by Robert W. Colby, Senior Analyst, TraderPlanet.com
Stock Market: another decisively Bearish trend day. The trend has been our friend.
Typical Bear Market action is evident.
Short-term minor Ripples may come and go, but signify nothing.
Short-term, dead-cat bounces are best viewed as selling opportunities when the Primary Tide Trend is Bearish, as it is now.
Investors focus on capital preservation.
On Thursday, major stock price indexes again opened lower and weakened further as the day wore on. Substantial selling pressure was evident most of the day. Intraday recovery attempts were few and feeble. Stocks closed near their lowest levels of the day. The Standard & Poor’s 500 cash index (904.88) broke down below previous 6-day lows and closed down 47.89 points, or 5.03%. Total NYSE volume rose 13%.
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
7.62% , DLTR , Dollar Tree Stores Inc
4.54% , MYY , Short 100% MidCap 400, MYY
9.38% , DXD , Short 200% Dow 30 PS, DXD
4.76% , SH , Short 100% S&P 500, SH
4.40% , PSQ , Short 100% QQQ, PSQ
10.33% , SDS , Short 200% S&P 500 PS, SDS
0.69% , LQD , Bond, Corp, LQD
4.45% , DOG , Short 100% Dow 30, DOG
4.19% , KG , KING PHARM
9.19% , QID , Short 200% QQQ PS, QID
1.65% , WFMI , Whole Foods Market Inc
7.49% , DHI , D.R. HORTON, DHI
1.43% , FRX , FOREST LABS STK A
1.99% , SWY , SAFEWAY
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-9.18% , XSD , Semiconductor SPDR, XSD
-7.42% , FPX , IPOs, First Tr IPOX-100, FPX
-25.71% , BIG , BIG LOTS
-6.49% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-6.68% , ADRU , Europe 100 BLDRS, ADRU
-5.34% , HHH , Internet H, HHH
-15.63% , NWS.A , NEWS CORP STK A
-4.76% , PSJ , Software, PSJ
-22.25% , LPX , LOUISIANA PAC
-8.56% , SNV , SYNOVUS
-17.85% , GT , GOODYEAR TIRE
-4.52% , JKE , Growth LargeCap iS M, JKE
-11.84% , FMCN , Focus Media, FMCN
-9.92% , ADRA , Asia 50 BLDRS, ADRA
-6.17% , PWJ , Growth Mid Cap Dynamic PS, PWJ
-7.43% , TBH , Telebras HOLDRS, TBH*
-6.73% , JKH , MidCap Growth iS M, JKH
-4.92% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
-16.47% , FNM , FANNIE MAE
-15.76% , EP , EL PASO
-9.95% , CVG , CONVERGYS
-7.28% , ADRD , Developed 100 BLDRS, ADRD
-4.74% , IGN , Networking, IGN
-4.47% , SDY , Dividend SPDR, SDY
-12.60% , AMAT , APPLIED MATERIAL
-5.16% , EWN , Netherlands Index, EWN
-9.19% , WFC , WELLS FARGO
-21.05% , XL , XL CAPITAL STK A
-2.58% , PZJ , SmallCap PS Zacks, PZJ
-10.88% , CBS , CBS CORP.
-13.95% , CMI , CUMMINS
-11.51% , EWY , South Korea Index, EWY
-13.33% , PWER , POWER ONE
-9.82% , CIEN.O , CIENA
-1.59% , PMR , Retail, PMR
-18.24% , CTB , COOPER TIRE
-6.75% , PID , Dividend International, PID
-5.04% , JKK , Growth SmallCap iS M, JKK
-4.14% , IJJ , Value MidCap S&P 400 B, IJJ
-5.60% , BDH , Broadband H, BDH
9 Major U.S. Stock Sectors
Ranked on Latest One-Day Price Change
% Price Change, Sector ETF, Symbol
-1.07% Consumer Staples SPDR, XLP
-2.43% Health Care SPDR, XLV
-4.69% Industrial SPDR, XLI
-4.69% Utilities SPDR, XLU
-5.29% Consumer Discretionary SPDR, XLY
-5.45% Materials SPDR, XLB
-5.52% Technology SPDR, XLK
-6.02% Energy SPDR, XLE
-6.87% Financial SPDR, XLF
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. All 9 sectors have lost in 2008, but XLP has lost least.
Health Care (XLV) Neutral, Market Weight. On 10/24/08, XLV/SPY Relative Strength Ratio rose to another new 4-year high. But 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 10/24/08, the XLK absolute price fell to a new 5-year low.
Industrial (XLI) Bearish, Underweight. On 10/24/08, the XLI absolute price fell to a new 5-year low.
Consumer Discretionary (XLY) Bearish, Underweight. On 10/24/08, 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.
Materials (XLB) Bearish, Underweight. On 10/27/08, the XLB 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.
Foreign stock index EFA Relative Strength Ratio has sharply underperformed the S&P 500 since 11/27/07. EFA absolute price fell to a new 5-year low on 10/27/08 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. Relative Strength underperforming S&P 500 since 8/14/08. On 10/24/08, the absolute price made another new 5-year low, reconfirming absolute 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 December contract price broke down below previous lows and confirmed the already established cyclical downtrend. Oil fell to a new 19-month low at 60.16. The intermediate-term trend remains clearly 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 has outperformed Crude Oil since 10/9/08.
Gold futures contract price fell moderately. The short-term trend still appears choppy and uncertain. Gold remains in an intermediate-term downtrend since the peak of 1,033.90 on 3/17/08.
Gold Mining stocks continue to underperform Gold futures on a major trend basis.
U.S. Treasury Bond futures contract price consolidated with an Inside Day (lower high and higher low). Over the past 4 trading days, Bonds appear to have been attempting an oversold bounce for the short term. Bonds still appear uncertain for the intermediate term. 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. Bond investors appear to be seriously concerned about the economic outlook.
iShares Lehman TIPS Bond (TIP) ETF Relative Strength suggests deflation. The TIP/TLT Relative Strength ratio has been in a persistent downtrend since 7/3/08.
The U.S. dollar rose above the high the previous trading day. The short-term trend appears to have turned choppy over the past 2 weeks. The dollar just made a new 24-month high on 10/27/08, so the longer-term trend is still Bullish.
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 30.3% Bulls versus 48.3% Bears as of 11/5/2008, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio was 0.63, up from 0.44 the previous week. This is still 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 63.68, rose again. Its 18-year high was 80.06 on 10/27/08. Its 18-year 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 62.70, rose again. Its 7-year high was 79.16 on 10/27/08. Its record high was 114.23 on 10/8/98. Its record 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 1.01, 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 0.87, 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 last reconfirmed a Primary Tide Bear Market on 10/27/08, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their previous lowest closing prices of 2006-2008. These two Averages originally signaled 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 10/27/08, the Cumulative Daily Advance-Decline Lines for the NYSE and for the NASDAQ both fell to new 2-year 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 (904.88):
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
1,238.807, Fibonacci 78.6% of 1,576.09 high
1,220.03, high of 9/25/2008
1,077.08, Fibonacci 61.8% of 2002-2007 upmove
1,044.31, high of 10/14/2008
1,001.84, high of 11/4/2008
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 (904.88):
Potential Support
839.80, low of 10/10/2008
788.05, Fibonacci 50.0% of 1,576.09 high
768.63, low of 10/10/2002
602.07, Fibonacci 38.2% of 1,576.09 high
Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
10.33% Short 200% S&P 500 PS, SDS
9.38% Short 200% Dow 30 PS, DXD
9.19% Short 200% QQQ PS, QID
9.09% Short 200% MidCap 400 PS, MZZ
4.76% Short 100% S&P 500, SH
4.54% Short 100% MidCap 400, MYY
4.45% Short 100% Dow 30, DOG
4.40% Short 100% QQQ, PSQ
0.69% Bond, Corp, LQD
0.04% Bond, 1-3 Year Treasury, SHY
-0.30% Bond, 10 Year Treasury, IEF
-0.41% Bond, Aggregate, AGG
-0.42% Bond, TIPS, TIP
-0.72% Bond, 20+ Years Treasury, TLT
-0.80% Gold Shares S.T., GLD
-1.07% Consumer Staples SPDR, XLP
-1.40% Micro Cap Zachs, PZI
-1.57% Biotech SPDR, XBI
-1.59% Retail, PMR
-2.28% Biotech H, BBH
-2.34% Pharmaceuticals, PJP
-2.43% Health Care SPDR, XLV
-2.49% Consumer Staples VIPERs, VDC
-2.58% SmallCap PS Zacks, PZJ
-2.64% Biotech & Genome, PBE
-2.65% Growth SmallCap Dynamic PS, PWT
-2.78% OTC Dynamic PS, PWO
-2.86% Health Care VIPERs, VHT
-2.90% Microcap Russell, IWC
-3.04% Silver Trust iS, SLV
-3.04% Food & Beverage, PBJ
-3.07% Consumer Non-Cyclical, IYK
-3.10% Value SmallCap Russell 2000, IWN
-3.13% Value SmallCap S&P 600 B, IJS
-3.19% Pharmaceutical H, PPH
-3.27% Healthcare DJ, IYH
-3.31% Growth BARRA Small Cap 600, IJT
-3.31% Retail H, RTH
-3.60% Malaysia Index, EWM
-3.61% Telecom H, TTH
-3.64% Value SmallCap VIPERS, VBR
-3.68% SmallCap Core iS M, JKJ
-3.68% Growth MidCap S&P 400, RFG
-3.70% Wilshire 5000 ST TM, TMW
-3.76% Value SmallCap iS M, JKL
-3.79% SmallCap S&P 600, IJR
-3.79% Value MidCap S&P 400, RFV
-3.81% Utilities VIPERs, VPU
-3.83% Consumer Cyclical DJ, IYC
-3.83% Homebuilders SPDR, XHB
-3.83% Healthcare Global, IXJ
-3.84% Dividend Appreciation Vipers, VIG
-3.86% Value Line Timeliness MidCap Gr, PIV
-3.88% Value Small Cap DJ, DSV
-3.88% SmallCap Russell 2000, IWM
-3.88% Software, IGV
-3.97% Growth SmallCap R 2000, IWO
-3.97% Value SmallCap S&P 600, RZV
-3.99% Growth LargeCap NASDAQ Fidelity, ONEQ
-4.04% Growth SmallCap VIPERs, VBK
-4.14% Belgium Index, EWK
-4.14% Value MidCap S&P 400 B, IJJ
-4.15% Utilities, PUI
-4.19% MidCap Blend Core iS M, JKG
-4.21% Telecommunications & Wireless, PTE
-4.21% LargeCap Blend S&P 100, OEF
-4.24% Small Cap VIPERs, VB
-4.27% Growth S&P 500, RPG
-4.28% Dividend High Yield Equity PS, PEY
-4.33% Utilities DJ, IDU
-4.35% Utilities H, UTH
-4.36% Dividend DJ Select, DVY
-4.36% LargeCap Rydex Rus Top 50, XLG
-4.38% Commodity Tracking, DBC
-4.39% Value SmallCap Dynamic PS, PWY
-4.41% Extended Mkt VIPERs, VXF
-4.43% Growth 1000 Russell, IWF
-4.45% Growth MidCap 400 B, IJK
-4.45% Dividend Achievers PS, PFM
-4.47% Growth LargeCap NASDAQ 100, QQQQ
-4.47% Dividend SPDR, SDY
-4.47% Telecommunications Global, IXP
-4.50% Growth S&P 500/BARRA, IVW
-4.52% Growth LargeCap iS M, JKE
-4.52% Switzerland Index, EWL
-4.52% LargeCap Blend Dynamic PS, PWC
-4.53% Singapore Index, EWS
-4.53% Real Estate US DJ, IYR
-4.54% Insurance, PIC
-4.57% LargeCap 1000 R, IWB
-4.62% Growth Large Cap, ELG
-4.65% Value 1000 Russell, IWD
-4.66% Value VIPERs, VTV
-4.67% Hong Kong Index, EWH
-4.68% REIT VIPERs, VNQ
-4.68% LargeCap Blend Total Market DJ, IYY
-4.69% LargeCap Blend S&P 1500 iS, ISI
-4.69% Industrial SPDR, XLI
-4.69% Utilities SPDR, XLU
-4.70% LargeCap Blend Core iS M, JKD
-4.72% MidCap S&P 400 iS, IJH
-4.74% Networking, IGN
-4.76% Canada Index, EWC
-4.76% Software, PSJ
-4.77% LargeCap Blend Russell 3000, IWV
-4.78% Growth LargeCap Russell 3000, IWZ
-4.79% Technology DJ US, IYW
-4.79% Value LargeCap Russell 3000, IWW
-4.79% REIT Wilshire, RWR
-4.83% Water Resources, PHO
-4.84% Dividend Growth PS, PHJ
-4.86% Technology GS, IGM
-4.89% Value MidCap iS M, JKI
-4.90% LargeCap VIPERs, VV
-4.91% Blend Total Market VIPERs, VTI
-4.92% Value LargeCap Fundamental RAFI 1000, PRF
-4.94% Value 40 Large Low P/E FT DB, FDV
-4.94% Telecom DJ US, IYZ
-4.96% Value Large Cap DJ, ELV
-4.96% Growth Small Cap DJ, DSG
-5.01% Dividend Leaders, FDL
-5.04% Emerging Markets, EEM
-5.04% Consumer D. VIPERs, VCR
-5.04% Growth SmallCap iS M, JKK
-5.06% Global Titans, DGT
-5.08% Realty Cohen & Steers, ICF
-5.08% Value MidCap Dynamic PS, PWP
-5.09% Value S&P 500 B, IVE
-5.09% Growth VIPERs, VUG
-5.14% DIAMONDS (DJIA), DIA
-5.15% Transportation Av DJ, IYT
-5.16% Netherlands Index, EWN
-5.17% Networking, PXQ
-5.17% S&P 500 iS LargeCap Blend, IVV
-5.18% Value MidCap Russell, IWS
-5.18% Internet Architecture H, IAH
-5.20% LargeCap Blend S&P=Weight R, RSP
-5.20% Building & Construction, PKB
-5.20% MidCap S&P 400 SPDRs, MDY
-5.22% India Earnings WTree, EPI
-5.24% Lg Cap Growth PSD, PWB
-5.26% Growth MidCap Russell, IWP
-5.27% MidCap Russell, IWR
-5.27% Info Tech VIPERs, VGT
-5.27% Hardware & Electronics, PHW
-5.29% Consumer Discretionary SPDR, XLY
-5.30% Bank Regional H, RKH
-5.33% Value LargeCap Dynamic PS, PWV
-5.34% Internet H, HHH
-5.37% Brazil Index, EWZ
-5.37% MidCap VIPERs, VO
-5.37% Value LargeCap Euro STOXX 50 DJ, FEU
-5.39% Latin Am 40, ILF
-5.44% Value LargeCap iS M, JKF
-5.45% Leisure & Entertainment, PEJ
-5.45% Telecom Services VIPERs, VOX
-5.45% Materials SPDR, XLB
-5.46% Value S&P 500, RPV
-5.47% Financials VIPERs, VFH
-5.52% Technology SPDR, XLK
-5.54% S&P 500 SPDRs LargeCap Blend, SPY
-5.57% Emerging VIPERs, VWO
-5.58% Energy DJ, IYE
-5.60% Broadband H, BDH
-5.70% Materials VIPERs, VAW
-5.71% LargeCap Blend NYSE Composite iS, NYC
-5.82% Austria Index, EWO
-5.87% LargeCap Blend Socially Responsible iS, KLD
-5.89% Energy VIPERs, VDE
-5.91% Global 100, IOO
-6.02% Energy SPDR, XLE
-6.03% Nanotech Lux, PXN
-6.04% Industrial LargeCap Blend DJ US, IYJ
-6.14% Financial Services DJ, IYG
-6.17% Growth Mid Cap Dynamic PS, PWJ
-6.18% Software H, SWH
-6.23% Value LargeCap NYSE 100 iS, NY
-6.24% EMU Europe Index, EZU
-6.26% Italy Index, EWI
-6.29% Technology Global, IXN
-6.31% European VIPERs, VGK
-6.33% Europe 350 S&P Index, IEV
-6.34% Financial DJ US, IYF
-6.36% Aerospace & Defense, PPA
-6.36% Taiwan Index, EWT
-6.39% Industrials VIPERs, VIS
-6.40% Mexico Index, EWW
-6.43% Growth EAFE MSCI, EFG
-6.45% France Index, EWQ
-6.46% EAFE Index, EFA
-6.49% Japan LargeCap Blend TOPIX 150, ITF
-6.54% Germany Index, EWG
-6.54% Spain Index, EWP
-6.59% Natural Resource iS GS, IGE
-6.63% Euro STOXX 50, FEZ
-6.64% Financials Global LargeCap Value, IXG
-6.67% Oil Services H, OIH
-6.68% Europe 100 BLDRS, ADRU
-6.72% South Africa Index, EZA
-6.72% Capital Markets KWB ST, KCE
-6.73% MidCap Growth iS M, JKH
-6.75% Dividend International, PID
-6.78% Semiconductors, PSI
-6.85% Oil, Crude, U.S. Oil Fund, USO
-6.87% Financial SPDR, XLF
-6.97% Sweden Index, EWD
-7.00% Technology MS sT, MTK
-7.09% Emerging 50 BLDRS, ADRE
-7.10% Pacific ex-Japan, EPP
-7.20% Value EAFE MSCI, EFV
-7.20% Energy Exploration & Prod, PXE
-7.28% Developed 100 BLDRS, ADRD
-7.42% IPOs, First Tr IPOX-100, FPX
-7.47% Pacific VIPERs, VPL
-7.48% Internet Infrastructure H, IIH
-7.51% Basic Materials DJ US, IYM
-7.58% Oil & Gas, PXJ
-7.60% Semiconductor iS GS, IGW
-7.73% United Kingdom Index, EWU
-7.73% WilderHill Clean Energy PS, PBW
-7.91% Energy Global, IXC
-7.95% China 25 iS, FXI
-8.26% Australia Index, EWA
-8.65% Japan Index, EWJ
-8.69% China LargeCap Growth G D H USX PS, PGJ
-9.18% Semiconductor SPDR, XSD
-9.21% Semiconductor H, SMH
-9.26% Ultra Dow30 Double, DDM
-9.27% Ultra MidCap400 Double, MVV
-9.45% Ultra QQQ Double, QLD
-9.53% Ultra S&P500 Double, SSO
-9.71% Internet B2B H, BHH
-9.92% Asia 50 BLDRS, ADRA
-11.44% Metals & Mining SPDR, XME
-11.51% South Korea Index, EWY
