By Robert W. Colby, Senior Analyst TraderPlanet.com
Crude Oil Futures rose to another new all-time high at 88.20.
The market demonstrated little of its old ability to bounce back from sinking spells. If that inability persists, it could call into question the market’s Bullish resilience and underlying demand for stocks. Based on the action of one day, however, it might be premature to reach such a conclusion.
Breadth ended 44% net Bearish, with more Declining stocks than Advancing stocks on the NYSE. The Cumulative Daily Advance-Decline line for the NYSE is far from its July high, lagging the price indices. The A-D Line lag is much more pronounced (I could say “dramatic”) for the NASDAQ.
Total volume rose modestly on both the NYSE and the NASDAQ.
New Highs-New Lows ratios were 16% net Bearish.
Short-term momentum indicators fell further to their lowest levels in more than a month. Momentum is still underperforming relative to the price indices.
The market does not move in a straight line, and temporary minor sinking spells are to be expected in any uptrend. The stock market has absorbed 1- to 4-day bouts of normal profit taking with minimal damage and with resilience since the low on 8/16/07. That indicates underlying demand and a Bullish intermediate-term trend for stocks. Finally, the long-term Primary Tide Trend remains Bullish, according to the Dow Theory.
Seasonal tendencies are clearly a concern. October has been a losing month on average, based on 101 years of month-end closing prices for the Dow-Jones Industrial Average, from 1900 through 2000. (See my book, pages 403-410.) October has seen some very notable downside shakeouts in the past. The media is all over this story, however, so a cautious exploration of the Art of Contrary Thinking could prove to be a good idea.
The market is a trick or treat monster, perhaps more so than usual at this time. Therefore, I am considering any and all opinions lightly, taking them with a few grains of salt, while staying alert, flexible, and ready to change quickly as “the tape” dictates.
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
8.34% , STT , STATE STREET
4.16% , DISH , EchoStar Communications Corporation
3.59% , MAR , MARRIOTT INTL STK A
5.48% , SVU , SUPERVALU
2.29% , NTRS , NORTHERN TRUST
2.30% , MZZ , Short 200% MidCap 400 PS, MZZ
1.96% , BSC , BEAR STEARNS
1.65% , USO , Oil, Crude, U.S. Oil Fund, USO
0.45% , CKFR , Checkfree Corp.
0.40% , PBJ , Food & Beverage, PBJ
1.51% , SSCC , Smurfit-Stone Container Corporation
2.54% , VRSN , VeriSign Inc
1.26% , CMCSA , COMCAST HOLDINGS STK A
3.38% , MLNM , Millennium Pharmaceuticals Inc
1.33% , IBM , IBM
1.66% , APOL , APOLLO GROUP
3.54% , VFC , VF
1.20% , NOC , NORTHROP GRUMMAN
1.60% , PKI , PERKINELMER
1.96% , LRCX , LAM RESEARCH CORP
0.97% , CSX , CSX
1.54% , PBI , PITNEY BOWES
1.67% , COP , CONOCOPHILLIPS
0.51% , DOG , Short 100% Dow 30, DOG
0.43% , BHH , Internet B2B H, BHH
0.98% , BF.B , BROWN FORMAN STK B
0.97% , DVN , DEVON ENERGY
2.11% , KG , KING PHARM
0.67% , LLTC , LINEAR TECH
2.20% , OXY , OCCIDENTAL
0.53% , MO , ALTRIA GROUP
1.01% , SDS , Short 200% S&P 500 PS, SDS
1.21% , CVX , CHEVRONTEXACO
0.57% , HOT , STARWOOD HOTELS
0.91% , APA , APACHE
1.11% , DXD , Short 200% Dow 30 PS, DXD
1.17% , BA , BOEING
0.76% , PPG , PPG INDUSTRIES
0.67% , VIA.B , VIACOM STK B
0.26% , WEN , WENDYS INTL
0.12% , PXE , Energy Exploration & Prod, PXE
0.54% , MKC , MCCORMICK
0.50% , TNB , THOMAS & BETTS
1.63% , BIG , BIG LOTS
0.93% , MSFT , MICROSOFT
0.50% , PAYX , PAYCHEX
1.60% , PBG , PEPSI BOTTLING
0.64% , AV , AVAYA
0.69% , VIA , VIACOM INC. (New)
0.51% , AMP , Ameriprise Financial Inc.
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-23.45% , ERIC.O , LM Ericsson Telephone Company
-1.33% , ANDW , ANDREW
-0.97% , JKI , Value MidCap iS M, JKI
-3.58% , CMA , COMERICA
-3.89% , WFC , WELLS FARGO
-5.90% , KEY , KEYCORP
-4.63% , FITB , FIFTH THIRD BANC
-3.04% , GNTX , Gentex Corporation
-4.20% , YHOO , YAHOO
-4.48% , FRX , FOREST LABS STK A
-4.04% , JNS , JANUS CAPITAL
-3.36% , THC , TENET HEALTHCARE
-5.27% , EWD , Sweden Index, EWD
-3.59% , BMC , BMC SOFTWARE
-3.00% , GNW , GENWORTH FINANCIAL (NYSE:GNW)
-2.57% , MVV , Ultra MidCap400 Double, MVV
-1.82% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-0.76% , JKL , Value SmallCap iS M, JKL
-4.31% , CPWR , COMPUWARE
-3.53% , STI , SUNTRUST BANKS
-3.26% , PNC , PNC FINL SVC
-2.42% , LNCR , Lincare Holdings Inc
-1.81% , VFH , Financials VIPERs, VFH
-1.47% , LXK , LEXMARK INTL STK A
-3.17% , DLTR , Dollar Tree Stores Inc
-2.54% , LSI , LSI LOGIC
-0.92% , DSV , Value Small Cap DJ, DSV
-1.27% , VB , Small Cap VIPERs, VB
-4.08% , SOV , SOVEREIGN BANC
-0.65% , RFV , Value MidCap S&P 400, RFV
-0.31% , IYW , Technology DJ US, IYW
-1.19% , ACS , AFFILIATED COMPUTER
-0.86% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
-4.77% , CIT , CIT GROUP
-1.36% , CFC , COUNTRYWIDE FNCL
-2.83% , MI , MARSHAL & ILSLEY
-3.16% , BBT , BB&T
-2.95% , WY , WEYERHAEUSER
-1.63% , RWR , REIT Wilshire, RWR
-3.08% , FHN , FIRST TENNESSEE
-0.72% , VO , MidCap VIPERs, VO
-0.77% , DGT , Global Titans, DGT
-1.39% , CA , COMPUTER ASSOC
-0.88% , BDH , Broadband H, BDH
-1.95% , HOG , HARLEY DAVIDSON
-1.92% , JCP , JC PENNEY
-1.85% , EEM , Emerging Markets, EEM
-0.48% , JKK , Growth SmallCap iS M, JKK
-2.68% , LPX , LOUISIANA PAC
-0.70% , ELV , Value Large Cap DJ, ELV
Sectors: among the 9 major U.S. sectors, 1 rose, 7 fell and 1 was unchanged.
Major Sectors Ranked for the Day
% Price Change, Sector
-0.32% Consumer Discretionary
-0.43% Consumer Staples
-0.75% Health Care
Energy (XLE) Bullish, Overweight. XLE made an all-time closing price high on 10/16/07, and relative strength confirmed. XLE has been strong compared to the S&P since 3/12/03.
Technology (XLK) Bullish, Overweight. XLK made a new 6-year price high on 10/11/07, and relative strength made a new 2-year high on 10/16/07. Long term, XLK has been relatively strong compared to the S&P since its low on 7/24/06.
Materials (XLB) Bullish, Overweight. Price made a new high on 10/11/07. Relative strength made a new 10-week high on 10/1/07. The relative strength trend strongly outperformed since the price shakeout low on 8/16/07, and its long term trend has been Bullish since 9/27/2000.
Industrial (XLI) Bullish, Overweight. Industrial stock sector price made an all-time price high on 10/10/07. Longer term, XLI has been relatively strong compared to the S&P since 8/9/06.
Utilities (XLU) Bearish, Underweight. This defensive sector’s relative strength made a new 8-week low on 9/28/07.
Consumer Staples (XLP) Bearish, Underweight. This defensive sector’s relative strength broke down to a new 11-week low on 10/9/07 and has been underperforming for 5 years, since 10/9/02.
Health Care (XLV) Bearish, Underweight. Relative strength has been trending down since 10/9/02, and it made a new 5-year low on 7/19/07, thereby confirming a major downtrend.
Consumer Discretionary (XLY) Bearish, Underweight. Price hit a new 10-month low on 8/16/07. Relative strength made another new 6-year low on 9/27/07.
Financial (XLF) Bearish, Underweight. The XLF/SPY relative strength ratio fell to its lowest level in more than 6 years. The long-term trend of relative strength has been trending down since 2/20/07.
Foreign stock indices underperformed since 10/11/07, but it is only a minor correction. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) made new price and relative strength highs on 10/11/07. 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 are all Foreign.
NASDAQ Composite index is holding up well, relative to most other indices. Price made a new 6-year high on 10/11/07. Relative strength made a new 17-month high on 10/10/07. Longer term, NASDAQ has outperformed for more than a year, since 8/8/06.
Growth stocks’ relative strength made a new 20-month high relative to Value stocks. Growth price made a new 6-year high on 10/11/07 and outperformed Value stocks since 8/8/06. The main trend is confirmed Bullish.
Small Caps substantially underperformed Large Caps since 4/19/06, and the main long-term trend is Bearish for Small Caps.
Crude Oil Futures rose to another new all-time high at 88.20. Support appears at previous resistance at 84.10 and at previous minor lows in the 78.25-78.35 zone. Note that the U.S. OIL FUND ETF (AMEX: USO) is not a pure play on Crude Oil. The longer-term trends for both remain Bullish.
The Energy stock sector underperformed the USO but outperformed the SPY. Longer term, since 3/12/03, the stocks in the Energy Select Sector SPDR ETF (XLE) have significantly outperformed crude oil as a commodity, as well as the S&P 500. So, the Relative Strength major trend is Bullish for the energy stocks.
Gold touched to a new 28-year high intraday but reversed with a Bearish Engulfing Line. The Gold Trust ETF (NYSE: GLD) confirmed. Some profit taking seems due, but these major trends remain Bullish.
Silver’s main trend is relatively Bearish. Compared to Gold, the iShares Silver Trust (AMEX: SLV) has been relatively weak since 12/7/06.
The Gold Miners ETF (GDX) fell and underperformed the metal. Some profit taking would be normal after the recent price run-up.
Inflation expectations appear choppy and uncertain, especially since 6/22/07. This is based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bond prices stabilized on Monday and Tuesday, but the short-term trend still may be Bearish. Bond prices are bumping along a little above their 2-month lows. Long-term, it seems possible that the iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT) ended a normal oversold bounce in a Bearish trend on 9/10/07. 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.
U.S. dollar moved above previous 3-day highs with a Bullish Engulfing Line. This could prove to be a pinky fingernail in the dike for the very short term. Longer term, the dollar fell 16% over the past 23 months, and the main tidal force remains very Bearish.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
0.42% Japanese Yen
0.21% US Dollar Index
0.17% Natural Gas
0.00% 30Y T-Bond
-0.14% Swiss Franc
-0.23% Dow Utilities
-0.26% Euro Index
-0.27% Computer Tech
-0.27% Canadian Dollar
-0.30% AMEX Composite
-0.32% Consumer Discretionary
-0.36% Nasdaq 100
-0.43% Consumer Staples
-0.51% Dow Industrial
-0.52% British Pound
-0.56% Commodity Related
-0.58% Nasdaq Composite
-0.59% S&P 100
-0.64% Dow Composite
-0.66% S&P 500
-0.66% Wilshire 5000
-0.68% Russell 1000
-0.68% Russell 3000
-0.72% Russell 2000
-0.74% Health Care
-0.75% Health Care
-0.81% Value Line
-0.85% S&P Mid Caps
-0.89% NYSE Composite
-0.90% S&P Small Caps
-1.02% Disk Drives
-1.02% United Kingdom
-1.13% Oil Services
-1.14% Dow Transports
-1.33% Australian Dollar
-1.37% Health Care Products
-1.44% Broker Dealers
-2.01% Gold Mining
-2.71% Hong Kong
-2.71% South Korea