by Robert W. Colby, Senior Analyst, TraderPlanet.com
Stock Market: abandoned all hope in the final hour.
Stocks erased nearly all of their previous day’s gains.
Sudden and violent reversals are common in Primary Tide Trend Bear Markets.
Investors focus on capital preservation.
New Weekly Relative Strength Rankings are posted, below.
On Friday, major stock price indexes opened lower, tried to recover, but sank below the early low just past noon. An afternoon recovery erased all of the morning’s losses. But in the final hour, stocks abandoned all hope and plunged below the previous low of the day. Prices closed near the lowest levels of the day. The Standard & Poor’s 500 cash index (873.29) closed down 38.00 points, or 4.17%. Total NYSE volume fell 24%, indicating weaker demand for stocks.
The stock market reflects future fundamental conditions about 6 months ahead. Economic news has been growing dramatically worse as time goes on, with no visible end to the downward fundamental spiral. Some economists see weakness for another 12 months. If so, then it would be too early for a change in the major trend.
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
20.94% , HIG , HARTFORD FINL
1.71% , CEPH , Cephalon Inc
5.44% , SUN , SUNOCO
0.20% , PXQ , Networking, PXQ
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-25.75% , LIZ , LIZ CLAIRBORNE
-4.40% , LVLT , LEVEL 3 COMMUNICATIONS
-15.57% , HOG , HARLEY DAVIDSON
-6.05% , IXN , Technology Global, IXN
-9.09% , BHH , Internet B2B H, BHH
-6.42% , PXJ , Oil & Gas, PXJ
-8.54% , AGN , ALLERGAN
-21.26% , SANM , SANMINA
-10.43% , JCP , JC PENNEY
-5.51% , EFV , Value EAFE MSCI, EFV
-6.56% , MHP , MCGRAW HILL
-6.92% , LBTYA , Liberty Global Inc. (LBTYA)
-3.57% , FDV , Value 40 Large Low P/E FT DB, FDV
-4.86% , IWV , LargeCap Blend Russell 3000, IWV
-7.77% , TLAB , TELLABS
-2.37% , PSI , Semiconductors, PSI
-12.90% , FNM , FANNIE MAE
-5.16% , JKE , Growth LargeCap iS M, JKE
-4.36% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-2.97% , PWY , Value SmallCap Dynamic PS, PWY
-4.51% , IYJ , Industrial LargeCap Blend DJ US, IYJ
-12.34% , KSU , Kansas City Southern, KSU
-5.24% , IEV , Europe 350 S&P Index, IEV
-8.22% , FRE , FREDDIE MAC
-1.72% , KLD , LargeCap Blend Socially Responsible iS, KLD
-8.23% , GNTX , Gentex Corporation
-3.50% , HANS , Hansen Natural, HANS
-3.91% , RZV , Value SmallCap S&P 600, RZV
-3.05% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-9.01% , EXC , EXELON CORP
-4.63% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
-6.27% , EZU , EMU Europe Index, EZU
9 Major U.S. Stock Sectors
Ranked on Latest One-Day Price Change
% Price Change, Sector ETF, Symbol
-2.37% Utilities SPDR, XLU
-2.98% Consumer Staples SPDR, XLP
-3.80% Health Care SPDR, XLV
-4.15% Energy SPDR, XLE
-4.23% Industrial SPDR, XLI
-4.57% Technology SPDR, XLK
-4.86% Consumer Discretionary SPDR, XLY
-5.07% Financial SPDR, XLF
-6.08% Materials SPDR, XLB
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. But since 9/22/08, the XLU/SPY Relative Strength Ratio has been trending higher.
Energy (XLE) Bearish, Underweight. On 10/10/08, the XLE absolute price hit another new 18-month intraday low.
Technology (XLK) Bearish, Underweight. On 11/13/08, the XLK absolute price fell to a new 5-year low.
Industrial (XLI) Bearish, Underweight. On 11/13/08, the XLI absolute price fell to a new 5-year low.
Consumer Discretionary (XLY) Bearish, Underweight. On 11/13/08, XLY absolute price fell to its lowest level in 10 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 11/13/08, 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 11/13/08, 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 gave up most of Thursday’s gain. On 11/13/08, oil fell to a new 22-month low of 54.67, confirming that the intermediate-term trend remains 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 moved above the highs of the previous 3 days, but the trend still looks uncertain 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 reversed strongly to the upside to 3-week highs, which is Bullish 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 consolidated losses with an Inside Day (lower high and higher low). Expect the corrective trend to continue for the short-term. 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 66.31, approached its November high. 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 66.05, rose to a new November high. 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 0.82, 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 1.08, 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 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 quarters.
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 (873.29):
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 (873.29):
Potential Support
818.69, low of 11/13/2008
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
11.50% Short 200% MidCap 400 PS, MZZ
9.99% Short 200% QQQ PS, QID
8.51% Short 200% Dow 30 PS, DXD
8.49% Short 200% S&P 500 PS, SDS
5.51% Short 100% MidCap 400, MYY
4.99% Short 100% QQQ, PSQ
4.57% Short 100% S&P 500, SH
3.93% Telecommunications & Wireless, PTE
3.93% Short 100% Dow 30, DOG
2.17% OTC Dynamic PS, PWO
1.98% Bond, 20+ Years Treasury, TLT
1.88% Internet Architecture H, IAH
1.63% Value LargeCap NYSE 100 iS, NY
1.59% Gold Shares S.T., GLD
1.19% Value S&P 500, RPV
1.02% Bond, TIPS, TIP
0.99% Bond, 10 Year Treasury, IEF
0.64% Silver Trust iS, SLV
0.37% IPOs, First Tr IPOX-100, FPX
0.30% Bond, Aggregate, AGG
0.20% Networking, PXQ
-0.02% Bond, Corp, LQD
-0.02% Bond, 1-3 Year Treasury, SHY
-0.09% Retail, PMR
-0.09% Telecom Services VIPERs, VOX
-0.58% Insurance, PIC
-0.63% Commodity Tracking, DBC
-0.63% SmallCap PS Zacks, PZJ
-0.64% Developed 100 BLDRS, ADRD
-1.00% Broadband H, BDH
-1.05% Telecom H, TTH
-1.07% Software, PSJ
-1.10% Global Titans, DGT
-1.12% Growth MidCap S&P 400, RFG
-1.23% Building & Construction, PKB
-1.38% Dividend Leaders, FDL
-1.39% Value LargeCap iS M, JKF
-1.54% Leisure & Entertainment, PEJ
-1.65% Biotech H, BBH
-1.72% LargeCap Blend Socially Responsible iS, KLD
-1.86% Utilities, PUI
-1.94% Food & Beverage, PBJ
-2.01% Growth Small Cap DJ, DSG
-2.01% Internet Infrastructure H, IIH
-2.02% Wilshire 5000 ST TM, TMW
-2.10% Value MidCap Dynamic PS, PWP
-2.37% Technology GS, IGM
-2.37% Semiconductors, PSI
-2.37% Utilities SPDR, XLU
-2.42% LargeCap Blend Core iS M, JKD
-2.42% Software H, SWH
-2.43% Europe 100 BLDRS, ADRU
-2.85% Pharmaceuticals, PJP
-2.97% Value SmallCap Dynamic PS, PWY
-2.98% Consumer Staples SPDR, XLP
-3.05% Consumer Staples VIPERs, VDC
-3.05% Japan LargeCap Blend TOPIX 150, ITF
-3.09% Consumer Non-Cyclical, IYK
-3.12% Utilities H, UTH
-3.14% Utilities VIPERs, VPU
-3.17% Technology MS sT, MTK
-3.18% Dividend Achievers PS, PFM
-3.23% Utilities DJ, IDU
-3.25% Software, IGV
-3.25% Mexico Index, EWW
-3.36% Value MidCap iS M, JKI
-3.40% Semiconductor SPDR, XSD
-3.51% Value LargeCap Dynamic PS, PWV
-3.52% Healthcare DJ, IYH
-3.54% Growth SmallCap iS M, JKK
-3.57% Value 40 Large Low P/E FT DB, FDV
-3.68% Growth Large Cap, ELG
-3.70% LargeCap Blend NYSE Composite iS, NYC
-3.72% Health Care VIPERs, VHT
-3.72% Value Line Timeliness MidCap Gr, PIV
-3.73% Dividend Growth PS, PHJ
-3.76% Pharmaceutical H, PPH
-3.77% Switzerland Index, EWL
-3.80% Health Care SPDR, XLV
-3.86% Consumer Cyclical DJ, IYC
-3.91% Value SmallCap S&P 600, RZV
-3.94% LargeCap Blend Dynamic PS, PWC
-3.99% Energy DJ, IYE
-4.00% LargeCap Blend S&P 100, OEF
-4.02% Nanotech Lux, PXN
-4.12% Consumer D. VIPERs, VCR
-4.14% Dividend Appreciation Vipers, VIG
-4.15% Energy SPDR, XLE
-4.18% Telecommunications Global, IXP
-4.20% Growth S&P 500, RPG
-4.20% Healthcare Global, IXJ
-4.20% Global 100, IOO
-4.23% Industrial SPDR, XLI
-4.23% Growth LargeCap NASDAQ Fidelity, ONEQ
-4.26% Lg Cap Growth PSD, PWB
-4.26% Blend Total Market VIPERs, VTI
-4.28% Telecom DJ US, IYZ
-4.28% S&P 500 iS LargeCap Blend, IVV
-4.29% Value Large Cap DJ, ELV
-4.30% Biotech SPDR, XBI
-4.32% Dividend SPDR, SDY
-4.33% Homebuilders SPDR, XHB
-4.36% Value LargeCap Euro STOXX 50 DJ, FEU
-4.36% Value VIPERs, VTV
-4.44% Biotech & Genome, PBE
-4.45% Industrials VIPERs, VIS
-4.46% Energy Global, IXC
-4.47% LargeCap Blend Total Market DJ, IYY
-4.47% Dividend DJ Select, DVY
-4.50% LargeCap Rydex Rus Top 50, XLG
-4.51% Industrial LargeCap Blend DJ US, IYJ
-4.52% Canada Index, EWC
-4.53% Growth LargeCap Russell 3000, IWZ
-4.57% Technology SPDR, XLK
-4.58% LargeCap Blend S&P=Weight R, RSP
-4.60% Growth Mid Cap Dynamic PS, PWJ
-4.61% Value S&P 500 B, IVE
-4.61% Micro Cap Zachs, PZI
-4.62% Growth MidCap Russell, IWP
-4.63% Value LargeCap Fundamental RAFI 1000, PRF
-4.65% LargeCap 1000 R, IWB
-4.67% LargeCap VIPERs, VV
-4.70% Value Small Cap DJ, DSV
-4.72% Aerospace & Defense, PPA
-4.72% Value MidCap S&P 400, RFV
-4.72% MidCap VIPERs, VO
-4.73% Value 1000 Russell, IWD
-4.79% Pacific VIPERs, VPL
-4.84% Value LargeCap Russell 3000, IWW
-4.84% Networking, IGN
-4.85% Growth S&P 500/BARRA, IVW
-4.85% MidCap Russell, IWR
-4.85% Natural Resource iS GS, IGE
-4.86% LargeCap Blend Russell 3000, IWV
-4.86% Growth LargeCap NASDAQ 100, QQQQ
-4.86% Consumer Discretionary SPDR, XLY
-4.89% LargeCap Blend S&P 1500 iS, ISI
-4.93% MidCap Growth iS M, JKH
-4.96% Growth VIPERs, VUG
-4.97% Growth 1000 Russell, IWF
-4.99% S&P 500 SPDRs LargeCap Blend, SPY
-5.03% Value MidCap Russell, IWS
-5.04% Info Tech VIPERs, VGT
-5.05% DIAMONDS (DJIA), DIA
-5.07% Financial SPDR, XLF
-5.10% Energy VIPERs, VDE
-5.16% Growth LargeCap iS M, JKE
-5.18% Hardware & Electronics, PHW
-5.19% Growth MidCap 400 B, IJK
-5.20% Transportation Av DJ, IYT
-5.24% Europe 350 S&P Index, IEV
-5.28% Growth SmallCap Dynamic PS, PWT
-5.33% United Kingdom Index, EWU
-5.33% Energy Exploration & Prod, PXE
-5.33% Technology DJ US, IYW
-5.39% Growth EAFE MSCI, EFG
-5.39% Financial Services DJ, IYG
-5.39% Japan Index, EWJ
-5.41% MidCap Blend Core iS M, JKG
-5.51% Value EAFE MSCI, EFV
-5.52% Financial DJ US, IYF
-5.56% European VIPERs, VGK
-5.68% MidCap S&P 400 iS, IJH
-5.70% Financials VIPERs, VFH
-5.71% Malaysia Index, EWM
-5.74% EAFE Index, EFA
-5.75% India Earnings WTree, EPI
-5.76% Oil, Crude, U.S. Oil Fund, USO
-5.76% Value MidCap S&P 400 B, IJJ
-5.78% Financials Global LargeCap Value, IXG
-5.81% Extended Mkt VIPERs, VXF
-5.86% Basic Materials DJ US, IYM
-5.88% Dividend High Yield Equity PS, PEY
-5.90% Italy Index, EWI
-5.99% Spain Index, EWP
-6.04% Asia 50 BLDRS, ADRA
-6.05% Technology Global, IXN
-6.08% Materials SPDR, XLB
-6.09% Growth BARRA Small Cap 600, IJT
-6.11% Bank Regional H, RKH
-6.12% Retail H, RTH
-6.14% SmallCap Core iS M, JKJ
-6.14% Dividend International, PID
-6.21% China LargeCap Growth G D H USX PS, PGJ
-6.22% WilderHill Clean Energy PS, PBW
-6.27% EMU Europe Index, EZU
-6.32% Oil Services H, OIH
-6.32% Materials VIPERs, VAW
-6.34% Internet H, HHH
-6.36% France Index, EWQ
-6.38% Water Resources, PHO
-6.42% Oil & Gas, PXJ
-6.45% Euro STOXX 50, FEZ
-6.54% Netherlands Index, EWN
-6.54% Capital Markets KWB ST, KCE
-6.55% Value SmallCap VIPERS, VBR
-6.56% Small Cap VIPERs, VB
-6.58% Value SmallCap iS M, JKL
-6.58% Growth SmallCap VIPERs, VBK
-6.61% Microcap Russell, IWC
-6.67% Belgium Index, EWK
-6.70% Germany Index, EWG
-6.88% SmallCap S&P 600, IJR
-6.96% Semiconductor iS GS, IGW
-7.19% South Africa Index, EZA
-7.22% Brazil Index, EWZ
-7.39% Metals & Mining SPDR, XME
-7.44% SmallCap Russell 2000, IWM
-7.54% Value SmallCap S&P 600 B, IJS
-7.58% MidCap S&P 400 SPDRs, MDY
-7.60% Latin Am 40, ILF
-7.64% Growth SmallCap R 2000, IWO
-7.68% Emerging 50 BLDRS, ADRE
-7.88% Ultra Dow30 Double, DDM
-7.99% Australia Index, EWA
-8.14% Pacific ex-Japan, EPP
-8.17% Emerging VIPERs, VWO
-8.23% Sweden Index, EWD
-8.26% Singapore Index, EWS
-8.28% Value SmallCap Russell 2000, IWN
-8.80% Semiconductor H, SMH
-9.00% Taiwan Index, EWT
-9.04% Hong Kong Index, EWH
-9.07% China 25 iS, FXI
-9.09% Internet B2B H, BHH
-9.50% Ultra S&P500 Double, SSO
-9.60% Emerging Markets, EEM
-9.84% Ultra QQQ Double, QLD
-9.86% Real Estate US DJ, IYR
-10.15% Austria Index, EWO
-10.22% South Korea Index, EWY
-10.56% Realty Cohen & Steers, ICF
-10.77% Ultra MidCap400 Double, MVV
-11.27% REIT VIPERs, VNQ
-11.60% REIT Wilshire, RWR
