By Robert W. Colby, Senior Analyst TraderPlanet.com
Materials and Energy sectors Relative Strength made new all-time highs.
Utilities Relative Strength made a new 6-year high.
Foreign stock indices Relative Strength made a new high.
December Crude Oil Futures consolidated with an “Inside Day”.
December Gold Futures hit another new 28-year closing price high of $83.70.
The U.S. dollar stabilized somewhat, but the trend is still weak.
Technical oscillators suggest that the stock market is oversold and losing downside momentum. Some oscillators are very low but still above their levels in October, and that indicates Bullish Divergence. Moreover, the long-term trend of the stock market remains upward. And seasonal tendencies remain Bullish. Finally, with the news headlines so negative, the Art of Contrary Thinking could be useful.
Breadth ended 4% net Bearish, with more Declining stocks than Advancing stocks 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 73% net Bearish.
Technology stocks lost 3.56% and were the main drag on the general market. Cisco led the way lower, down 9.53%, on word that its forward business outlook was less optimistic than market expectations.
VIX “Fear Index” rose to a 7-week high, 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 32.33, more than 3 standard deviations above its 1-year mean.
ISEE Call/Put Ratio at 1.19 showed moderate Bearishness. The ISEE Call/Put Ratio was moderately below its 5-year median of 1.48, indicating that customers opened a 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
13.63% , KG , KING PHARM
2.74% , ILF , Latin Am 40, ILF
9.63% , ROK , ROCKWELL AUTOMAT
5.43% , BIIB , BIOGEN IDEC
6.67% , GPS , GAP
1.93% , RFV , Value MidCap S&P 400, RFV
6.89% , QID , Short 200% QQQ PS, QID
0.80% , NY , Value LargeCap NYSE 100 iS, NY
0.62% , TTH , Telecom H, TTH
4.05% , PSQ , Short 100% QQQ, PSQ
0.71% , FEZ , Euro STOXX 50, FEZ
5.23% , EWZ , Brazil Index, EWZ
3.94% , MON , MONSANTO
2.90% , URBN , Urban Outfitters Inc.
3.04% , APOL , APOLLO GROUP
2.21% , JKL , Value SmallCap iS M, JKL
1.65% , ADRE , Emerging 50 BLDRS, ADRE
0.53% , IYM , Basic Materials DJ US, IYM
2.47% , SOV , SOVEREIGN BANC
2.97% , TE , TECO ENERGY
3.17% , MI , MARSHAL & ILSLEY
2.54% , LLL , L-3 COMMS HLDGS
1.74% , PUI , Utilities, PUI
1.30% , EWG , Germany Index, EWG
3.45% , ZION , ZIONS
4.12% , SGP , SCHERING PLOUGH
3.98% , PCG , PG&E
1.63% , EWU , United Kingdom Index, EWU
4.48% , MIL , MILLIPORE
2.78% , AN , AUTONATION
2.83% , HRB , H&R BLOCK
5.26% , UIS , UNISYS
1.75% , MDP , MEREDITH
2.52% , KO , COCA COLA
2.81% , SO , SOUTHERN
0.31% , TIP , Bond, TIPS, TIP
1.17% , EFG , Growth EAFE MSCI, EFG
3.37% , NI , NISOURCE
3.72% , DOV , DOVER
4.00% , ETN , EATON
2.23% , PBW , WilderHill Clean Energy PS, PBW
1.05% , DSV , Value Small Cap DJ, DSV
3.77% , BCR , C R BARD
5.73% , CIT , CIT GROUP
1.82% , RRD , RR DONNELLEY SON
2.10% , AYE , ALLEGHENY ENERGY
0.98% , VAW , Materials VIPERs, VAW
1.00% , IYZ , Telecom DJ US, IYZ
2.99% , SNV , SYNOVUS
1.70% , MCD , MCDONALDS
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-0.97% , PSI , Semiconductors, PSI
-3.96% , MTK , Technology MS sT, MTK
-1.98% , IGV , Software, IGV
-4.10% , PXQ , Networking, PXQ
-5.09% , IAH , Internet Architecture H, IAH
-9.24% , AMCC , APPLD MICRO CIRC
-3.00% , BDH , Broadband H, BDH
-7.92% , ORCL , ORACLE
-5.35% , DLTR , Dollar Tree Stores Inc
-6.08% , GLW , CORNING
-3.34% , WYE , WYETH
-8.12% , LTD , LIMITED BRANDS
-0.88% , IWZ , Growth LargeCap Russell 3000, IWZ
-1.85% , PWO , OTC Dynamic PS, PWO
-4.47% , IBM , IBM
-6.05% , BRCM , BROADCOM STK A
-3.20% , CHKP , Check Point Software Technologies Ltd
-3.93% , LXK , LEXMARK INTL STK A
-7.14% , QLD , Ultra QQQ Double, QLD
-5.49% , NTAP , NETWK APPLIANCE
-3.24% , VGT , Info Tech VIPERs, VGT
-3.77% , IGM , Technology GS, IGM
-3.77% , IYW , Technology DJ US, IYW
-5.33% , GOOG , Google
-5.82% , AAPL , APPLE COMPUTER
-3.56% , XLK , Technology SPDR, XLK
-3.64% , DYN , DYNEGY
-5.80% , PMCS , PMC SIERRA
-3.87% , JNPR , Juniper Networks Inc
-7.06% , EMC , EMC
-3.56% , DISCA , Discovery Holding Co.
-5.58% , JBL , JABIL CIRCUIT
-3.98% , SNDK , SanDisk Corporation
-6.27% , NVDA , NVIDIA
-6.43% , RIMM , RESEARCH IN MOTION LTD
-2.01% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
-9.53% , CSCO , CISCO SYSTEMS
-0.85% , BHH , Internet B2B H, BHH
-3.26% , IXN , Technology Global, IXN
-3.39% , CTXS , CITRIX SYSTEMS
-3.25% , NCC , NATIONAL CITY
-2.07% , TIF , TIFFANY
-0.52% , HCR , MANOR CARE
-1.60% , IIH , Internet Infrastructure H, IIH
-5.02% , RHT , Red Hat Inc.
-4.79% , LAMR , Lamar Advertising Company
-2.21% , PSJ , Software, PSJ
-1.41% , IGW , Semiconductor iS GS, IGW
-3.03% , PGJ , China LargeCap Growth G D H USX PS, PGJ
-3.04% , QQQQ.O , Growth LargeCap NASDAQ 100, QQQQ
Sectors: among the 9 major U.S. sectors, 7 rose and 2 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.72% Consumer Staples
0.66% Health Care
-0.29% 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.
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.
Utilities (XLU) Bullish, Overweight. Relative Strength for this defensive sector made a new 6-year high on 11/8/07. Price made a new 5-month high on 10/31/07. Utilities have improved significantly since their Relative Strength low on 9/28/07.
Technology (XLK) Bullish, Overweight. XLK hit another 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.
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 11/8/07.
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. 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, a day 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, a day after setting a new 20-month high. Growth stocks outperformed Value stocks since 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 consolidated with an “Inside Day”. The day’s range was completely contained within the previous day’s range. It was a neutral day. Support appears at the 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 hit another new 28-year closing price high of $83.70, but GLD eased 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 11/6/07. 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 consolidated over this week, after hitting resistance last week. The long-term, iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT) touched a new 11-month high on 11/2/07 but was unable to hold new high territory into the close that day. This could signal fatigue. 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 recovered, but only slightly, 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.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
1.99% Dow Utilities
1.63% United Kingdom
1.05% Natural Gas
0.91% Health Care Products
0.75% S&P Small Caps
0.72% Dow Transports
0.72% Consumer Staples
0.69% Commodity Related
0.67% Japanese Yen
0.66% Health Care
0.64% Russell 2000
0.62% Health Care
0.55% Value Line
0.54% Swiss Franc
0.52% Dow Composite
0.48% NYSE Composite
0.48% Gold Mining
0.45% Oil Services
0.39% S&P Mid Caps
0.27% 30Y T-Bond
0.23% Broker Dealers
0.19% British Pound
0.03% Russell 3000
-0.02% Russell 1000
-0.02% Euro Index
-0.03% Wilshire 5000
-0.05% Hong Kong
-0.06% S&P 500
-0.17% US Dollar Index
-0.25% Dow Industrial
-0.29% Consumer Discretionary
-0.38% S&P 100
-0.58% AMEX Composite
-0.92% Australian Dollar
-1.86% Canadian Dollar
-1.92% Nasdaq Composite
-1.92% South Korea
-2.92% Nasdaq 100
-3.14% Disk Drives
-4.33% Computer Tech