by Robert W. Colby, Senior Analyst, TraderPlanet.com
Stock Market: Financial stock sector fell to new 10-year price lows. It has been at the bottom of my rankings for more than a year.
S&P 500 fell to new 10-day price lows.
Recovery attempts were brief and feeble.
Rising volume indicates increasing selling pressure.
Stocks may appear oversold by normal standards–but these are not normal times.
Typical Primary Tide Trend Bear Market action remains evident.
Investors focus on capital preservation.
On Wednesday, major stock price indexes gapped open lower again and chopped irregularly lower most of the day. Recovery attempts were brief and feeble. Stocks closed weakly, near their lows of the day. The Standard & Poor’s 500 cash index (852.30) closed down 46.65 points, or 5.19%, for its lowest close since 10/27/08. Total NYSE volume rose 15%, indicating rising selling pressure on stocks.
The stock market reflects future fundamental conditions several months ahead, more than it reflects current conditions. The problem is that currently there is no visible end to the downward fundamental spiral. Economic news seems to be growing worse and worse as time goes on. Today’s press quotes business leaders’ expectations of a deep and prolonged global recession, perhaps lasting several quarters, and U.S. housing market falling another 15%-20% from here. Atlanta Fed President Lockhart stated that he sees economic weakness and higher unemployment at least through the first half of 2009. President-elect Obama said, “Some of the choices that we’re going to make are going to be difficult. It is not going to be quick. It’s not going to be easy for us to dig ourselves out of the hole that we are in.”
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
5.10% , MYY , Short 100% MidCap 400, MYY
5.07% , SH , Short 100% S&P 500, SH
3.67% , HOLX , Hologic, Inc., HOLX
8.83% , DXD , Short 200% Dow 30 PS, DXD
2.72% , FISV , FISERV
4.72% , PSQ , Short 100% QQQ, PSQ
4.40% , DOG , Short 100% Dow 30, DOG
0.62% , IEF , Bond, 10 Year Treasury, IEF
0.64% , TLT , Bond, 20+ Years Treasury, TLT
0.15% , SHY , Bond, 1-3 Year Treasury, SHY
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-5.32% , DSV , Value Small Cap DJ, DSV
-4.38% , FPX , IPOs, First Tr IPOX-100, FPX
-20.76% , CBS , CBS CORP.
-24.13% , BC , BRUNSWICK
-6.52% , PHW , Hardware & Electronics, PHW
-5.34% , PXQ , Networking, PXQ
-6.73% , IGN , Networking, IGN
-5.95% , VXF , Extended Mkt VIPERs, VXF
-22.92% , S , SPRINT NEXTEL
-7.24% , PZI , Micro Cap Zachs, PZI
-5.92% , PKB , Building & Construction, PKB
-5.42% , VOX , Telecom Services VIPERs, VOX
-34.93% , PLD , PROLOGIS TRUST
-12.88% , IP , INTL PAPER
-7.48% , BHH , Internet B2B H, BHH
-8.00% , BBY , BEST BUY
-5.25% , PSI , Semiconductors, PSI
-5.14% , PWO , OTC Dynamic PS, PWO
-16.30% , STLD , Steel Dynamics, STLD
-12.64% , KEY , KEYCORP
-5.43% , RPV , Value S&P 500, RPV
-7.69% , SANM , SANMINA
-13.18% , AMD , ADV MICRO DEV
-10.97% , PMCS , PMC SIERRA
-7.13% , EWO , Austria Index, EWO
-13.94% , ETFC.O , E*TRADE FINANCIAL
-7.72% , AZO , AUTOZONE
-3.69% , RPG , Growth S&P 500, RPG
-10.36% , TNB , THOMAS & BETTS
-3.11% , RFG , Growth MidCap S&P 400, RFG
-6.09% , RZV , Value SmallCap S&P 600, RZV
-10.54% , NUE , NUCOR
-14.35% , IPG , INTERPUBLIC GRP
-10.49% , AXP , AMERICAN EXPRESS
-8.24% , FLEX , Flextronics International Ltd
-5.29% , IYY , LargeCap Blend Total Market DJ, IYY
-13.36% , JNY , JONES APPAREL
-15.07% , JBL , JABIL CIRCUIT
-17.76% , OMX , OFFICEMAX INC., OMX
-13.51% , ZION , ZIONS
9 Major U.S. Stock Sectors
Ranked on Latest One-Day Price Change
% Price Change, Sector ETF, Symbol
-2.14% Consumer Staples SPDR, XLP
-2.21% Health Care SPDR, XLV
-3.31% Utilities SPDR, XLU
-4.70% Technology SPDR, XLK
-4.76% Industrial SPDR, XLI
-6.08% Consumer Discretionary SPDR, XLY
-6.16% Financial SPDR, XLF
-6.36% Materials SPDR, XLB
-8.19% Energy SPDR, XLE
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 11/12/08, XLP/SPY Relative Strength Ratio rose to a new 10-year high, but XLP absolute price was falling toward its 4-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.
Energy (XLE) Bearish, Underweight. On 10/10/08, the XLE absolute price hit another new 18-month intraday low.
Consumer Discretionary (XLY) Bearish, Underweight. On 10/24/08, XLY absolute price fell to its lowest level in 5 years.
Materials (XLB) Bearish, Underweight. On 10/27/08, the XLB absolute price fell to a new 5-year low.
Financial (XLF) Bearish, Underweight. On 11/12/08, 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 has been underperforming the 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 2008 lows, again confirming its downtrend. Oil fell to a new 22-month low of 55.50. 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 broke down below the low of 11/07/08, flashing a Bearish signal. The Gold trend now appears Bearish for the short-term. 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 broke out above the highs of the previous 10 trading days, suggesting an uptrend for the short term. Bonds still seem 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 to challenge its high of 10/28/02. The dollar set a new 24-month high on 10/28/08, 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 31.9% Bulls versus 46.1% Bears as of 11/12/2008, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio was 0.69, up from 0.63 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 66.46, 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 64.64, 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 0.97, 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 0.67, which indicates very 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 credit market crisis has derailed that engine. Economic statistics and corporate earnings have been weakening and seem likely to weaken further over the next several months…or longer.
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 (852.30):
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 (852.30):
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
10.35% Short 200% MidCap 400 PS, MZZ
9.78% Short 200% S&P 500 PS, SDS
9.56% Short 200% QQQ PS, QID
8.83% Short 200% Dow 30 PS, DXD
5.10% Short 100% MidCap 400, MYY
5.07% Short 100% S&P 500, SH
4.72% Short 100% QQQ, PSQ
4.40% Short 100% Dow 30, DOG
0.64% Bond, 20+ Years Treasury, TLT
0.62% Bond, 10 Year Treasury, IEF
0.16% Bond, TIPS, TIP
0.15% Bond, 1-3 Year Treasury, SHY
-0.02% Bond, Corp, LQD
-0.86% Bond, Aggregate, AGG
-1.12% Japan LargeCap Blend TOPIX 150, ITF
-1.47% Utilities, PUI
-2.08% Telecommunications Global, IXP
-2.10% Biotech H, BBH
-2.14% Consumer Staples SPDR, XLP
-2.16% Insurance, PIC
-2.21% Health Care SPDR, XLV
-2.34% Utilities VIPERs, VPU
-2.37% Value MidCap S&P 400, RFV
-2.74% Japan Index, EWJ
-2.75% Pharmaceutical H, PPH
-2.79% Healthcare Global, IXJ
-2.85% Gold Shares S.T., GLD
-2.88% Utilities DJ, IDU
-2.92% Global Titans, DGT
-2.94% Commodity Tracking, DBC
-3.02% Taiwan Index, EWT
-3.05% Utilities H, UTH
-3.11% Growth MidCap S&P 400, RFG
-3.22% Healthcare DJ, IYH
-3.27% Health Care VIPERs, VHT
-3.31% Utilities SPDR, XLU
-3.34% Pharmaceuticals, PJP
-3.37% Consumer Staples VIPERs, VDC
-3.39% Pacific VIPERs, VPL
-3.50% Software H, SWH
-3.50% Technology Global, IXN
-3.57% Dividend Leaders, FDL
-3.66% Singapore Index, EWS
-3.68% Hong Kong Index, EWH
-3.69% Growth S&P 500, RPG
-3.74% Consumer Non-Cyclical, IYK
-3.77% Malaysia Index, EWM
-3.81% Telecom H, TTH
-3.87% China 25 iS, FXI
-3.92% Dividend Achievers PS, PFM
-3.92% Biotech SPDR, XBI
-3.94% Growth LargeCap Russell 3000, IWZ
-3.94% Dividend Appreciation Vipers, VIG
-3.99% Biotech & Genome, PBE
-4.00% Spain Index, EWP
-4.06% Value Line Timeliness MidCap Gr, PIV
-4.19% Dividend SPDR, SDY
-4.19% Semiconductor H, SMH
-4.21% Aerospace & Defense, PPA
-4.22% DIAMONDS (DJIA), DIA
-4.26% Food & Beverage, PBJ
-4.32% Transportation Av DJ, IYT
-4.38% IPOs, First Tr IPOX-100, FPX
-4.40% S&P 500 SPDRs LargeCap Blend, SPY
-4.46% MidCap S&P 400 SPDRs, MDY
-4.53% Software, PSJ
-4.53% Italy Index, EWI
-4.54% Growth Mid Cap Dynamic PS, PWJ
-4.58% Value MidCap Dynamic PS, PWP
-4.59% Value LargeCap Dynamic PS, PWV
-4.60% Netherlands Index, EWN
-4.62% Growth LargeCap NASDAQ 100, QQQQ
-4.65% Switzerland Index, EWL
-4.66% LargeCap VIPERs, VV
-4.66% Growth Large Cap, ELG
-4.67% Telecommunications & Wireless, PTE
-4.70% Technology SPDR, XLK
-4.71% LargeCap Blend S&P 100, OEF
-4.71% LargeCap Blend Socially Responsible iS, KLD
-4.74% Technology GS, IGM
-4.74% LargeCap Blend Core iS M, JKD
-4.75% Growth 1000 Russell, IWF
-4.75% Internet Architecture H, IAH
-4.76% Industrial SPDR, XLI
-4.77% Internet Infrastructure H, IIH
-4.78% Growth SmallCap Dynamic PS, PWT
-4.80% Value LargeCap NYSE 100 iS, NY
-4.81% Telecom DJ US, IYZ
-4.82% Global 100, IOO
-4.83% Value 1000 Russell, IWD
-4.83% Growth VIPERs, VUG
-4.85% Info Tech VIPERs, VGT
-4.86% S&P 500 iS LargeCap Blend, IVV
-4.86% Growth S&P 500/BARRA, IVW
-4.87% LargeCap Rydex Rus Top 50, XLG
-4.88% Silver Trust iS, SLV
-4.91% Oil, Crude, U.S. Oil Fund, USO
-4.91% Growth LargeCap iS M, JKE
-4.92% Asia 50 BLDRS, ADRA
-4.93% Growth EAFE MSCI, EFG
-4.93% Technology DJ US, IYW
-4.95% Software, IGV
-4.96% Retail, PMR
-4.97% LargeCap 1000 R, IWB
-4.98% LargeCap Blend Russell 3000, IWV
-5.00% Value EAFE MSCI, EFV
-5.00% Sweden Index, EWD
-5.00% MidCap S&P 400 iS, IJH
-5.01% Value Large Cap DJ, ELV
-5.01% Wilshire 5000 ST TM, TMW
-5.03% Semiconductor iS GS, IGW
-5.05% LargeCap Blend S&P=Weight R, RSP
-5.09% Semiconductor SPDR, XSD
-5.12% Blend Total Market VIPERs, VTI
-5.12% Belgium Index, EWK
-5.14% OTC Dynamic PS, PWO
-5.14% LargeCap Blend Dynamic PS, PWC
-5.15% Value S&P 500 B, IVE
-5.16% Value VIPERs, VTV
-5.19% Dividend DJ Select, DVY
-5.21% Value LargeCap Euro STOXX 50 DJ, FEU
-5.23% Value MidCap iS M, JKI
-5.23% Value LargeCap iS M, JKF
-5.24% Developed 100 BLDRS, ADRD
-5.25% Semiconductors, PSI
-5.25% Growth BARRA Small Cap 600, IJT
-5.29% LargeCap Blend Total Market DJ, IYY
-5.29% Value MidCap S&P 400 B, IJJ
-5.30% Growth MidCap 400 B, IJK
-5.31% Retail H, RTH
-5.32% Value Small Cap DJ, DSV
-5.33% LargeCap Blend S&P 1500 iS, ISI
-5.33% Industrial LargeCap Blend DJ US, IYJ
-5.33% Technology MS sT, MTK
-5.34% Networking, PXQ
-5.38% EAFE Index, EFA
-5.39% Value 40 Large Low P/E FT DB, FDV
-5.41% Value LargeCap Russell 3000, IWW
-5.42% Telecom Services VIPERs, VOX
-5.43% Value S&P 500, RPV
-5.43% Lg Cap Growth PSD, PWB
-5.43% Euro STOXX 50, FEZ
-5.46% China LargeCap Growth G D H USX PS, PGJ
-5.47% Germany Index, EWG
-5.49% Bank Regional H, RKH
-5.50% MidCap Russell, IWR
-5.50% Pacific ex-Japan, EPP
-5.53% Value MidCap Russell, IWS
-5.57% Value SmallCap VIPERS, VBR
-5.58% Growth LargeCap NASDAQ Fidelity, ONEQ
-5.58% Consumer Cyclical DJ, IYC
-5.58% SmallCap Core iS M, JKJ
-5.59% MidCap VIPERs, VO
-5.59% LargeCap Blend NYSE Composite iS, NYC
-5.62% Dividend High Yield Equity PS, PEY
-5.62% Growth SmallCap iS M, JKK
-5.63% SmallCap S&P 600, IJR
-5.63% Value LargeCap Fundamental RAFI 1000, PRF
-5.64% MidCap Blend Core iS M, JKG
-5.65% European VIPERs, VGK
-5.66% Europe 350 S&P Index, IEV
-5.66% Value SmallCap Dynamic PS, PWY
-5.74% Emerging 50 BLDRS, ADRE
-5.75% France Index, EWQ
-5.75% EMU Europe Index, EZU
-5.76% Growth MidCap Russell, IWP
-5.83% SmallCap Russell 2000, IWM
-5.86% Dividend International, PID
-5.87% Value SmallCap Russell 2000, IWN
-5.91% Europe 100 BLDRS, ADRU
-5.92% Building & Construction, PKB
-5.92% Industrials VIPERs, VIS
-5.95% Extended Mkt VIPERs, VXF
-5.98% Value SmallCap iS M, JKL
-6.08% Consumer Discretionary SPDR, XLY
-6.09% Value SmallCap S&P 600, RZV
-6.11% Small Cap VIPERs, VB
-6.12% South Korea Index, EWY
-6.16% Financial SPDR, XLF
-6.18% Dividend Growth PS, PHJ
-6.18% Financial DJ US, IYF
-6.22% MidCap Growth iS M, JKH
-6.24% Growth Small Cap DJ, DSG
-6.25% Financials VIPERs, VFH
-6.25% Leisure & Entertainment, PEJ
-6.28% Consumer D. VIPERs, VCR
-6.30% Nanotech Lux, PXN
-6.35% Microcap Russell, IWC
-6.36% Materials SPDR, XLB
-6.37% Growth SmallCap R 2000, IWO
-6.37% Materials VIPERs, VAW
-6.39% Value SmallCap S&P 600 B, IJS
-6.51% Australia Index, EWA
-6.52% Hardware & Electronics, PHW
-6.57% Growth SmallCap VIPERs, VBK
-6.61% Financial Services DJ, IYG
-6.73% Networking, IGN
-7.07% Energy DJ, IYE
-7.07% Financials Global LargeCap Value, IXG
-7.10% Homebuilders SPDR, XHB
-7.10% Mexico Index, EWW
-7.13% Austria Index, EWO
-7.13% Capital Markets KWB ST, KCE
-7.16% REIT VIPERs, VNQ
-7.24% Micro Cap Zachs, PZI
-7.24% Basic Materials DJ US, IYM
-7.37% Real Estate US DJ, IYR
-7.37% Water Resources, PHO
-7.42% India Earnings WTree, EPI
-7.42% Emerging Markets, EEM
-7.48% Internet B2B H, BHH
-7.51% Energy Global, IXC
-7.53% SmallCap PS Zacks, PZJ
-7.62% Oil Services H, OIH
-7.69% United Kingdom Index, EWU
-7.75% Energy VIPERs, VDE
-7.82% REIT Wilshire, RWR
-7.88% Oil & Gas, PXJ
-8.10% South Africa Index, EZA
-8.19% Energy SPDR, XLE
-8.20% Ultra Dow30 Double, DDM
-8.25% Natural Resource iS GS, IGE
-8.28% Canada Index, EWC
-8.28% Internet H, HHH
-8.30% Realty Cohen & Steers, ICF
-8.57% Broadband H, BDH
-8.67% Emerging VIPERs, VWO
-8.73% Latin Am 40, ILF
-9.46% Energy Exploration & Prod, PXE
-9.64% Ultra S&P500 Double, SSO
-10.09% Brazil Index, EWZ
-10.12% Ultra QQQ Double, QLD
-10.34% Ultra MidCap400 Double, MVV
-11.11% Metals & Mining SPDR, XME
-11.89% WilderHill Clean Energy PS, PBW
