By Robert W. Colby, Senior Analyst TraderPlanet.com
the Technology stock sector, and Growth stocks relative to Value stocks.
U.S. dollar jumped up with a Bullish Engulfing Line.
The U.S. stock market retraced 43.2% (intraday) of its August-October gain. That magnitude is entirely typical and normal for a minor correction. The market does not move in a straight line, and downside corrections or shakeouts are to be expected in any uptrend. The long-term Primary Tide Trend remains Bullish, according to the Dow Theory.
Breadth ended 10% net Bullish, with more Advancing stocks than Declining stocks on the NYSE. The Cumulative Daily Advance-Decline line for the NASDAQ turned upward after breaking down to a new low on 10/19/07.
Up-Down Volume finished the day 18% net Bullish, with greater Up Volume than Down Volume on the NYSE.
Total volume fell on both the NYSE and the NASDAQ, indicating a calmer emotional trading climate.
New Highs-New Lows ratios ended 72% net Bearish.
Very short-term indicators now show that Bearish momentum decelerated. The market is still short-term oversold. Please note that “oversold” does not guarantee an immediate bounce.
Seasonal tendencies are clearly a concern to many traders. 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
5.02% , XHB , Homebuilders SPDR, XHB
0.60% , RPG , Growth S&P 500, RPG
0.81% , RFG , Growth MidCap S&P 400, RFG
1.64% , PHW , Hardware & Electronics, PHW
5.02% , RZV , Value SmallCap S&P 600, RZV
5.17% , CIEN.O , CIENA
1.56% , IJT , Growth BARRA Small Cap 600, IJT
1.70% , PMR , Retail, PMR
1.18% , PZJ , SmallCap PS Zacks, PZJ
1.47% , XSD , Semiconductor SPDR, XSD
1.73% , VB , Small Cap VIPERs, VB
3.78% , TBH , Telebras H, TBH
6.35% , CPWR , COMPUWARE
5.15% , BDK , BLACK & DECKER
0.48% , VPU , Utilities VIPERs, VPU
8.71% , PHM , PULTE HOMES
1.00% , EWM , Malaysia Index, EWM
0.88% , RSP , LargeCap Blend S&P=Weight R, RSP
1.87% , PWY , Value SmallCap Dynamic PS, PWY
4.45% , ATVI , Activision Inc.
1.18% , PZI , Micro Cap Zachs, PZI
1.45% , RWR , REIT Wilshire, RWR
2.69% , CCL , CARNIVAL STK A
0.98% , VBK , Growth SmallCap VIPERs, VBK
2.86% , LVLT , LEVEL 3 COMMUNICATIONS
3.94% , HMA , HEALTH MGMT STK A
0.82% , PWP , Value MidCap Dynamic PS, PWP
2.98% , PH , PARKER HANNIFIN
1.21% , DSG , Growth Small Cap DJ, DSG
2.25% , IWN , Value SmallCap Russell 2000, IWN
4.54% , KMB , KIMBERLY CLARK
2.88% , MRK , MERCK & CO
3.28% , LXK , LEXMARK INTL STK A
3.10% , RX , IMS HEALTH
1.46% , PSJ , Software, PSJ
2.62% , VNQ , REIT VIPERs, VNQ
2.14% , BEAS , BEA Systems Inc
1.01% , ADRA , Asia 50 BLDRS, ADRA
1.93% , MYL , MYLAN LABS
1.04% , VCR , Consumer D. VIPERs, VCR
0.36% , TMW , Wilshire 5000 ST TM, TMW
1.35% , VXF , Extended Mkt VIPERs, VXF
0.74% , ICF , Realty Cohen & Steers, ICF
1.78% , DLX , DELUXE
4.61% , GRMN , GARMIN LTD
1.26% , GNTX , Gentex Corporation
1.03% , MVV , Ultra MidCap400 Double, MVV
0.51% , IYJ , Industrial LargeCap Blend DJ US, IYJ
2.11% , IPG , INTERPUBLIC GRP
0.93% , FO , FORTUNE BRANDS
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-13.36% , SGP , SCHERING PLOUGH
-0.67% , IYZ , Telecom DJ US, IYZ
-1.52% , DLTR , Dollar Tree Stores Inc
-2.92% , ASH , ASHLAND
-0.50% , IEV , Europe 350 S&P Index, IEV
-0.35% , IXG , Financials Global LargeCap Value, IXG
-2.92% , IGT , INTL GAME TECH
-0.83% , IYM , Basic Materials DJ US, IYM
-0.64% , FEZ , Euro STOXX 50, FEZ
-3.04% , EDS , ELECTR DATA
-0.46% , EWI , Italy Index, EWI
-3.24% , STJ , ST JUDE MEDICAL
-0.46% , EZU , EMU Europe Index, EZU
-1.06% , IXC , Energy Global, IXC
-2.63% , GT , GOODYEAR TIRE
-2.96% , MZZ , Short 200% MidCap 400 PS, MZZ
-0.86% , PXJ , Oil & Gas, PXJ
-2.78% , WY , WEYERHAEUSER
-0.72% , PXE , Energy Exploration & Prod, PXE
-0.52% , PTE , Telecommunications & Wireless, PTE
-2.29% , COP , CONOCOPHILLIPS
-0.31% , CHKP , Check Point Software Technologies Ltd
-0.71% , MLNM , Millennium Pharmaceuticals Inc
-0.81% , LH , LAB CRP OF AMER
-2.23% , CTB , COOPER TIRE
-0.30% , PPH , Pharmaceutical H, PPH
-0.71% , MCD , MCDONALDS
-0.38% , VGK , European VIPERs, VGK
-1.14% , STI , SUNTRUST BANKS
-2.64% , ZMH , ZIMMER HLDGS
-0.68% , EWN , Netherlands Index, EWN
-0.49% , PWV , Value LargeCap Dynamic PS, PWV
-1.30% , EWO , Austria Index, EWO
-0.17% , IYH , Healthcare DJ, IYH
-1.27% , BIG , BIG LOTS
-0.55% , PTV , PACTIV
-1.09% , VC , VISTEON
-0.97% , TIN , TEMPLE INLAND
-0.92% , PKB , Building & Construction, PKB
-0.40% , WAG , WALGREEN
-0.13% , DVY , Dividend DJ Select, DVY
-0.19% , VAW , Materials VIPERs, VAW
-0.42% , AXP , AMERICAN EXPRESS
-0.42% , EWY , South Korea Index, EWY
-1.01% , MDT , MEDTRONIC
-0.43% , FRE , FREDDIE MAC
-0.79% , GIS , GENERAL MILLS
-0.70% , MYY , Short 100% MidCap 400, MYY
-1.50% , IAU , Gold COMEX iS, IAU
-0.27% , DBC , Commodity Tracking, DBC
Sectors: among the 9 major U.S. sectors, 6 rose, 2 fell, and 1 finished unchanged.
Major Sectors Ranked for the Day
% Price Change, Sector
1.23% Financial
0.89% Consumer Discretionary
0.70% Utilities
0.65% Consumer Staples
0.63% Technology
0.38% Industrial
0.00% Health Care
-0.74% Materials
-1.14% Energy
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
Energy (XLE) Bullish, Overweight. XLE made an all-time closing price high on 10/16/07, and XLE made an all-time high in relative strength 10/18/07. 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 10/22/07. 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 3-month high on 10/19/07. 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.
Consumer Staples (XLP) Neutral, Market Weight. This defensive sector’s relative strength has improved since its low on 10/9/07.
Utilities (XLU) Neutral, Market Weight. This defensive sector’s relative strength has improved modestly since its low on 9/28/07.
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 and is back down to that low now.
Financial (XLF) Bearish, Underweight. on 10/19/07, 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’ eased lower a day after Relative Strength versus the S&P 500 rose to a new high. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) made a new price high on 10/11/07 and a new relative strength high on 10/19/07. 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 has been Relatively Strong, compared to most other indices. Price made a new 6-year high on 10/11/07. Relative strength made a new 17-month high on 10/22/07. Longer term, NASDAQ has outperformed since 8/8/06.
Growth Stock/Value Stock Relative Strength ratio rose to a another new 20-month high. Growth price made a new 6-year high on 10/11/07. Growth stocks outperformed Value stocks since 8/8/06. The main trend for Growth is confirmed Bullish.
Small Caps substantially underperformed Large Caps since 4/19/06, and the main long-term trend is Bearish for Small Caps.
November Crude Oil Futures fell for the second consecutive session. On 10/19/07, price hit a record high at $90.07 a barrel intraday. 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. Some profit taking seems normal after oil’s sharp price run-up since 8/22/07, but these major trends remain Bullish.
The Energy stock sector underperformed the USO and 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 fell for the second consecutive session. Gold set a new 28-year high on 10/19/07, and Relative Strength versus the S&P 500 confirmed. The Gold Trust ETF (NYSE: GLD) also confirmed the uptrend on 10/19/07. Some profit taking seems normal after gold’s sharp price run-up since 8/16/07, 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) has underperformed the metal steadily since 10/12/07. Profit taking seems normal after the previous 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 Bonds stalled following a sharp 3-day price run-up. The short-term trend still appears Bullish. 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 jumped up with a Bullish Engulfing Line. Still, the main trend has been confirmed Bearish—again and again. 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:
2.64% Airlines
2.01% Hardware
1.78% Retailers
1.65% Disk Drives
1.50% Broker Dealers
1.43% S&P Small Caps
1.41% Russell 2000
1.28% Insurance
1.24% Nasdaq 100
1.23% Financial
1.23% REITs
1.18% Hong Kong
1.14% Hospitals
1.06% Nasdaq Composite
1.01% Semiconductors
1.00% Malaysia
0.99% Computer Tech
0.97% Network
0.93% Value Line
0.91% Dow Transports
0.90% DOT
0.89% Consumer Discretionary
0.81% US Dollar Index
0.78% Internet
0.76% Banks
0.70% Utilities
0.65% S&P Mid Caps
0.65% Consumer Staples
0.64% Dow Utilities
0.63% Technology
0.60% Japanese Yen
0.58% Japan
0.57% Dow Composite
0.48% Russell 3000
0.48% Wilshire 5000
0.46% Paper
0.42% Biotechs
0.40% Russell 1000
0.38% S&P 500
0.38% Industrial
0.36% Taiwan
0.33% Dow Industrial
0.33% S&P 100
0.28% Australia
0.27% Canada
0.17% 30Y T-Bond
0.13% Singapore
0.11% NYSE Composite
0.00% Health Care
-0.09% Brazil
-0.11% Mexico
-0.23% United Kingdom
-0.24% Health Care
-0.36% AMEX Composite
-0.42% South Korea
-0.46% Italy
-0.47% Drugs
-0.48% Chemicals
-0.48% Spain
-0.67% Switzerland
-0.68% Netherlands
-0.69% Oil Services
-0.70% Swiss Franc
-0.73% Natural Gas
-0.74% Materials
-0.76% France
-0.81% Germany
-0.90% Euro Index
-0.92% Belgium
-0.93% British Pound
-1.03% Health Care Products
-1.14% Energy
-1.20% Australian Dollar
-1.26% Oil
-1.30% Austria
-1.32% Commodity Related
-1.61% Sweden
-1.61% Canadian Dollar
-2.42% Gold Mining
