by Robert W. Colby, Senior Analyst, TraderPlanet.com
Stock Market: creating uncertainty and unease for investors.
Although strong action may seem necessary, nevertheless, government intervention into markets and privately-owned companies appears to be creating uncertainty and unease for investors.
And who knows what the governments might try next?
Investors are realizing that the economy is going down, and it may take some time to turn it around.
With stock market trends clearly Bearish, it seems too early to initiate Bullish bets.
With the stock market oversold and sentiment very Bearish, it seems too late to initiate Bearish bets.
Sometimes the best offense is a strong defense. Focus on capital preservation.
On Wednesday, major stock price indexes gapped lower on the open and remained under substantial selling pressure most of the day. Prices closed very weak, near their lowest levels of the day. The Standard & Poor’s 500 cash index (907.84) closed down 90.17 points, or 9.03%. It was the biggest percentage loss since the Crash of October 1987. Total NYSE volume fell 20%.
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
18.62% , MZZ , Short 200% MidCap 400 PS, MZZ
1.35% , GLD , Gold Shares S.T., GLD
1.63% , IAU , Gold COMEX iS, IAU
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-8.33% , PZJ , SmallCap PS Zacks, PZJ
-29.66% , JNY , JONES APPAREL
-11.02% , PXQ , Networking, PXQ
-10.30% , EWK , Belgium Index, EWK
-15.50% , BHH , Internet B2B H, BHH
-11.08% , BDH , Broadband H, BDH
-31.91% , TIN , TEMPLE INLAND
-7.31% , PMR , Retail, PMR
-7.01% , PEJ , Leisure & Entertainment, PEJ
-10.04% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-34.78% , SSCC , Smurfit-Stone Container Corporation
-11.43% , FEZ , Euro STOXX 50, FEZ
-14.68% , AM , AMER GREETINGS STK A
-9.70% , EWI , Italy Index, EWI
-21.97% , VC , VISTEON
-6.13% , CEG , CONSTELL ENERGY
-11.68% , ISIL , INTERSIL CORP
-8.32% , PSI , Semiconductors, PSI
-7.04% , IXG , Financials Global LargeCap Value, IXG
-8.71% , IYC , Consumer Cyclical DJ, IYC
-15.31% , LIZ , LIZ CLAIRBORNE
-11.20% , EWN , Netherlands Index, EWN
-13.26% , ADI , ANALOG DEVICES
-13.59% , EBAY , EBAY
-10.11% , EZU , EMU Europe Index, EZU
-9.71% , VXF , Extended Mkt VIPERs, VXF
-22.93% , LPX , LOUISIANA PAC
-13.10% , MCHP , Microchip Technology Incorporated
-7.16% , PHJ , Dividend Growth PS, PHJ
-10.99% , CSX , CSX
-6.99% , PHW , Hardware & Electronics, PHW
-9.96% , XSD , Semiconductor SPDR, XSD
-6.42% , IXJ , Healthcare Global, IXJ
-15.03% , LLTC , LINEAR TECH
-5.80% , RFV , Value MidCap S&P 400, RFV
-9.07% , IWV , LargeCap Blend Russell 3000, IWV
-13.94% , PLL , PALL
-18.52% , IP , INTL PAPER
-19.13% , FCX , FREEPRT MCMORAN STK B
-12.85% , UIS , UNISYS
Sectors: among the 9 major U.S. sectors, all 9 fell.
Major Sectors Ranked for the Day
% Price Change, Sector ETF, Symbol
-3.43% Consumer Staples SPDR, XLP
-7.44% Utilities SPDR, XLU
-7.52% Technology SPDR, XLK
-9.41% Industrial SPDR, XLI
-9.78% Health Care SPDR, XLV
-10.85% Financial SPDR, XLF
-11.62% Consumer Discretionary SPDR, XLY
-12.41% Materials SPDR, XLB
-14.44% Energy SPDR, XLE
Primary Tide Trends for the 9 major sectors last for years. Here are my up-to-date Relative Strength Rankings, as measured with emphasis on these long-term Primary Tide Trends (listed in order of long-term relative strength):
Consumer Staples (XLP) Neutral, Market Weight. On 10/10/08, XLP/SPY Relative Strength Ratio rose to another new 5-year high, but XLP absolute price fell to a new 2-year low. XLP is the best of a bad lot.
Utilities (XLU) Bearish, Underweight. On 10/10/08, the XLU absolute price fell to another new 2-year low.
Technology (XLK) Bearish, Underweight. On 10/10/08, the XLK absolute price fell to another new 41-month low.
Industrial (XLI) Bearish, Underweight. On 10/10/08, the XLI absolute price hit another new 58-month low, indicating long-term trend weakness.
Health Care (XLV) Bearish, Underweight. On 10/10/08, XLV absolute price fell to a new 5-year low.
Financial (XLF) Bearish, Underweight. On 10/10/08, the XLF absolute price hit another new 10-year low. The XLF long-term trend of relative strength has been trending down since 2/20/07.
Consumer Discretionary (XLY) Bearish, Underweight. On 10/10/08, XLY absolute price fell to its lowest level in 5 years.
Materials (XLB) Bearish, Underweight. On 10/10/08, the XLB absolute price made another new 26-month intraday low.
Energy (XLE) Bearish, Underweight. On 10/10/08, the XLE absolute price hit another new 18-month intraday low.
Foreign stock index EFA Relative Strength Ratio has underperformed the S&P 500 since 11/27/07. EFA absolute price fell to a new 4-year low on 10/10/08 and has been in a falling trend since 10/31/07. EFA is the ETF representing the EAFE, the international developed country stock markets, ex the U.S. and Canada.
NASDAQ Composite remains Bearish. On 10/15/08, the closing price broke down to a new 5-year low, reconfirming long-term trend weakness. Relative Strength Ratio has been in a declining trend since 8/14/08.
NASDAQ 100 Index closing price broke down to a new 5-year low on 10/15/08, reconfirming long-term trend weakness.
Growth Stock/Value Stock Relative Strength Ratio has been trending down since it peaked on 7/15/08.
The Small Cap/Large Cap Relative Strength Ratio has been trending down since it peaked on 9/19/08.
Crude Oil futures November contract price hit new 12-month lows. The short-term and intermediate-term trends remain Bearish. 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 underperformed Crude Oil since 5/30/07.
Gold futures contract price consolidated recent losses. Gold is a traditional store of value that benefits from financial panic. Still, gold has been in an intermediate-term downtrend since the peak of 1033.90 on 3/17/08.
Gold Mining stocks continue to underperform Gold futures on a major trend basis.
U.S. Treasury Bond futures contract price fell to new 4-month lows. Bonds remain Bearish for the short term and appear uncertain for the intermediate-term trend. Long term, Bonds have been in a neutral sideways trend since June 2003.
iShares iBoxx $ Invest Grade Corp Bond (LQD) ETF price and LQD/TLT Relative Strength Ratio both fell to multi-year new lows on 10/10/08. All trends remain Bearish. Bond investors appear to be seriously concerned about the economic outlook.
iShares Lehman TIPS Bond (TIP) ETF absolute price hit a new 15-month closing price low on 10/10/08, implying deflation. All trends remain Bearish.
The U.S. dollar appears to be consolidating, short-term. Most trends remain Bullish, except perhaps for the secular, which is more than one major cycle.
The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood. The business and financial news has flipped from fear to hope and back again this year, creating higher levels of volatility. Investors might be wise to focus on risk control.
Sentiment/Contrary Opinion: There were 22.4% Bulls versus 52.9% Bears as of 10/15/2008, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio was 0.42, down from 0.48 the previous week. This is an extreme level of pessimism. The ratio’s 38-year range is 0.28 to 17.51, and the median is 1.47. Contrary Opinion must be tempered with other timing tools, of course.
VIX Fear Index, now at 69.25, approached its all-time high of 69.95 set on 10/10/08. The all-time low was 9.89 on 1/24/07. 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 72.93, broke out to a new 7-year high. The all-time high was 114.23 on 10/8/98. The all-time low was 12.61 on 7/29/05. VXN measures NASDAQ Volatility using a method comparable to that used for VIX.
CBOE Put/Call Ratio is 0.90, which indicates Bearish sentiment. Its 4-year mean and median are 0.62, and its 4-year range is 0.35 to 1.28.
ISEE Call/Put Ratio is 1.12, which indicates Bearish sentiment. The ratio’s 4-year mean is 1.50, 4-year median is 1.47, and 4-year range is 0.51 to 3.16.
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 weakened and seem likely to weaken further over the next several months.
The Dow Theory reconfirmed a Primary Tide Bear Market on 10/9/08, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their lowest closing prices of March through September, 2008. These two Averages originally confirmed a Primary Tide Bear Market on 11/21/07, when both closed below their closing price lows of August, 2007.
Shock and Fear. There is nothing new under the sun. The Dow Theory described this type of market many decades ago. From my book, The Encyclopedia of Technical Market Indicators , Second Edition : “The second Bear phase is marked by a sudden mood change, from optimism and hope to shock and fear. One day, the public wakes up and sees, much to its surprise, that “the emperor has no clothes”. Actual fundamental business conditions are not panning out to be as positive as previously hoped. In fact, there may be a little problem. The smart money is long gone, and there is no one left to buy when the public wants out. Stock prices drop steeply in a vacuum. Fear quickly replaces greed. Repeated waves of panic may sweep the market. Transactional volume swells as the unsophisticated investor screams, “Get me out at any price!” Sharp professional traders are willing to bid way down in price for stocks when prices drop too far too fast. The best that can be expected, however, is a dead-cat bounce that recovers only a fraction of the steep loss.”
The breadth of the market has been in a Bearish trend long term since June 2007. The number of New Lows has exceeded the number of New Highs most days for more than a year, since July 2007, and that is one sign of a Bear Market. On 10/10/08, the Cumulative Daily Advance-Decline Lines for the NYSE and for the NASDAQ both fell to new 24-month lows, reconfirming that the major breadth trends remain Bearish.
To discover the next Resistance, traders probably will be watching how the market acts at the following levels for the Standard & Poor’s 500 cash index (907.84):
Potential Resistance
1,576.09, high of 10/11/2007
1,552.76, high of 10/31/2007
1,523.57, high of 12/11/2007
1,498.85, high of 12/26/2007
1,440.24, high of 5/19/2008
1,406.32, high of 5/29/2008
1,366.59, high of 6/17/2008
1,335.63, high of 6/25/2008
1,313.15, high of 8/11/2008
1,274.42, high of 9/8/2008
1,255.09, high of 9/12/2008
1,220.03, high of 9/25/2008
1,077.08, Fibonacci 61.8% of 2002-2007 upmove
1,044.91, high of 10/14/2008
970.50, Gann 75.0% of 2002-2007 upmove
941.43, Fibonacci 78.6% of 2002-2007 upmove
To discover the next Support, traders probably will be watching how the market acts at the following levels for the S&P 500 cash index (907.84):
Potential Support
839.80, low of 10/10/2008
768.63, low of 10/10/2002
Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
18.62% Short 200% MidCap 400 PS, MZZ
18.07% Short 200% S&P 500 PS, SDS
17.46% Short 200% QQQ PS, QID
16.82% Short 200% Dow 30 PS, DXD
9.41% Short 100% S&P 500, SH
8.66% Short 100% QQQ, PSQ
8.39% Short 100% MidCap 400, MYY
8.18% Short 100% Dow 30, DOG
1.60% Bond, Aggregate, AGG
1.35% Gold Shares S.T., GLD
0.96% Bond, 20+ Years Treasury, TLT
0.82% Bond, 10 Year Treasury, IEF
0.34% Bond, TIPS, TIP
0.33% Bond, 1-3 Year Treasury, SHY
0.00% Bond, Corp, LQD
-3.43% Consumer Staples SPDR, XLP
-3.79% Malaysia Index, EWM
-3.87% Biotech H, BBH
-4.03% Growth LargeCap NASDAQ Fidelity, ONEQ
-4.55% Commodity Tracking, DBC
-5.05% Food & Beverage, PBJ
-5.11% OTC Dynamic PS, PWO
-5.40% LargeCap Blend Socially Responsible iS, KLD
-5.43% Value MidCap iS M, JKI
-5.43% Silver Trust iS, SLV
-5.80% Value MidCap S&P 400, RFV
-5.80% Dividend SPDR, SDY
-5.89% Utilities, PUI
-6.10% Internet Architecture H, IAH
-6.22% Telecommunications & Wireless, PTE
-6.32% Insurance, PIC
-6.42% Healthcare Global, IXJ
-6.53% Bank Regional H, RKH
-6.55% Taiwan Index, EWT
-6.61% Oil, Crude, U.S. Oil Fund, USO
-6.72% Growth S&P 500, RPG
-6.75% Pharmaceutical H, PPH
-6.77% Growth SmallCap Dynamic PS, PWT
-6.77% Software, PSJ
-6.82% Consumer Staples VIPERs, VDC
-6.82% Healthcare DJ, IYH
-6.82% Micro Cap Zachs, PZI
-6.83% Semiconductor H, SMH
-6.90% Health Care VIPERs, VHT
-6.91% Biotech SPDR, XBI
-6.94% Consumer Non-Cyclical, IYK
-6.99% Hardware & Electronics, PHW
-7.01% Leisure & Entertainment, PEJ
-7.04% Dividend DJ Select, DVY
-7.04% Financials Global LargeCap Value, IXG
-7.16% Dividend Growth PS, PHJ
-7.16% Value Small Cap DJ, DSV
-7.31% Retail, PMR
-7.39% Technology DJ US, IYW
-7.44% Utilities SPDR, XLU
-7.47% Technology Global, IXN
-7.49% Microcap Russell, IWC
-7.51% Telecommunications Global, IXP
-7.52% Technology SPDR, XLK
-7.55% Value LargeCap NYSE 100 iS, NY
-7.58% Utilities H, UTH
-7.59% Homebuilders SPDR, XHB
-7.60% Financials VIPERs, VFH
-7.63% Value MidCap Dynamic PS, PWP
-7.76% Retail H, RTH
-7.80% Technology GS, IGM
-7.86% Value SmallCap S&P 600 B, IJS
-7.88% Telecom Services VIPERs, VOX
-7.89% Pharmaceuticals, PJP
-7.94% Info Tech VIPERs, VGT
-7.94% Dividend Leaders, FDL
-8.01% Europe 100 BLDRS, ADRU
-8.03% Switzerland Index, EWL
-8.03% LargeCap Blend Core iS M, JKD
-8.09% Canada Index, EWC
-8.10% Growth BARRA Small Cap 600, IJT
-8.15% Utilities VIPERs, VPU
-8.32% Semiconductors, PSI
-8.33% SmallCap PS Zacks, PZJ
-8.34% Japan LargeCap Blend TOPIX 150, ITF
-8.35% Dividend Appreciation Vipers, VIG
-8.35% Dividend High Yield Equity PS, PEY
-8.45% Financial Services DJ, IYG
-8.51% Value S&P 500 B, IVE
-8.54% Value SmallCap iS M, JKL
-8.55% Telecom H, TTH
-8.56% Value LargeCap Fundamental RAFI 1000, PRF
-8.57% MidCap Russell, IWR
-8.61% LargeCap Rydex Rus Top 50, XLG
-8.61% LargeCap Blend NYSE Composite iS, NYC
-8.63% Growth 1000 Russell, IWF
-8.70% Global Titans, DGT
-8.70% Utilities DJ, IDU
-8.71% Transportation Av DJ, IYT
-8.71% Consumer Cyclical DJ, IYC
-8.73% Aerospace & Defense, PPA
-8.73% Dividend Achievers PS, PFM
-8.76% Software, IGV
-8.77% Growth LargeCap iS M, JKE
-8.84% LargeCap Blend S&P 100, OEF
-8.90% Value Large Cap DJ, ELV
-8.90% Networking, IGN
-8.92% LargeCap Blend S&P=Weight R, RSP
-8.93% Software H, SWH
-8.94% Wilshire 5000 ST TM, TMW
-8.94% LargeCap VIPERs, VV
-8.96% Growth LargeCap NASDAQ 100, QQQQ
-8.97% SmallCap Russell 2000, IWM
-8.98% Value S&P 500, RPV
-9.01% Value 1000 Russell, IWD
-9.03% Value Line Timeliness MidCap Gr, PIV
-9.06% LargeCap Blend S&P 1500 iS, ISI
-9.07% Value LargeCap Russell 3000, IWW
-9.07% Value SmallCap Dynamic PS, PWY
-9.07% LargeCap Blend Russell 3000, IWV
-9.08% Growth SmallCap R 2000, IWO
-9.13% SmallCap S&P 600, IJR
-9.13% Value LargeCap Dynamic PS, PWV
-9.14% LargeCap Blend Dynamic PS, PWC
-9.15% Growth LargeCap Russell 3000, IWZ
-9.16% Dividend International, PID
-9.16% S&P 500 iS LargeCap Blend, IVV
-9.18% Value MidCap Russell, IWS
-9.19% Growth MidCap 400 B, IJK
-9.25% Semiconductor iS GS, IGW
-9.26% Growth S&P 500/BARRA, IVW
-9.31% Industrials VIPERs, VIS
-9.33% SmallCap Core iS M, JKJ
-9.35% Blend Total Market VIPERs, VTI
-9.37% LargeCap 1000 R, IWB
-9.37% MidCap S&P 400 iS, IJH
-9.38% LargeCap Blend Total Market DJ, IYY
-9.39% Consumer D. VIPERs, VCR
-9.39% DIAMONDS (DJIA), DIA
-9.40% Value SmallCap VIPERS, VBR
-9.41% Industrial SPDR, XLI
-9.42% Value MidCap S&P 400 B, IJJ
-9.43% Biotech & Genome, PBE
-9.44% Industrial LargeCap Blend DJ US, IYJ
-9.47% Financial DJ US, IYF
-9.48% Growth Small Cap DJ, DSG
-9.59% Value SmallCap Russell 2000, IWN
-9.63% Value LargeCap iS M, JKF
-9.69% MidCap Growth iS M, JKH
-9.70% Italy Index, EWI
-9.71% Extended Mkt VIPERs, VXF
-9.77% IPOs, First Tr IPOX-100, FPX
-9.78% Health Care SPDR, XLV
-9.79% Small Cap VIPERs, VB
-9.84% S&P 500 SPDRs LargeCap Blend, SPY
-9.93% Technology MS sT, MTK
-9.95% Value VIPERs, VTV
-9.95% Australia Index, EWA
-9.96% Semiconductor SPDR, XSD
-9.98% Spain Index, EWP
-10.03% Growth VIPERs, VUG
-10.04% Value LargeCap Euro STOXX 50 DJ, FEU
-10.11% EMU Europe Index, EZU
-10.12% Mexico Index, EWW
-10.15% Growth MidCap S&P 400, RFG
-10.20% Telecom DJ US, IYZ
-10.25% Growth Large Cap, ELG
-10.27% Growth SmallCap iS M, JKK
-10.30% Belgium Index, EWK
-10.32% Growth SmallCap VIPERs, VBK
-10.35% Global 100, IOO
-10.36% Growth EAFE MSCI, EFG
-10.36% Growth Mid Cap Dynamic PS, PWJ
-10.41% Japan Index, EWJ
-10.44% Value 40 Large Low P/E FT DB, FDV
-10.51% MidCap VIPERs, VO
-10.53% Growth MidCap Russell, IWP
-10.56% Europe 350 S&P Index, IEV
-10.58% Pacific VIPERs, VPL
-10.67% EAFE Index, EFA
-10.68% Lg Cap Growth PSD, PWB
-10.75% Value EAFE MSCI, EFV
-10.76% Value SmallCap S&P 600, RZV
-10.76% MidCap Blend Core iS M, JKG
-10.80% Pacific ex-Japan, EPP
-10.85% Financial SPDR, XLF
-10.87% Internet Infrastructure H, IIH
-10.95% France Index, EWQ
-11.02% Networking, PXQ
-11.08% Broadband H, BDH
-11.10% Singapore Index, EWS
-11.17% Austria Index, EWO
-11.20% India Earnings WTree, EPI
-11.20% Netherlands Index, EWN
-11.26% European VIPERs, VGK
-11.29% Germany Index, EWG
-11.43% Euro STOXX 50, FEZ
-11.48% Internet H, HHH
-11.59% Asia 50 BLDRS, ADRA
-11.62% Nanotech Lux, PXN
-11.62% Consumer Discretionary SPDR, XLY
-11.66% MidCap S&P 400 SPDRs, MDY
-11.90% United Kingdom Index, EWU
-11.92% Building & Construction, PKB
-12.01% Water Resources, PHO
-12.06% Capital Markets KWB ST, KCE
-12.28% Developed 100 BLDRS, ADRD
-12.30% Hong Kong Index, EWH
-12.30% Materials VIPERs, VAW
-12.41% Materials SPDR, XLB
-12.49% WilderHill Clean Energy PS, PBW
-12.83% REIT VIPERs, VNQ
-13.15% Energy Global, IXC
-13.34% Realty Cohen & Steers, ICF
-13.39% China LargeCap Growth G D H USX PS, PGJ
-13.47% Basic Materials DJ US, IYM
-13.47% REIT Wilshire, RWR
-13.65% Sweden Index, EWD
-13.82% South Korea Index, EWY
-14.17% Real Estate US DJ, IYR
-14.44% Energy SPDR, XLE
-14.85% China 25 iS, FXI
-15.34% Emerging VIPERs, VWO
-15.50% Internet B2B H, BHH
-15.92% Emerging 50 BLDRS, ADRE
-15.97% Ultra Dow30 Double, DDM
-16.08% Natural Resource iS GS, IGE
-16.17% Emerging Markets, EEM
-16.24% Energy VIPERs, VDE
-16.40% Energy DJ, IYE
-17.06% Metals & Mining SPDR, XME
-17.09% Oil & Gas, PXJ
-17.11% Energy Exploration & Prod, PXE
-17.11% Ultra S&P500 Double, SSO
-17.46% Oil Services H, OIH
-18.21% Ultra MidCap400 Double, MVV
-18.27% Ultra QQQ Double, QLD
-19.47% Latin Am 40, ILF
-19.63% Brazil Index, EWZ
-20.08% South Africa Index, EZA
