By Robert W. Colby, Senior Analyst TraderPlanet.com
The Fed disappoints.
The market hates uncertainity.
Volume surged, validating a downside trend reversal.
On Tuesday, major stock price indices were rising until 2:15 p.m., when the Fed announced policy. Traders did not get what they were looking for, so they dumped stocks in a big hurry. Stock prices closed with steep losses on the lows of the day.The problem was that the Fed cut its discount rate, the interest it charges to make direct loans to banks, by only a quarter-point. Investors had hoped for a half-point cut to encourage banks to borrow more freely from the Fed at a time when investors worry that a rising number of bad loans will prompt banks to tighten credit. To make matters worse, the Fed stated that “strains in financial markets have increased in recent weeks…Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation.” The market hates uncertainty.
Volume on the NYSE surged by 40%, validating a downside trend reversal following an overbought condition.
Breadth ended 67% net Bearish, with more Declining stocks than Advancing stocks on the NYSE.
Up-Down Volume finished the day 86% net Bearish, with greater Down Volume than Up Volume on the NYSE.
New Highs-New Lows on the NYSE ended at 5% net Bearish.
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
6.11% , MZZ , Short 200% MidCap 400 PS, MZZ
4.02% , DXD , Short 200% Dow 30 PS, DXD
3.85% , JNPR , Juniper Networks Inc
5.58% , SDS , Short 200% S&P 500 PS, SDS
3.61% , ISIL , INTERSIL CORP
1.92% , BIIB , BIOGEN IDEC
4.72% , QID , Short 200% QQQ PS, QID
4.12% , T , AT&T Corp., T
1.08% , TTH , Telecom H, TTH
1.92% , DOG , Short 100% Dow 30, DOG
2.37% , PSQ , Short 100% QQQ, PSQ
2.19% , SH , Short 100% S&P 500, SH
1.09% , TIP , Bond, TIPS, TIP
0.37% , SHY , Bond, 1-3 Year Treasury, SHY
1.99% , MCD , MCDONALDS
1.30% , CSCO , CISCO SYSTEMS
0.98% , LNCR , Lincare Holdings Inc
1.96% , TLT , Bond, 20+ Years Treasury, TLT
1.12% , Q , QWEST COMMUNICAT
1.37% , IEF , Bond, 10 Year Treasury, IEF
0.80% , TXN , TEXAS INSTRUMENT
0.48% , WYE , WYETH
0.49% , AGG , Bond, Aggregate, AGG
0.30% , STJ , ST JUDE MEDICAL
1.21% , MNST , MONSTER WORLDWID
0.11% , LH , LAB CRP OF AMER
0.29% , TRB , TRIBUNE
0.12% , NVDA , NVIDIA
0.24% , CL , COLGATE
2.77% , MYY , Short 100% MidCap 400, MYY
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-2.34% , RPG , Growth S&P 500, RPG
-3.07% , PWT , Growth SmallCap Dynamic PS, PWT
-2.95% , PMR , Retail, PMR
-12.37% , WM , WASHINGTON MUT
-1.92% , XSD , Semiconductor SPDR, XSD
-2.93% , PWP , Value MidCap Dynamic PS, PWP
-5.98% , MVV , Ultra MidCap400 Double, MVV
-2.56% , ISI , LargeCap Blend S&P 1500 iS, ISI
-1.88% , PBJ , Food & Beverage, PBJ
-2.84% , JKG , MidCap Blend Core iS M, JKG
-2.18% , FPX , IPOs, First Tr IPOX-100, FPX
-2.93% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-5.38% , PKI , PERKINELMER
-1.98% , IGW , Semiconductor iS GS, IGW
-4.08% , PKB , Building & Construction, PKB
-11.33% , KBH , KB HOME
-3.65% , PZJ , SmallCap PS Zacks, PZJ
-2.75% , RZV , Value SmallCap S&P 600, RZV
-6.60% , KR , KROGER
-2.25% , EFG , Growth EAFE MSCI, EFG
-2.62% , PWV , Value LargeCap Dynamic PS, PWV
-8.10% , BBT , BB&T
-2.66% , ELV , Value Large Cap DJ, ELV
-2.81% , JKI , Value MidCap iS M, JKI
-4.71% , RKH , Bank Regional H, RKH
-3.29% , RTH , Retail H, RTH
-5.29% , SSO , Ultra S&P500 Double, SSO
-4.08% , IYT , Transportation Av DJ, IYT
-3.13% , RSP , LargeCap Blend S&P=Weight R, RSP
-3.10% , PWY , Value SmallCap Dynamic PS, PWY
-10.65% , FRE , FREDDIE MAC
-5.99% , WHR , WHIRLPOOL
-2.95% , IWV , LargeCap Blend Russell 3000, IWV
-3.13% , IJT , Growth BARRA Small Cap 600, IJT
-2.72% , JKK , Growth SmallCap iS M, JKK
-3.19% , XLI , Industrial SPDR, XLI
-10.52% , LEN , Lennar Corp. (LEN)
-5.74% , BBBY , BED BATH BEYOND
-2.59% , EWO , Austria Index, EWO
-10.50% , DHI , D.R. HORTON, DHI
-3.35% , VCR , Consumer D. VIPERs, VCR
-12.89% , CTX , CENTEX
-2.47% , EWG , Germany Index, EWG
-3.63% , EWY , South Korea Index, EWY
-4.44% , TNB , THOMAS & BETTS
-2.81% , PHJ , Dividend Growth PS, PHJ
-2.00% , IGN , Networking, IGN
-4.31% , DDM , Ultra Dow30 Double, DDM
-6.54% , CMA , COMERICA
-6.88% , KEY , KEYCORP
Sectors: among the 9 major U.S. sectors, all 9 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
-1.09% Consumer Staples
-1.55% Health Care
-1.55% Technology
-2.32% Utilities
-2.47% Energy
-3.19% Industrial
-3.21% Consumer Discretionary
-4.15% Materials
-5.05% Financial
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
Energy (XLE) Bullish, Overweight. Relative Strength made a 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 12/5/07, and price made a new all-time high on 12/10/07.
Consumer Staples (XLP) Bullish, Overweight. This defensive sector’s price made a new all-time high on 12/10/07, 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) Neutral, Market Weight. Relative Strength made a new 7-week low on 11/30/07. Still, 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. XLV price moved up to a new 6-month high on 12/3/07. 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 since 8/3/07. Longer-term trends appear Bullish.
Consumer Discretionary (XLY) Bearish, Underweight. On 11/27/07, price made a new 14-month low. On 12/11/07, 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 underperformed substantially on Tuesday and Wednesday. The oversold bounce in late November is history. 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 have underperformed U.S. stock indices short term, since 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 underperformed the S&P since 11/7/07. But trends in different time frames conflict. 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 neutral trend since 11/7/07. The long-term, the main trend for the Growth/Value ratio (IWF/IWD) has been rising since 8/8/06.
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 rose slightly but still may be in a correction. Watch to see if the 12/6/07 low at 85.82 holds. The next Potential Support levels might be 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 outperformed the USO since 11/26/07. Previously, over the 6 months from 5/30/07 to 11/26/07, XLE lagged oil the commodity.
December Gold Futures appears to be in a correction, well below their top at 848.00 set 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 recovered weakly after moving steadily down from 11/23/07 to 12/5/07. A new 3-month low on 12/05/07 suggests that a downside correction is underway, based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bond prices rebounded in a flight to safety. 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 eased rose slightly but still appears uncertain short-term. Longer term, the main trend is still Bearish. The dollar fell 19% from its high of 92.53 on 11/16/05 to its low of 74.65 on 11/23/07, moving it into “oversold”.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
1.50% 30Y T-Bond
0.61% Japanese Yen
0.28% US Dollar Index
-0.18% Euro Index
-0.36% Swiss Franc
-0.40% British Pound
-0.60% Canadian Dollar
-0.61% Australian Dollar
-0.77% Malaysia
-1.09% Consumer Staples
-1.32% Drugs
-1.52% Health Care
-1.55% Health Care
-1.55% Technology
-1.55% Health Care Products
-1.63% Network
-1.69% Oil
-1.75% Spain
-1.87% Switzerland
-1.89% Natural Gas
-1.93% Disk Drives
-2.03% Computer Tech
-2.08% Semiconductors
-2.09% DOT
-2.13% Hospitals
-2.14% Dow Industrial
-2.15% Internet
-2.16% S&P 100
-2.17% Japan
-2.24% AMEX Composite
-2.32% Utilities
-2.34% Dow Utilities
-2.39% Biotechs
-2.40% Nasdaq 100
-2.45% Nasdaq Composite
-2.45% Oil Services
-2.47% Energy
-2.47% Germany
-2.52% Italy
-2.53% S&P 500
-2.53% Wilshire 5000
-2.56% Dow Composite
-2.56% Russell 1000
-2.56% France
-2.57% Sweden
-2.59% Austria
-2.60% Russell 3000
-2.62% Insurance
-2.63% NYSE Composite
-2.63% Australia
-2.64% Hong Kong
-2.66% Netherlands
-2.70% Canada
-2.85% Value Line
-2.91% Belgium
-2.93% United Kingdom
-2.94% Commodity Related
-2.96% S&P Mid Caps
-3.02% S&P Small Caps
-3.07% Singapore
-3.08% Hardware
-3.15% Russell 2000
-3.19% Industrial
-3.21% Consumer Discretionary
-3.39% Dow Transports
-3.41% Chemicals
-3.52% Taiwan
-3.63% South Korea
-3.74% Gold Mining
-3.77% Brazil
-3.92% Mexico
-4.15% Materials
-4.19% Retailers
-4.25% Paper
-4.76% Airlines
-5.01% Broker Dealers
-5.05% Financial
-5.22% Banks
-5.58% REITs
