By Robert W. Colby, Senior Analyst TraderPlanet.com
Fear is high and rising.
Commodity related instruments hammered down.
VXN “Fear Index” rose to a 4-year closing high.
Stochastic (14-day) extremely oversold at zero.
December Gold and Crude Oil Futures both fell below previous 5-days lows.
On Monday, major stock price indices tried to rally, but fell steeply in the last hour to close near the lows of the day. Trading volume fell again, suggesting that the selling may have reflected less intense emotions and less urgency to act.
Breadth ended 35% net Bearish, with more Declining stocks than Advancing stocks on the NYSE.
Up-Down Volume finished the day 32% net Bearish, with greater Down Volume than Up Volume on the NYSE.
New Highs-New Lows on the NYSE ended at 86% net Bearish.
VIX “Fear Index” rose to a 4-year closing high on 11/12/07. VIX closed at 31.09 (which is 3 standard deviations above its 1-year mean) on 11/12/07, indicating that options traders were feeling extremely 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 34.94, a new 4-year closing high. VXN is now more than 4 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 1.17 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
8.54% , LUV , SOUTHWEST AIRLS
0.12% , RFV , Value MidCap S&P 400, RFV
3.58% , HRB , H&R BLOCK
3.39% , WY , WEYERHAEUSER
1.65% , MYY , Short 100% MidCap 400, MYY
2.61% , SCHW.O , CHARLES SCHWAB
2.89% , UNM , UNUMPROVIDENT
4.24% , WHR , WHIRLPOOL
7.14% , THC , TENET HEALTHCARE
4.21% , MAT , MATTEL
2.20% , NOVL , NOVELL
1.91% , CLX , CLOROX
1.42% , MLNM , Millennium Pharmaceuticals Inc
1.47% , PGR , PROGRESSIVE OHIO
2.40% , LNCR , Lincare Holdings Inc
1.39% , BF.B , BROWN FORMAN STK B
1.67% , LPX , LOUISIANA PAC
1.01% , NTRS , NORTHERN TRUST
2.55% , PSQ , Short 100% QQQ, PSQ
3.43% , MZZ , Short 200% MidCap 400 PS, MZZ
1.97% , JWN , NORDSTROM
0.50% , IYT , Transportation Av DJ, IYT
3.71% , ROST , Ross Stores Inc
2.89% , INTU , INTUIT
2.53% , SBUX , STARBUCKS
0.38% , RWR , REIT Wilshire, RWR
2.27% , WYE , WYETH
1.15% , WEN , WENDYS INTL
0.51% , PDCO , Patterson Dental Company
0.34% , IYH , Healthcare DJ, IYH
1.34% , AMP , Ameriprise Financial Inc.
1.84% , R , RYDER SYSTEM
2.12% , KSS , KOHLS
1.54% , HSIC , Henry Schein Inc
0.32% , TDC , Teradata Corporation, TDC
2.55% , MI , MARSHAL & ILSLEY
0.39% , MCD , MCDONALDS
0.61% , HSY , HERSHEY FOODS
0.98% , WMT , WAL MART STORES
1.86% , ESRX , EXPRESS SCRIPTS
0.52% , TE , TECO ENERGY
0.56% , FITB , FIFTH THIRD BANC
0.94% , DDS , DILLARD STK A
2.74% , UPS , UNITED PARCEL STK B
1.38% , PRU , PRUDENTIAL FINL
1.03% , NWL , NEWELL RUBBER
1.76% , JNJ , JOHNSON&JOHNSON
1.15% , VNQ , REIT VIPERs, VNQ
0.44% , PETM , PETsMART Inc
1.77% , BCR , C R BARD
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-58.67% , ETFC.O , E*TRADE FINANCIAL
-15.83% , DISH , EchoStar Communications Corporation
-3.11% , FPX , IPOs, First Tr IPOX-100, FPX
-1.47% , PEJ , Leisure & Entertainment, PEJ
-4.11% , IYE , Energy DJ, IYE
-4.79% , IAU , Gold COMEX iS, IAU
-1.72% , IWZ , Growth LargeCap Russell 3000, IWZ
-4.72% , GLD , Gold Shares S.T., GLD
-5.57% , PXJ , Oil & Gas, PXJ
-5.60% , OIH , Oil Services H, OIH
-7.74% , NEM , NEWMONT MINING
-9.93% , NOV , NATIONAL OILWELL VARC0
-6.21% , XME , Metals & Mining SPDR, XME
-1.49% , BDH , Broadband H, BDH
-2.82% , JKG , MidCap Blend Core iS M, JKG
-4.84% , STJ , ST JUDE MEDICAL
-1.31% , FEZ , Euro STOXX 50, FEZ
-3.92% , VDE , Energy VIPERs, VDE
-3.57% , MWV , MEADWESTVACO
-5.24% , NUE , NUCOR
-6.20% , NE , NOBLE
-7.31% , DE , DEERE & CO
-4.69% , IGE , Natural Resource iS GS, IGE
-3.29% , PXQ , Networking, PXQ
-2.78% , ADRA , Asia 50 BLDRS, ADRA
-2.19% , DBC , Commodity Tracking, DBC
-7.52% , APOL , APOLLO GROUP
-9.45% , FCX , FREEPRT MCMORAN STK B
-6.38% , SLV , Silver Trust iS, SLV
-6.47% , X , US STEEL CORP
-8.32% , FLR , FLUOR
-3.65% , PIV , Value Line Timeliness MidCap Gr, PIV
-7.75% , MON , MONSANTO
-4.68% , BJS , BJ SERVICES
-4.87% , JNPR , Juniper Networks Inc
-0.99% , PZJ , SmallCap PS Zacks, PZJ
-6.33% , EZA , South Africa Index, EZA
-5.80% , RIG , TRANSOCEAN
-3.50% , SUN , SUNOCO
-6.17% , APA , APACHE
-4.91% , EP , EL PASO
-3.81% , VAW , Materials VIPERs, VAW
-1.94% , EWO , Austria Index, EWO
-2.83% , PID , Dividend International, PID
-2.02% , JKE , Growth LargeCap iS M, JKE
-5.71% , CMI , CUMMINS
-1.94% , IJK , Growth MidCap 400 B, IJK
-4.32% , PXE , Energy Exploration & Prod, PXE
-1.90% , VO , MidCap VIPERs, VO
-2.57% , RFG , Growth MidCap S&P 400, RFG
Sectors: among the 9 major U.S. sectors, 4 rose and 5 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.36% Financial
0.26% Health Care
0.15% Consumer Discretionary
0.07% Consumer Staples
-1.08% Industrial
-1.62% Technology
-1.74% Utilities
-4.00% Materials
-4.84% Energy
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.
Consumer Staples (XLP) Bullish, Overweight. This defensive sector’s Relative Strength has improved since its low on 10/9/07 and made a new 13-month high on 11/12/07.
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.
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 11/12/07, price made a new 13-month low. 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 underperformed for 2 days after 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 underperformed for 4 days, after making new 6-year Relative strength highs on 11/7/07. The main is still Bullish, confirmed by price on 10/31/07. Longer term, NASDAQ has outperformed since 8/8/06.
Growth Stock/Value Stock Relative Strength ratio underperformed for 3 days after Relative Strength made a new high on 11/7/07. Before that, 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 fell below previous 5-days lows. Oil has been extended so a correction seems normal. 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 fell below previous 5-days lows. Gold has been extended so a correction seems normal. The GLD ETF confirmed. 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) fell steeply, underperforming Gold Futures.
Inflation expectations rose to a new 14-month high on 11/12/07. 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 are rising and interest rates are in a downtrend. The long-term, iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT) made a new 21-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 rebounded above previous 3-day highs. This may be only a temporary oversold bounce, since 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.
1.18% Banks
1.00% Japanese Yen
0.98% Retailers
0.92% US Dollar Index
0.44% Health Care
0.38% Hospitals
0.38% Insurance
0.36% Financial
0.26% Health Care
0.19% Drugs
0.15% Consumer Discretionary
0.13% REITs
0.07% Consumer Staples
0.07% Japan
0.03% 30Y T-Bond
-0.15% Biotechs
-0.22% Health Care Products
-0.23% Dow Transports
-0.26% Swiss Franc
-0.42% Dow Industrial
-0.56% Italy
-0.62% Dow Composite
-0.68% Russell 2000
-0.72% Euro Index
-0.79% S&P 100
-0.81% S&P Small Caps
-0.89% Value Line
-1.00% S&P 500
-1.08% Industrial
-1.09% Sweden
-1.10% Russell 3000
-1.13% Wilshire 5000
-1.14% Russell 1000
-1.17% Switzerland
-1.37% Semiconductors
-1.38% DOT
-1.39% British Pound
-1.40% Paper
-1.40% Spain
-1.51% S&P Mid Caps
-1.55% Computer Tech
-1.57% Dow Utilities
-1.58% France
-1.61% Belgium
-1.62% Technology
-1.67% Nasdaq Composite
-1.68% NYSE Composite
-1.74% Utilities
-1.94% Austria
-2.05% Network
-2.08% United Kingdom
-2.11% Netherlands
-2.30% Germany
-2.34% Hardware
-2.35% Malaysia
-2.40% AMEX Composite
-2.45% Disk Drives
-2.49% Canadian Dollar
-2.56% Nasdaq 100
-2.72% Hong Kong
-3.20% Chemicals
-3.26% Singapore
-3.46% Broker Dealers
-3.53% Internet
-3.65% Oil
-3.66% Australian Dollar
-3.77% Mexico
-3.82% Taiwan
-3.99% Natural Gas
-4.00% Materials
-4.41% South Korea
-4.50% Australia
-4.59% Canada
-4.84% Energy
-4.88% Commodity Related
-5.91% Oil Services
-7.81% Gold Mining
-8.66% Brazil
