by Robert W. Colby, Senior Analyst, TraderPlanet.com
Stock Market: major stock price indexes firmed slightly but remain Bearish.
Total NYSE volume fell 21%, casting doubt on the conviction behind the modest price recovery.
The underlying financial/economic crisis has proved to be much worse than expected at every turn, and it appears not at all clear when there might be an end to it.
The Primary Tide Trend has been clearly and consistently Bearish for more than a year, in my interpretation, and there is no visible end to it.
Focus on capital preservation.
On Monday, major stock price indexes firmed slightly but remain Bearish. The Standard & Poor’s 500 cash index (985.40) closed up 44.85 points, or 4.77%. Total NYSE volume fell 21%, suggesting diminished demand for stocks and casting doubt on the conviction behind the modest price recovery.
CATS remains short. CATS Simulated Cumulative Equity soared by 73% to new all-time highs from 9/8/08 to 10/17/08, assuming 50% margin and zero transaction costs. CATS is the Colby Algorithmic Timing System. (Click here for a graph of simulated performance.)
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
4.59% , IXG , Financials Global LargeCap Value, IXG
9.95% , HMA , HEALTH MGMT STK A
5.02% , IOO , Global 100, IOO
15.71% , ERIC.O , LM Ericsson Telephone Company
13.20% , CIEN.O , CIENA
4.44% , IWZ , Growth LargeCap Russell 3000, IWZ
4.26% , VIG , Dividend Appreciation Vipers, VIG
4.56% , NY , Value LargeCap NYSE 100 iS, NY
7.19% , PUI , Utilities, PUI
4.19% , VIA , VIACOM INC. (New)
21.20% , AES , AES
10.07% , Q , QWEST COMMUNICAT
4.83% , IYZ , Telecom DJ US, IYZ
5.78% , EFG , Growth EAFE MSCI, EFG
6.73% , JNS , JANUS CAPITAL
10.59% , PXJ , Oil & Gas, PXJ
4.87% , VV , LargeCap VIPERs, VV
12.87% , AYE , ALLEGHENY ENERGY
12.57% , DVN , DEVON ENERGY
3.15% , IGM , Technology GS, IGM
3.05% , LQD , Bond, Corp, LQD
7.56% , VPL , Pacific VIPERs, VPL
8.01% , MU , MICRON TECH
8.14% , AVY , AVERY DENNISON
7.71% , TLAB , TELLABS
3.04% , EPI , India Earnings WTree, EPI
1.86% , HSP , HOSPIRA
5.51% , MRO , MARATHON OIL
11.69% , DYN , DYNEGY
4.19% , PBE , Biotech & Genome, PBE
2.70% , PFM , Dividend Achievers PS, PFM
14.43% , SOV , SOVEREIGN BANC
7.23% , ITF , Japan LargeCap Blend TOPIX 150, ITF
3.39% , IWC , Microcap Russell, IWC
4.93% , EWQ , France Index, EWQ
7.75% , DTE , DTE ENERGY
1.80% , ETN , EATON
4.99% , VGK , European VIPERs, VGK
7.89% , EWJ , Japan Index, EWJ
8.77% , MRK , MERCK & CO
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-22.18% , BC , BRUNSWICK
-10.26% , CC , CIRCUIT CITY STR
-7.03% , SNDK , SanDisk Corporation
-8.64% , RIMM , RESEARCH IN MOTION LTD
-2.60% , PTV , PACTIV
-4.15% , HAS , HASBRO
-3.17% , XRAY , DENTSPLY International Inc
-3.36% , PSQ , Short 100% QQQ, PSQ
-2.67% , NCC , NATIONAL CITY
-2.14% , ACV , Alberto-Culver Co.
-3.56% , SHLD , SEARS HOLDINGS
-2.24% , TUP , TUPPERWARE
-1.51% , PRU , PRUDENTIAL FINL
-3.37% , KEY , KEYCORP
-2.50% , MYY , Short 100% MidCap 400, MYY
-2.00% , SCHW.O , CHARLES SCHWAB
-2.08% , DE , DEERE & CO
-0.07% , SHY , Bond, 1-3 Year Treasury, SHY
-0.65% , TIF , TIFFANY
-1.88% , GLW , CORNING
-0.93% , MHS , MEDCO HEALTH
-0.28% , CAG , CONAGRA FOODS
-1.36% , MRVL , MARVELL TECHNOLOGY
Sectors: among the 9 major U.S. sectors, all 10 rose.
Major Sectors Ranked for the Day
% Price Change, Sector ETF, Symbol
11.65% Energy SPDR, XLE
8.43% Utilities SPDR, XLU
5.05% Materials SPDR, XLB
4.97% Industrial SPDR, XLI
4.95% Financial SPDR, XLF
4.02% Health Care SPDR, XLV
3.99% Technology SPDR, XLK
0.82% Consumer Staples SPDR, XLP
0.54% Consumer Discretionary SPDR, XLY
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.
Health Care (XLV) Bearish, Underweight. On 10/10/08, XLV absolute price fell to a new 5-year low.
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.
Consumer Discretionary (XLY) Bearish, Underweight. On 10/10/08, XLY absolute price fell to its lowest level in 5 years.
Energy (XLE) Bearish, Underweight. On 10/10/08, the XLE absolute price hit another new 18-month intraday low.
Industrial (XLI) Bearish, Underweight. On 10/10/08, the XLI absolute price hit another new 58-month low.
Materials (XLB) Bearish, Underweight. On 10/16/08, the XLB absolute price made another new 26-month intraday 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.
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 10/10/08, the absolute price made another new 5-year low, reconfirming long-term trend weakness.
NASDAQ 100 Index intraday price hit a new 5-year low on 10/16/08.
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 firmed slightly over the past 2 trading sessions but remains Bearish. On 10/16/08, oil hit a new 12-month low of 68.57. 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 firmed slightly but remains Bearish. broke down below previous 4-week lows. On 10/17/08, Gold broke down below previous 4-week lows. Gold is in a short-term downtrend and 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 firmed slightly but remains Bearish. 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 absolute 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 jumped up to a new 19-month high. 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 record high 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 52.97, backed down from its 18-year high set on 10/17/08. 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 59.65, fell further from its 7-year high of 72.93 set on 10/15/08. 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 0.62, which indicates Neutral 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 1.46, which indicates Neutral 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 (985.40):
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
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 (985.40):
Potential Support
970.50, Gann 75.0% of 2002-2007 upmove
941.43, Fibonacci 78.6% of 2002-2007 upmove
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
14.36% Metals & Mining SPDR, XME
12.45% Energy Exploration & Prod, PXE
12.21% Oil Services H, OIH
11.65% Energy SPDR, XLE
11.64% Ultra MidCap400 Double, MVV
11.57% Natural Resource iS GS, IGE
11.54% Energy VIPERs, VDE
11.07% Energy DJ, IYE
10.66% Australia Index, EWA
10.59% Oil & Gas, PXJ
10.46% Energy Global, IXC
9.23% Ultra Dow30 Double, DDM
8.80% Ultra S&P500 Double, SSO
8.64% Utilities DJ, IDU
8.63% Internet Infrastructure H, IIH
8.61% Brazil Index, EWZ
8.59% Basic Materials DJ US, IYM
8.43% Utilities SPDR, XLU
8.40% China 25 iS, FXI
8.29% Pacific ex-Japan, EPP
8.05% Homebuilders SPDR, XHB
8.03% Utilities VIPERs, VPU
7.89% Japan Index, EWJ
7.73% Europe 100 BLDRS, ADRU
7.56% Pacific VIPERs, VPL
7.54% Materials VIPERs, VAW
7.44% Emerging 50 BLDRS, ADRE
7.23% Japan LargeCap Blend TOPIX 150, ITF
7.19% Utilities, PUI
7.17% Lg Cap Growth PSD, PWB
7.11% WilderHill Clean Energy PS, PBW
7.01% Emerging Markets, EEM
6.89% Utilities H, UTH
6.79% Netherlands Index, EWN
6.73% Ultra QQQ Double, QLD
6.71% Telecom H, TTH
6.58% South Africa Index, EZA
6.56% DIAMONDS (DJIA), DIA
6.47% Asia 50 BLDRS, ADRA
6.40% Canada Index, EWC
6.38% EAFE Index, EFA
6.29% China LargeCap Growth G D H USX PS, PGJ
6.14% LargeCap Blend S&P=Weight R, RSP
6.11% Value LargeCap Dynamic PS, PWV
6.01% S&P 500 SPDRs LargeCap Blend, SPY
5.95% Value EAFE MSCI, EFV
5.95% Growth Mid Cap Dynamic PS, PWJ
5.95% United Kingdom Index, EWU
5.95% South Korea Index, EWY
5.94% MidCap Growth iS M, JKH
5.85% Silver Trust iS, SLV
5.83% Hong Kong Index, EWH
5.82% Emerging VIPERs, VWO
5.78% Growth EAFE MSCI, EFG
5.62% Water Resources, PHO
5.62% Sweden Index, EWD
5.55% Singapore Index, EWS
5.54% Latin Am 40, ILF
5.51% Wilshire 5000 ST TM, TMW
5.46% LargeCap Blend NYSE Composite iS, NYC
5.44% Value MidCap Dynamic PS, PWP
5.41% Growth MidCap 400 B, IJK
5.41% MidCap S&P 400 iS, IJH
5.37% Value LargeCap iS M, JKF
5.25% Growth MidCap Russell, IWP
5.21% Europe 350 S&P Index, IEV
5.20% Value 40 Large Low P/E FT DB, FDV
5.15% Nanotech Lux, PXN
5.13% Blend Total Market VIPERs, VTI
5.12% MidCap VIPERs, VO
5.12% Growth SmallCap VIPERs, VBK
5.11% MidCap S&P 400 SPDRs, MDY
5.10% Growth S&P 500/BARRA, IVW
5.05% Materials SPDR, XLB
5.04% Value VIPERs, VTV
5.02% Global 100, IOO
5.01% Euro STOXX 50, FEZ
4.99% European VIPERs, VGK
4.97% Industrial SPDR, XLI
4.95% Financial SPDR, XLF
4.94% EMU Europe Index, EZU
4.94% LargeCap Blend S&P 100, OEF
4.93% France Index, EWQ
4.91% LargeCap Blend Russell 3000, IWV
4.89% Telecom Services VIPERs, VOX
4.87% LargeCap VIPERs, VV
4.85% LargeCap Rydex Rus Top 50, XLG
4.85% MidCap Russell, IWR
4.83% Value LargeCap Russell 3000, IWW
4.83% LargeCap Blend S&P 1500 iS, ISI
4.83% Telecom DJ US, IYZ
4.82% S&P 500 iS LargeCap Blend, IVV
4.80% Value LargeCap Euro STOXX 50 DJ, FEU
4.73% Value 1000 Russell, IWD
4.64% SmallCap S&P 600, IJR
4.62% Software, IGV
4.62% Italy Index, EWI
4.59% Financials Global LargeCap Value, IXG
4.59% SmallCap Russell 2000, IWM
4.59% MidCap Blend Core iS M, JKG
4.56% Value LargeCap NYSE 100 iS, NY
4.49% Growth VIPERs, VUG
4.47% Telecommunications Global, IXP
4.45% Growth 1000 Russell, IWF
4.45% Value MidCap S&P 400 B, IJJ
4.44% Growth LargeCap Russell 3000, IWZ
4.41% LargeCap Blend Dynamic PS, PWC
4.39% Growth BARRA Small Cap 600, IJT
4.36% Value Large Cap DJ, ELV
4.35% Growth SmallCap R 2000, IWO
4.35% LargeCap 1000 R, IWB
4.33% Software H, SWH
4.32% Small Cap VIPERs, VB
4.31% Transportation Av DJ, IYT
4.30% Extended Mkt VIPERs, VXF
4.26% Dividend Appreciation Vipers, VIG
4.23% Value LargeCap Fundamental RAFI 1000, PRF
4.22% Growth Small Cap DJ, DSG
4.20% Belgium Index, EWK
4.19% Biotech & Genome, PBE
4.19% Value S&P 500 B, IVE
4.18% LargeCap Blend Total Market DJ, IYY
4.15% Value MidCap Russell, IWS
4.13% Growth SmallCap iS M, JKK
4.09% Oil, Crude, U.S. Oil Fund, USO
4.09% Healthcare Global, IXJ
4.03% Value SmallCap Russell 2000, IWN
4.03% Biotech H, BBH
4.02% Health Care SPDR, XLV
3.99% Technology SPDR, XLK
3.96% Biotech SPDR, XBI
3.96% Value SmallCap VIPERS, VBR
3.93% Value SmallCap S&P 600 B, IJS
3.89% Growth LargeCap iS M, JKE
3.86% Dividend International, PID
3.80% Spain Index, EWP
3.76% Networking, IGN
3.72% Growth Large Cap, ELG
3.69% Pharmaceutical H, PPH
3.57% Value SmallCap iS M, JKL
3.55% Insurance, PIC
3.51% LargeCap Blend Core iS M, JKD
3.50% Technology Global, IXN
3.45% Internet B2B H, BHH
3.44% Growth LargeCap NASDAQ Fidelity, ONEQ
3.39% Microcap Russell, IWC
3.38% Health Care VIPERs, VHT
3.36% Industrial LargeCap Blend DJ US, IYJ
3.36% Dividend DJ Select, DVY
3.33% LargeCap Blend Socially Responsible iS, KLD
3.33% Technology DJ US, IYW
3.32% Global Titans, DGT
3.28% Industrials VIPERs, VIS
3.28% Consumer D. VIPERs, VCR
3.19% Healthcare DJ, IYH
3.15% Technology GS, IGM
3.15% Software, PSJ
3.13% Info Tech VIPERs, VGT
3.06% Consumer Cyclical DJ, IYC
3.05% Consumer Non-Cyclical, IYK
3.05% Bond, Corp, LQD
3.04% India Earnings WTree, EPI
3.03% Growth MidCap S&P 400, RFG
3.00% Semiconductor iS GS, IGW
2.97% Pharmaceuticals, PJP
2.96% Value Line Timeliness MidCap Gr, PIV
2.94% Telecommunications & Wireless, PTE
2.94% Growth S&P 500, RPG
2.94% Value MidCap iS M, JKI
2.91% Taiwan Index, EWT
2.85% Networking, PXQ
2.81% Mexico Index, EWW
2.80% Semiconductor H, SMH
2.79% Growth LargeCap NASDAQ 100, QQQQ
2.70% Dividend Achievers PS, PFM
2.68% Financial DJ US, IYF
2.67% Consumer Staples VIPERs, VDC
2.65% Value SmallCap Dynamic PS, PWY
2.62% Capital Markets KWB ST, KCE
2.62% SmallCap Core iS M, JKJ
2.57% Micro Cap Zachs, PZI
2.57% Dividend SPDR, SDY
2.48% Food & Beverage, PBJ
2.46% Value S&P 500, RPV
2.34% Internet Architecture H, IAH
2.30% Internet H, HHH
2.28% Growth SmallCap Dynamic PS, PWT
2.28% Malaysia Index, EWM
2.27% Financials VIPERs, VFH
2.19% Aerospace & Defense, PPA
2.08% Retail H, RTH
2.01% Financial Services DJ, IYG
2.01% Commodity Tracking, DBC
2.00% Value MidCap S&P 400, RFV
1.89% Switzerland Index, EWL
1.82% Dividend Leaders, FDL
1.79% Bond, Aggregate, AGG
1.73% Germany Index, EWG
1.73% Dividend High Yield Equity PS, PEY
1.67% Austria Index, EWO
1.67% Gold Shares S.T., GLD
1.49% Technology MS sT, MTK
1.46% Building & Construction, PKB
1.41% Value Small Cap DJ, DSV
1.40% Dividend Growth PS, PHJ
1.39% Bank Regional H, RKH
1.37% Bond, TIPS, TIP
1.25% OTC Dynamic PS, PWO
1.13% Broadband H, BDH
0.98% REIT Wilshire, RWR
0.96% SmallCap PS Zacks, PZJ
0.95% Real Estate US DJ, IYR
0.82% Consumer Staples SPDR, XLP
0.80% Semiconductor SPDR, XSD
0.80% Bond, 20+ Years Treasury, TLT
0.73% Retail, PMR
0.73% Hardware & Electronics, PHW
0.73% REIT VIPERs, VNQ
0.68% Semiconductors, PSI
0.61% Realty Cohen & Steers, ICF
0.54% Consumer Discretionary SPDR, XLY
0.45% IPOs, First Tr IPOX-100, FPX
0.10% Bond, 10 Year Treasury, IEF
-0.07% Bond, 1-3 Year Treasury, SHY
-0.58% Value SmallCap S&P 600, RZV
-1.40% Developed 100 BLDRS, ADRD
-1.56% Leisure & Entertainment, PEJ
-2.50% Short 100% MidCap 400, MYY
-3.36% Short 100% QQQ, PSQ
-4.63% Short 100% Dow 30, DOG
-4.93% Short 100% S&P 500, SH
-5.20% Short 200% QQQ PS, QID
-9.31% Short 200% MidCap 400 PS, MZZ
-9.40% Short 200% Dow 30 PS, DXD
-9.54% Short 200% S&P 500 PS, SDS
