By Robert W. Colby, Senior Analyst TraderPlanet.com
Shakeout losing downside momentum?
Technology stocks hammered again.
On Friday, major stock price indices opened lower, tried to rally, but fell steeply in the last half hour to close near the lows of the day. Trading volume fell, suggesting that the selling may have reflected less intense emotions and urgency to act.
Breadth ended 45% net Bearish, with more Declining stocks than Advancing stocks on the NYSE.
Up-Down Volume finished the day 42% net Bearish, with greater Down Volume than Up Volume on the NYSE.
Total volume rose on both the NYSE and on the NASDAQ to confirm the price downtrend.
New Highs-New Lows on the NYSE ended at 86% net Bearish.
VIX “Fear Index” rose to a 7-week high on 11/8/07, more than 2.5 standard deviations above its 1-year mean. VIX hit 29.15, intraday on 11/8/07, indicating that options traders were feeling very Bearish. 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.
The similarly calculated VXN “Fear Index”, measuring Nasdaq Volatility, rose to 33.75, more than 3 standard deviations above its 1-year mean.
CBOE Put/Call Ratio at 0.83 on 11/8/07 showed substantial Bearishness. The CBOE Equity Put/Call Ratio (http://www.cboe.com/data/PutCallRatio.aspx) was nearly 2 standard deviations above its 1-year mean.
ISEE Call/Put Ratio at 1.18 showed moderate Bearishness. The ISEE Call/Put Ratio was moderately below its 5-year median of 1.48, indicating that customers opened fewer long call options and more long put options than normal.
News: The business and financial news has taken a turn toward the gloomy side due to concerns about housing and credit problems. But keep in mind that the stock market is a leading economic indicator and the news is a lagging indicator. Stock prices typically discount the future many months ahead. Therefore, the current news usually arrives too late to be of much actual use to investors.
The Primary Tide Major Trend remains Bullish, and that is a strong force. The Dow Theory has repeatedly confirmed a Primary Bull Market every time both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed at new all-time highs. Both last made new all-time highs on 7/19/07. The Industrial Average made a new high on 10/9/07, but the Transportation Average failed to confirm. Then on 11/7/07, the Transports closed below their August low, but that weakness alone is not sufficient to change the main trend. As long as the Dow-Jones Industrial Average holds above its 8/16/07 closing price low of 12,845.78, then the Primary Tide is still Bullish.
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
16.01% , MTG , MGIC INVESTMENT
4.22% , CEPH , Cephalon Inc
2.74% , UNH , UNITEDHEALTH GRP
4.61% , ODP , OFFICE DEPOT
2.83% , VC , VISTEON
4.47% , AMAT , APPLIED MATERIAL
3.27% , EBAY , EBAY
6.43% , ABK , AMBAC FINL GRP
2.06% , MRK , MERCK & CO
8.87% , MBI , MBIA
3.49% , LEH , LEHMAN BROS HLDG
1.26% , NYT , NY TIMES STK A
2.20% , XMSR , XM Satellite R
1.60% , ATI , ALLEGHENY TECH
1.73% , FPL , FPL GROUP INC
0.92% , SIAL , SIGMA ALDRICH
0.60% , TEVA , Teva Pharmaceutical Industries Limited
1.18% , EFX , EQUIFAX
0.11% , PIC , Insurance, PIC
2.02% , LMT , LOCKHEED MARTIN
0.93% , USO , Oil, Crude, U.S. Oil Fund, USO
2.25% , ACE , ACE
2.16% , AVP , AVON
1.10% , WLP , WELLPOINT HEALTH
0.07% , RFG , Growth MidCap S&P 400, RFG
0.34% , PNW , PINNACLE WEST
3.38% , CMA , COMERICA
0.43% , HOT , STARWOOD HOTELS
0.87% , WB , WACHOVIA
2.79% , GNW , GENWORTH FINANCIAL (NYSE:GNW)
2.08% , PNC , PNC FINL SVC
1.30% , XHB , Homebuilders SPDR, XHB
0.26% , RDC , ROWAN COMPANIES
0.34% , NVLS , NOVELLUS SYS
0.33% , PCL , PLUM CREEK TIMB
0.07% , HUM , HUMANA
2.67% , CFC , COUNTRYWIDE FNCL
0.18% , HNZ , HJ HEINZ
0.29% , MKC , MCCORMICK
0.13% , AOC , AON
0.06% , BDK , BLACK & DECKER
0.09% , D , DOMINION RSCS
0.03% , CEG , CONSTELL ENERGY
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-1.71% , PMR , Retail, PMR
-2.99% , PHW , Hardware & Electronics, PHW
-4.77% , AW , ALLIED WASTE IND
-3.84% , NCR , NCR
-1.73% , ELG , Growth Large Cap, ELG
-1.67% , PKB , Building & Construction, PKB
-3.54% , WMI , WASTE MANAGEMENT
-7.65% , LBTYA , Liberty Global Inc. (LBTYA)
-1.67% , ADRU , Europe 100 BLDRS, ADRU
-1.47% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-5.81% , WOR , WORTHINGTON INDS
-1.98% , IYJ , Industrial LargeCap Blend DJ US, IYJ
-1.84% , IOO , Global 100, IOO
-1.81% , VUG , Growth VIPERs, VUG
-2.07% , EWL , Switzerland Index, EWL
-6.41% , PWER , POWER ONE
-4.18% , QCOM , QUALCOMM
-3.65% , STT , STATE STREET
-3.19% , IXN , Technology Global, IXN
-4.84% , FRE , FREDDIE MAC
-1.82% , PSJ , Software, PSJ
-0.63% , UTH , Utilities H, UTH
-5.51% , WFMI , Whole Foods Market Inc
-4.55% , A , AGILENT TECH
-1.70% , HHH , Internet H, HHH
-0.54% , IIH , Internet Infrastructure H, IIH
-2.58% , BBBY , BED BATH BEYOND
-4.11% , IAH , Internet Architecture H, IAH
-1.84% , YUM , YUM BRANDS
-4.17% , SANM , SANMINA
-3.18% , BBY , BEST BUY
-4.76% , PBW , WilderHill Clean Energy PS, PBW
-1.59% , KCE , Capital Markets KWB ST, KCE
-2.12% , CTL , CENTURYTEL
-1.67% , PWB , Lg Cap Growth PSD, PWB
-1.86% , EWP , Spain Index, EWP
-2.34% , VGK , European VIPERs, VGK
-2.84% , ESRX , EXPRESS SCRIPTS
-0.60% , PBJ , Food & Beverage, PBJ
-1.27% , RPV , Value S&P 500, RPV
-1.89% , IXC , Energy Global, IXC
-1.40% , LTR , LOEWS
-3.48% , XRAY , DENTSPLY International Inc
-1.21% , PTE , Telecommunications & Wireless, PTE
-4.28% , TGT , TARGET
-1.25% , PWP , Value MidCap Dynamic PS, PWP
-3.71% , HAS , HASBRO
-4.01% , MMM , 3M
-1.89% , MHS , MEDCO HEALTH
-2.01% , PWO , OTC Dynamic PS, PWO
Sectors: among the 9 major U.S. sectors, all 9 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
-0.26% Health Care
-0.76% Financial
-0.78% Utilities
-0.96% Consumer Staples
-1.85% Energy
-1.99% Industrial
-2.05% Materials
-2.07% Technology
-2.28% Consumer Discretionary
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
Energy (XLE) Bullish, Overweight. Relative Strength made new all-time high on 11/8/07. XLE made an all-time closing price high on 10/16/07. XLE has been strong compared to the S&P since 3/12/03.
Utilities (XLU) Bullish, Overweight. Relative Strength for this defensive sector made a new 6-year high on 11/9/07. Price made a new 5-month high on 10/31/07. Utilities have improved significantly since their Relative Strength low on 9/28/07.
Materials (XLB) Bullish, Overweight. Relative Strength made new all-time high on 11/8/07. Price made new all-time high on 10/29/07. The long-term Relative Strength trend has strongly outperformed since 9/27/2000.
Technology (XLK) Bullish, Overweight. The past 3-days down appears to be more a sharp shakeout than a major trend. XLK hit a new 6-year price high on 11/1/07, and Relative Strength made a new 3-year high on 11/5/07. Long term, XLK has been relatively strong compared to the S&P since its low on 7/24/06.
Consumer Staples (XLP) Neutral, Market Weight. This defensive sector’s Relative Strength has improved since its low on 10/9/07 and made a new 13-month high on 11/9/07.
Industrial (XLI) Neutral, Market Weight. Price made an all-time price high on 10/10/07. Relative Strength made a new 3-month high on 11/8/07.
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 11/8/07, price made a new 13-month low on. On 11/6/07, 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. XLF price hit another new 2-year low on 11/8/07, and the XLF/SPY Relative Strength ratio fell to its lowest level in more than 6 years on 11/7/07. Relative Strength has been trending down since 2/20/07.
Foreign stock indices Relative Strength made a new high on 11/8/07. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) made a new price high on 10/31/07 and a new relative strength high on 11/8/07. 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 have been nearly all Foreign for many months.
NASDAQ Composite and NASDAQ 100 both were hit by profit taking, after making new 6-year Relative strength highs on 11/7/07. Price confirmed the Bullish trend on 10/31/07. Longer term, NASDAQ has outperformed since 8/8/06.
Growth Stock/Value Stock Relative Strength ratio underperformed since 11/7/07. Growth stocks outperformed Value stocks from 8/8/06. The main trend for the Growth/Value ratio (IWF/IWD) has been confirmed Bullish again and again.
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 recovered slightly. Support appears at the 10/31/07 low of 88.92, at previous resistance at 84.10, and at previous minor lows in the 78.25-78.35 zone. The U.S. OIL FUND ETF (AMEX: USO), which is not a pure play on Crude Oil, confirmed the action of oil futures.
The Energy stock sector has been lagging oil the commodity. XLE has underperformed the USO since 5/30/07.
December Gold Futures eased slightly a day after making a new 28-year closing price high of $83.70. The GLD ETF confirmed by easing slightly lower. Still, major trends remain Bullish for Gold and the Gold Trust ETF (NYSE: GLD).
Silver’s main trend is Bearish compared to Gold. The iShares Silver Trust (AMEX: SLV) has been relatively weak since 12/7/06.
The Gold Miners ETF (GDX) eased lower, underperforming Gold Futures.
Inflation expectations rose to a new 14-month high on 11/9/07. The main trend is still up. This is based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bonds prices rose steeply. The long-term, iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT) made a new 11-month price high. 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.
The U.S. dollar fell to another new low within its major downtrend. The main trend has been confirmed Bearish—again and again. Longer term, the dollar fell 17% from its high of 92.53 on 11/16/05, and the main tidal force remains very Bearish.
1.13% Japanese Yen
0.53% Banks
0.52% 30Y T-Bond
0.47% Malaysia
0.26% Insurance
0.11% Broker Dealers
0.09% Swiss Franc
0.03% Euro Index
-0.06% Taiwan
-0.06% US Dollar Index
-0.08% Hospitals
-0.26% Health Care
-0.26% REITs
-0.26% Semiconductors
-0.36% Canadian Dollar
-0.38% Health Care
-0.50% Dow Utilities
-0.72% Drugs
-0.73% Health Care Products
-0.76% Financial
-0.78% Utilities
-0.82% British Pound
-0.85% Australian Dollar
-0.92% Germany
-0.96% Consumer Staples
-1.03% Singapore
-1.09% Russell 2000
-1.13% Biotechs
-1.20% S&P Small Caps
-1.23% Hong Kong
-1.27% South Korea
-1.29% Value Line
-1.33% Japan
-1.34% S&P Mid Caps
-1.41% Russell 3000
-1.42% Wilshire 5000
-1.43% S&P 500
-1.43% Gold Mining
-1.44% Russell 1000
-1.46% NYSE Composite
-1.50% Dow Composite
-1.52% S&P 100
-1.54% Paper
-1.69% Dow Industrial
-1.70% Natural Gas
-1.71% Commodity Related
-1.72% Oil
-1.72% Austria
-1.75% Mexico
-1.85% Energy
-1.85% Oil Services
-1.86% Spain
-1.95% AMEX Composite
-1.98% Dow Transports
-1.99% Industrial
-2.00% Netherlands
-2.05% Materials
-2.07% Technology
-2.07% Switzerland
-2.17% Canada
-2.28% Consumer Discretionary
-2.32% Chemicals
-2.32% Italy
-2.35% Belgium
-2.39% France
-2.45% United Kingdom
-2.52% Nasdaq Composite
-2.75% Network
-2.80% Airlines
-2.80% Internet
-2.82% Hardware
-2.99% DOT
-3.23% Retailers
-3.35% Brazil
-3.41% Nasdaq 100
-3.53% Computer Tech
-3.56% Australia
-3.85% Sweden
