By Robert W. Colby, Senior Analyst TraderPlanet.com
Downside correction in commodity prices could help the stock market.
Short-term technical momentum oscillators for the stock indices are still positive, even though momentum slowed on Thursday.
Major stock price indices have retraced more than 3/8 of their losses from the October highs, which already is sufficient for an upside correction.On Thursday, major stock price indices were narrowly mixed all day, suggesting a little rest a day after their biggest two-day rally since 10/15/02.
Volume shrank significantly, suggesting hesitation to chase stock prices higher.
Breadth ended 9% net Bearish, with more Declining stocks than Advancing stocks on the NYSE.
Up-Down Volume finished the day 6% net Bearish, with greater Down Volume than Up Volume on the NYSE.
New Highs-New Lows on the NYSE ended at 48% net Bearish.
Bullish Price Divergences: Although the Dow Industrials and Transports both closed below their August lows in November, the following indices held above their August closing lows: DJUA, S&P 500, S&P 100, NASDAQ Composite, NASDAQ 100, Russell 3000, Russell 1000, and Wilshire 5000.
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 2.10% , VIA , VIACOM INC. (New)
0.99% , IXN , Technology Global, IXN
4.60% , PBW , WilderHill Clean Energy PS, PBW
4.61% , NUE , NUCOR
0.60% , IAH , Internet Architecture H, IAH
5.93% , DDS , DILLARD STK A
2.48% , ERIC.O , LM Ericsson Telephone Company
4.79% , NOV , NATIONAL OILWELL VARC0
0.45% , IYZ , Telecom DJ US, IYZ
0.61% , XLV , Health Care SPDR, XLV
3.54% , BIIB , BIOGEN IDEC
0.94% , ITF , Japan LargeCap Blend TOPIX 150, ITF
0.49% , VOX , Telecom Services VIPERs, VOX
1.08% , IYE , Energy DJ, IYE
1.85% , SNA , SNAP ON
1.97% , CR , CRANE
2.58% , RAI , RJR TOBACCO HLDS
1.63% , DELL , DELL
0.07% , BDH , Broadband H, BDH
2.20% , MHS , MEDCO HEALTH
0.69% , VAW , Materials VIPERs, VAW
0.29% , AGG , Bond, Aggregate, AGG
0.88% , CCU , CLEAR CHANNEL
0.49% , VO , MidCap VIPERs, VO
0.21% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
1.77% , IGT , INTL GAME TECH
1.13% , VDE , Energy VIPERs, VDE
1.53% , TDC , Teradata Corporation, TDC
0.39% , ADRA , Asia 50 BLDRS, ADRA
0.12% , PEJ , Leisure & Entertainment, PEJ
0.79% , MAR , MARRIOTT INTL STK A
0.26% , IJH , MidCap S&P 400 iS, IJH
0.17% , XLG , LargeCap Rydex Rus Top 50, XLG
0.53% , VPL , Pacific VIPERs, VPL
0.88% , PBE , Biotech & Genome, PBE
0.73% , FPL , FPL GROUP INC
2.62% , IACI , IAC/INTERACTIVCORP
0.82% , IYW , Technology DJ US, IYW
1.09% , RHI , ROBERT HALF
0.97% , NBR , NABORS
0.61% , GNTX , Gentex Corporation
0.28% , TTH , Telecom H, TTH
1.03% , ABT , ABBOTT LABS
0.11% , VBK , Growth SmallCap VIPERs, VBK
0.77% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
4.48% , LPX , LOUISIANA PAC
2.63% , SUN , SUNOCO
0.16% , JKF , Value LargeCap iS M, JKF
0.50% , DVN , DEVON ENERGY
0.07% , JKE , Growth LargeCap iS M, JKE Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name -10.53% , SHLD , SEARS HOLDINGS
-2.84% , PMR , Retail, PMR
-8.71% , ETFC.O , E*TRADE FINANCIAL
-1.64% , PXQ , Networking, PXQ
-0.65% , RZV , Value SmallCap S&P 600, RZV
-0.42% , RFV , Value MidCap S&P 400, RFV
-2.03% , AMD , ADV MICRO DEV
-8.05% , PFG , PRINCIPAL FINL
-0.60% , RFG , Growth MidCap S&P 400, RFG
-0.18% , PBJ , Food & Beverage, PBJ
-0.64% , IGN , Networking, IGN
-0.52% , ADRU , Europe 100 BLDRS, ADRU
-3.36% , BF.B , BROWN FORMAN STK B
-2.34% , MDP , MEREDITH
-1.48% , TMO , THERMO ELECTRON
-0.91% , PWT , Growth SmallCap Dynamic PS, PWT
-1.07% , VGK , European VIPERs, VGK
-1.37% , SLV , Silver Trust iS, SLV
-2.68% , LUV , SOUTHWEST AIRLS
-0.69% , EFV , Value EAFE MSCI, EFV
-0.27% , IJT , Growth BARRA Small Cap 600, IJT
-0.89% , IYC , Consumer Cyclical DJ, IYC
-0.34% , VCR , Consumer D. VIPERs, VCR
-1.67% , IAU , Gold COMEX iS, IAU
-2.96% , EWM , Malaysia Index, EWM
-1.34% , PKI , PERKINELMER
-0.28% , IOO , Global 100, IOO
-1.26% , A , AGILENT TECH
-1.46% , LEG , LEGGETT & PLATT
-3.47% , CVS , CVS
-2.66% , WAG , WALGREEN
-0.43% , VTV , Value VIPERs, VTV
-2.59% , AMP , Ameriprise Financial Inc.
-0.54% , IXJ , Healthcare Global, IXJ
-1.31% , EWD , Sweden Index, EWD
-0.74% , EWQ , France Index, EWQ
-3.10% , WMI , WASTE MANAGEMENT
-0.61% , VBR , Value SmallCap VIPERS, VBR
-1.21% , BUD , ANHEUSER BUSCH
-1.81% , NOC , NORTHROP GRUMMAN
-1.31% , FO , FORTUNE BRANDS
-0.52% , EFG , Growth EAFE MSCI, EFG
-2.95% , TIF , TIFFANY
-1.88% , LXK , LEXMARK INTL STK A
-0.91% , IEV , Europe 350 S&P Index, IEV
-0.72% , CVG , CONVERGYS
-1.98% , XHB , Homebuilders SPDR, XHB
-0.95% , SLM , SLM CORP
-0.63% , VXF , Extended Mkt VIPERs, VXF
-0.92% , EWP , Spain Index, EWP
Sectors: among the 9 major U.S. sectors, 5 rose, 3 fell, and 1 was unchanged.
% Price Change, Sector 1.10% Energy
0.61% Health Care
0.52% Consumer Staples
-0.99% 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. This defensive sector’s Relative Strength made a new 6-year high on 11/26/07. 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 price made a new all-time high on 11/29/07, and Relative Strength made a new 6-year high on 11/26/07.
Materials (XLB) Bullish, Overweight. The short-term turned down but the long-term trend is still up. 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. 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.
Health Care (XLV) Neutral, Market Weight. This defensive sector’s Relative Strength moved up to a new 13-month high on 11/27/07.
Industrial (XLI) Neutral, Market Weight. Price and Relative Strength have been chopping sideways over the past 4 months. Longer-term trends appear Bullish.
Consumer Discretionary (XLY) Bearish, Underweight. On 11/27/07, price made a new 14-month low. On 11/21/07, 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 2.5-year low on 11/26/07, and the XLF/SPY Relative Strength ratio fell to its lowest level in more than 7 years on 11/26/07. Relative Strength has been trending down since 2/20/07.
Foreign stock indices were mostly lower after making new highs in Relative Strength on 11/27/07. 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 11/27/07. 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 outperformed since 11/12/07. Longer term, NASDAQ outperformed from 8/8/06 to 11/7/07, including a new 6-year Relative strength high on 11/7/07 and a new price high on 10/31/07.
Growth Stock/Value Stock Relative Strength ratio has been in a rising trend since 11/12/07. The ratio made a new high on 11/7/07. The long-term, the main trend for the Growth/Value ratio (IWF/IWD) has been rising since 8/8/06.
Small Cap Relative Strength fell to new lows on 11/29/07 and price broke its August low on 11/21/07. Small Caps substantially underperformed Large Caps since 4/19/06, and so the main long-term trend is Bearish for Small Caps.
January Crude Oil Futures consolidated recent losses with an Inside Day Continuation Pattern. The day’s range was entirely contained within the previous day’s range. An Inside Day suggests continuation of the preexisting trend, which was down for the short term. On 11/28/07, Crude Oil fell to a low of 90.33—which was just 0.20 above a previous low at 90.13. Support appears at previous lows of 90.13 and 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) is not a pure play on Crude Oil, although it generally moves in the same direction.
The Energy stock sector has been lagging oil the commodity over the past 6 months. XLE has underperformed the USO since 5/30/07.
December Gold Futures fell another 0.96% to 792.60. Gold appears to have entered a correction since its top at 848.00 on 11/7/07.
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) has underperformed Gold Futures since 10/31/07.
Inflation expectations turned down since 11/23/07. A downside correction may be underway, based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bonds prices bounced after 2 days down. Bonds made a new 28-month price high on 11/26/07. The long-term, iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT) has been rising since 6/12/07. 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 has firmed slightly since the low on 11/23/07. The U.S. dollar’s action appears to be more of a consolidation than the beginning of a significant rally. The main trend is still down. All rally attempts have been confined to only one day at a time over the past 2 months , indicating persistent selling pressure. Longer term, the dollar fell 19% from its high of 92.53 on 11/16/05 to its low of 74.65 on 11/23/07.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
1.57% Oil Services
0.72% 30Y T-Bond
0.61% Health Care
0.52% Consumer Staples
0.47% Computer Tech
0.43% Japanese Yen
0.38% Commodity Related
0.36% Hong Kong
0.35% Natural Gas
0.27% Health Care
0.20% Nasdaq Composite
0.17% S&P 100
0.12% Health Care Products
0.07% Russell 1000
0.04% Wilshire 5000
0.02% Russell 3000
0.00% Dow Industrial
0.00% S&P 500
0.00% Russell 2000
0.00% Nasdaq 100
0.00% US Dollar Index
-0.01% S&P Mid Caps
-0.08% Dow Utilities
-0.18% NYSE Composite
-0.26% Dow Composite
-0.27% Value Line
-0.39% S&P Small Caps
-0.47% Euro Index
-0.48% Disk Drives
-0.48% Swiss Franc
-0.66% Gold Mining
-0.72% British Pound
-0.85% Australian Dollar
-0.87% AMEX Composite
-0.99% Consumer Discretionary
-1.13% Dow Transports
-1.16% Canadian Dollar
-1.17% United Kingdom
-1.48% South Korea
-1.56% Broker Dealers