&P 500
-0.53% Russell 1000
-0.57% NYSE Composite
-0.60% Russell 3000
-0.60% US Dollar Index
-0.61% Wilshire 5000
-0.64% Consumer Discretionary
-0.68% United Kingdom
-0.70% Consumer Staples
-0.81% Value Line
-0.83% Health Care
-0.84% 30Y T-Bond
-0.91% Health Care Products
-1.07% S&P Mid Caps
-1.12% S&P Small Caps
-1.16% Health Care
-1.38% Russell 2000
-2.26% Disk Drives
-2.59% Hong Kong
-2.72% Oil Services
-3.12% South Korea