By Robert W. Colby, Senior Analyst TraderPlanet.com
Stocks: “The worst may be over.”
“Resilience in the face of bad news.”
This week’s lows hold again.
Relative Strength again rose to new highs for
Growth stocks relative to Value stocks, Materials stock sector, and Foreign stocks.
Utilities stock sector Relative Strength made a new 2-month high.
Relative Strength fell to new 6-year lows for
Consumer Discretionary and Financial stock sectors.
December Crude Oil Futures rose to a new record at $91.
Gold popped up another new high while the U.S. dollar sank to another new low.
The Bulls were encouraged by the market’s resilience in the face of the scary rumor. Also, they liked that the lows of Monday and Wednesday were tested and held. It seems apparent that downside momentum is dissipating, and there may be a growing feeling that “The worst may be over.”
Breadth ended 2% net Bearish, with slightly more Declining stocks than Advancing stocks on the NYSE. The A-D for the NASDAQ was worse, and that Cumulative Daily Advance-Decline line broke down to a new low.
Up-Down Volume finished the day 4% net Bearish, with slightly greater Down Volume than Up Volume on the NYSE.
Total volume rose on the NYSE but fell slightly on the NASDAQ. The high overall level of trading reflected very active selling and buying.
New Highs-New Lows on the NYSE ended net Bullish by the narrowest of margins—just one stock. Still, that is a change toward the Bullish side after a string of Bearish readings.
The U.S. stock market recently 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.
Earnings reports and troublesome seasonal tendencies are clearly of 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.) Earnings reports, guidance, and now rumors of write-offs may continue to influence the price action over the very short term.
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
12.15% , CPWR , COMPUWARE
5.84% , AET , AETNA
6.22% , ESRX , EXPRESS SCRIPTS
8.52% , EMC , EMC
0.33% , JKI , Value MidCap iS M, JKI
6.40% , MHS , MEDCO HEALTH
4.82% , MWV , MEADWESTVACO
4.25% , FPL , FPL GROUP INC
7.57% , MNST , MONSTER WORLDWID
2.35% , WEN , WENDYS INTL
4.12% , UST , UST
8.12% , BDK , BLACK & DECKER
5.42% , MDP , MEREDITH
4.21% , FLR , FLUOR
3.90% , XEL , XCEL ENERGY
3.53% , GILD , Gilead Sciences Inc
0.43% , EWD , Sweden Index, EWD
0.82% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
2.37% , MSFT , MICROSOFT
4.68% , SWY , SAFEWAY
2.52% , TAP , ADOLPH COORS STK B, TAP
2.12% , SLV , Silver Trust iS, SLV
2.60% , ATVI , Activision Inc.
2.55% , ETR , ENTERGY
3.35% , AGN , ALLERGAN
3.03% , URBN , Urban Outfitters Inc.
4.04% , MOT , MOTOROLA
2.45% , PNW , PINNACLE WEST
3.35% , PETM , PETsMART Inc
1.93% , VPU , Utilities VIPERs, VPU
2.95% , YUM , YUM BRANDS
2.33% , DBC , Commodity Tracking, DBC
2.23% , WMB , WILLIAMS
3.03% , HMA , HEALTH MGMT STK A
3.31% , BMY , BRISTOL MYERS
2.83% , DYN , DYNEGY
3.15% , USO , Oil, Crude, U.S. Oil Fund, USO
0.26% , VIG , Dividend Appreciation Vipers, VIG
0.36% , RYAAY , Ryanair Holdings plc
2.89% , AYE , ALLEGHENY ENERGY
1.48% , AEP , AM ELEC POWER
2.43% , JCI , JOHNSON CONTROLS
1.74% , FISV , FISERV
2.41% , NWL , NEWELL RUBBER
1.62% , PUI , Utilities, PUI
1.25% , SCHW.O , CHARLES SCHWAB
1.38% , DISCA , Discovery Holding Co.
2.50% , IIH , Internet Infrastructure H, IIH
1.07% , PGN , PROGRESS ENERGY
1.95% , FE , FIRSTENERGY
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-19.28% , NIHD , NII Holdings, Inc.
-15.09% , ZMH , ZIMMER HLDGS
-3.65% , PSI , Semiconductors, PSI
-16.58% , CMI , CUMMINS
-8.42% , LH , LAB CRP OF AMER
-10.78% , CMCSA , COMCAST HOLDINGS STK A
-16.35% , BIG , BIG LOTS
-9.03% , LSI , LSI LOGIC
-14.86% , MBI , MBIA
-6.63% , LLY , ELI LILLY
-3.92% , LNCR , Lincare Holdings Inc
-4.19% , HSIC , Henry Schein Inc
-9.62% , SSCC , Smurfit-Stone Container Corporation
-5.03% , HPC , HERCULES
-6.19% , LRCX , LAM RESEARCH CORP
-3.21% , AIG , AMER INTL GROUP
-11.99% , SYMC , SYMANTEC
-9.32% , MTG , MGIC INVESTMENT
-13.82% , ABK , AMBAC FINL GRP
-1.19% , IGV , Software, IGV
-3.59% , SANM , SANMINA
-1.35% , PWT , Growth SmallCap Dynamic PS, PWT
-0.93% , MTK , Technology MS sT, MTK
-0.36% , FPX , IPOs, First Tr IPOX-100, FPX
-8.73% , NVDA , NVIDIA
-3.42% , HOT , STARWOOD HOTELS
-2.46% , PBE , Biotech & Genome, PBE
-1.26% , SYK , STRYKER
-4.52% , BLL , BALL
-3.78% , AMAT , APPLIED MATERIAL
-0.45% , PEJ , Leisure & Entertainment, PEJ
-0.61% , PWP , Value MidCap Dynamic PS, PWP
-0.50% , JKL , Value SmallCap iS M, JKL
-0.81% , PHJ , Dividend Growth PS, PHJ
-3.54% , TWX , TIME WARNER INC
-1.92% , LPX , LOUISIANA PAC
-2.17% , ROH , ROHM & HAAS
-1.44% , FDO , FAMILY DLR STRS
-2.00% , DELL , DELL
-1.36% , RAI , RJR TOBACCO HLDS
-1.69% , SNPS , Synopsys Inc
-2.00% , TMO , THERMO ELECTRON
-0.92% , EWW , Mexico Index, EWW
-3.48% , CIT , CIT GROUP
-0.85% , MYL , MYLAN LABS
-1.41% , ASD , AMER STANDARD
-1.74% , DIS , WALT DISNEY
-1.31% , TBH , Telebras H, TBH
-0.75% , PMR , Retail, PMR
-1.48% , IVGN , Invitrogen Corporation
Sectors: among the 9 major U.S. sectors, 7 rose and 2 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
2.45% Utilities
0.95% Energy
0.84% Technology
0.82% Consumer Staples
0.78% Materials
0.59% Health Care
0.17% Industrial
-0.61% Consumer Discretionary
-0.70% Financial
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 on 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 10/23/07. Long term, XLK has been relatively strong compared to the S&P since its low on 7/24/06.
Materials (XLB) Bullish, Overweight. Relative Strength made a new all-time high on 10/25/07. Price made a new high on 10/11/07. The long-term relative strength trend strongly outperformed 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) Neutral, Market Weight. This defensive sector’s Relative Strength made a new 2-month high on 10/25/07 and has improved significantly since its low on 9/28/07.
Consumer Staples (XLP) Neutral, Market Weight. This defensive sector’s Relative Strength has improved since its low on 10/9/07.
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. On 10/25/07, the XLY/SPY Relative Strength ratio fell to its lowest level in 6 years. Relative Strength has been trending down since 1/5/05.
Financial (XLF) Bearish, Underweight. On 10/25/07, the XLF/SPY Relative Strength ratio fell to its lowest level in more than 6 years. Relative Strength has been trending down since 2/20/07.
Foreign stock indices’ Relative Strength made 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 10/25/07. 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 10/23/07. 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 the Growth/Value ratio (IWF/IWD) is confirmed Bullish.
Small Caps substantially underperformed Large Caps since 4/19/06, and the main long-term trend is Bearish for Small Caps.
December Crude Oil Futures rose to a new record at $91. 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. Major trends 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 made a new price high. Gold set a new 28-year high on 10/25/07. The Gold Trust ETF (NYSE: GLD) also hit a new high. 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 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 eased a little lower in an indecisive Inside Day. The short-term trend is still 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 sank to another new low. 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:
3.16% South Korea
2.45% Utilities
1.98% Taiwan
1.91% Natural Gas
1.87% Hong Kong
1.77% Dow Utilities
1.58% Brazil
1.48% Singapore
1.31% Malaysia
0.95% Energy
0.95% Oil
0.92% United Kingdom
0.89% Australian Dollar
0.87% Paper
0.84% Technology
0.83% France
0.82% Consumer Staples
0.80% Germany
0.78% Materials
0.74% Commodity Related
0.74% Gold Mining
0.72% Oil Services
0.72% Italy
0.60% Switzerland
0.59% Health Care
0.58% Spain
0.57% Chemicals
0.50% Swiss Franc
0.46% Euro Index
0.45% Canadian Dollar
0.43% Sweden
0.38% Health Care
0.32% Health Care Products
0.30% Belgium
0.27% Australia
0.26% REITs
0.24% Canada
0.20% NYSE Composite
0.17% Industrial
0.17% Japanese Yen
0.12% AMEX Composite
0.12% Drugs
0.12% Netherlands
0.10% British Pound
0.00% Austria
-0.01% Dow Composite
-0.02% Dow Industrial
-0.08% Retailers
-0.09% Computer Tech
-0.10% S&P 500
-0.14% Russell 1000
-0.16% 30Y T-Bond
-0.17% Wilshire 5000
-0.18% S&P 100
-0.18% Russell 3000
-0.29% Value Line
-0.32% Banks
-0.35% US Dollar Index
-0.36% Japan
-0.47% S&P Small Caps
-0.47% S&P Mid Caps
-0.58% Russell 2000
-0.58% Hospitals
-0.61% Consumer Discretionary
-0.70% Financial
-0.72% Network
-0.85% Biotechs
-0.86% Nasdaq Composite
-0.92% Mexico
-1.02% DOT
-1.13% Broker Dealers
-1.24% Dow Transports
-1.24% Nasdaq 100
-1.28% Internet
-1.32% Insurance
-1.95% Airlines
-2.02% Semiconductors
-2.26% Disk Drives
-3.06% Hardware
