By Robert W. Colby, Senior Analyst TraderPlanet.com
Trends look mixed, short term…Apparent active portfolio switching and realignment.
Major stock price indices have had a half-way retracement of October-November losses over the past 4 trading days. This proportion already is sufficient for an upside correction.
The Standard & Poor’s 500 cash index (1,481.14) approached but failed to penetrate Potential Resistance at 1,492.14, which was the high of 11/14/2007.
Health Care Sector price moved up to a new 6-month high.
Technology and Growth stocks fell on word of Dell’s downbeat outlook.
Semiconductor Holders (SMH) Relative Strength fell to new 5-year lows on 11/30/07.
Small Caps continue under pressure.
CRB Index fell again to a new 5-week low, reinforcing a correction in commodity prices.
Crude Oil broke down below November lows.
U.S. dollar has oversold bounce.
Volume rose significantly, suggesting active portfolio switching and realignment.
Breadth ended 41% net Bullish, with more Advancing stocks than Declining stocks on the NYSE.
Up-Down Volume finished the day 51% net Bullish, with greater Up Volume than Down Volume on the NYSE.
New Highs-New Lows on the NYSE ended at 21% net Bearish.
The Art of Contrary Thinking: The business and financial news took an abrupt turn toward the extreme Bullish side in the past week, mainly due to hopes for a Fed interest rate cut and infusions of new capital for troubled financial institutions impacted by the housing and credit crisis. Until 11/26/07, traders were fearful of financial collapse and a nationwide housing “Depression,” in the words of John Stumpf, CEO of Wells Fargo. That led to an oversold condition. On 11/27-30, news of some new capital infusion for 3 financial institutions sparked a sharp 4-day oversold bounce that has the market somewhat overbought for the short term. When the news changes so dramatically from one day to the next, risk control becomes more important than aggressive profit seeking. Actual conditions may be neither as bad nor as good as they might seem day to day, so stay flexible and ready to change quickly.
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
13.54% , XMSR , XM Satellite R
14.33% , DHI , D.R. HORTON, DHI
8.81% , SIRI , Sirius Satellite
18.77% , MBI , MBIA
8.94% , MTG , MGIC INVESTMENT
16.34% , CFC , COUNTRYWIDE FNCL
0.58% , RPG , Growth S&P 500, RPG
16.32% , ABK , AMBAC FINL GRP
7.02% , XHB , Homebuilders SPDR, XHB
8.26% , PHM , PULTE HOMES
0.63% , PIC , Insurance, PIC
18.62% , FNM , FANNIE MAE
7.96% , KBH , KB HOME
0.95% , JKL , Value SmallCap iS M, JKL
6.19% , WFC , WELLS FARGO
9.04% , CTX , CENTEX
8.27% , WM , WASHINGTON MUT
0.97% , JKG , MidCap Blend Core iS M, JKG
10.83% , CIT , CIT GROUP
2.55% , CHRW.O , CH Robinson Worldwide Inc, CHRWD
6.75% , GNW , GENWORTH FINANCIAL (NYSE:GNW)
0.58% , JKH , MidCap Growth iS M, JKH
2.27% , UIS , UNISYS
2.06% , AZO , AUTOZONE
1.62% , AGN , ALLERGAN
8.25% , THC , TENET HEALTHCARE
5.20% , LUV , SOUTHWEST AIRLS
0.62% , VPU , Utilities VIPERs, VPU
4.31% , R , RYDER SYSTEM
3.36% , BAC , BANK OF AMERICA
2.68% , COF , CAPITAL ONE FNCL
0.49% , LQD , Bond, Corp, LQD
7.24% , LEN , Lennar Corp. (LEN)
1.74% , ADRE , Emerging 50 BLDRS, ADRE
18.84% , FRE , FREDDIE MAC
4.51% , JPM , J P MORGAN CHASE
4.04% , ZION , ZIONS
3.17% , HON , HONEYWELL INTL
6.51% , TIN , TEMPLE INLAND
2.62% , TXT , TEXTRON
2.24% , ICF , Realty Cohen & Steers, ICF
1.25% , AYE , ALLEGHENY ENERGY
4.41% , MER , MERRILL LYNCH
4.43% , FITB , FIFTH THIRD BANC
0.14% , ELG , Growth Large Cap, ELG
4.23% , NIHD , NII Holdings, Inc.
3.97% , RF , REGIONS FINAN
1.36% , JNY , JONES APPAREL
5.15% , EXPD , Expeditors International WA
0.53% , PJP , Pharmaceuticals, PJP
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-12.79% , DELL , DELL
-1.60% , MV , METAVANTE TECHNOLOGIES, MV
-6.77% , RIMM , RESEARCH IN MOTION LTD
-8.88% , BIG , BIG LOTS
-2.91% , RX , IMS HEALTH
-4.76% , TIF , TIFFANY
-0.68% , SWH , Software H, SWH
-0.74% , IGV , Software, IGV
-5.06% , ISIL , INTERSIL CORP
-1.66% , SYMC , SYMANTEC
-1.24% , PSJ , Software, PSJ
-1.92% , EK , EASTMAN KODAK
-1.21% , PHW , Hardware & Electronics, PHW
-1.97% , MZZ , Short 200% MidCap 400 PS, MZZ
-1.73% , NYT , NY TIMES STK A
-1.78% , INTU , INTUIT
-4.77% , NVDA , NVIDIA
-1.81% , LLTC , LINEAR TECH
-1.27% , DRI , DARDEN REST
-1.54% , EWC , Canada Index, EWC
-2.16% , IBM , IBM
-4.02% , BRCM , BROADCOM STK A
-3.17% , LRCX , LAM RESEARCH CORP
-3.31% , NEM , NEWMONT MINING
-1.76% , CA , COMPUTER ASSOC
-1.46% , ORCL , ORACLE
-2.12% , COL , ROCKWELL COLLINS
-2.58% , NVLS , NOVELLUS SYS
-1.89% , QLGC , QLOGIC
-1.55% , QCOM , QUALCOMM
-0.92% , SVU , SUPERVALU
-1.30% , NSM , NATL SEMICONDUCT
-2.41% , USO , Oil, Crude, U.S. Oil Fund, USO
-1.24% , DBC , Commodity Tracking, DBC
-1.75% , NTAP , NETWK APPLIANCE
-1.73% , CTXS , CITRIX SYSTEMS
-1.30% , PMTC.O , PARAMETRIC
-0.80% , SH , Short 100% S&P 500, SH
-0.87% , EXC , EXELON CORP
-0.45% , PUI , Utilities, PUI
-0.72% , BA , BOEING
-0.41% , IWC , Microcap Russell, IWC
-1.52% , FISV , FISERV
-1.89% , FLEX , Flextronics International Ltd
-2.04% , TDC , Teradata Corporation, TDC
-1.73% , SNDK , SanDisk Corporation
-0.75% , Q , QWEST COMMUNICAT
-1.23% , APA , APACHE
-0.89% , UTX , UNITED TECH
-0.50% , NCR , NCR
Sectors: among the 9 major U.S. sectors, 8 rose, and 1 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
2.48% Financial
1.46% Consumer Discretionary
0.95% Materials
0.66% Utilities
0.38% Industrial
0.30% Energy
0.14% Health Care
0.14% Consumer Staples
-0.53% Technology
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
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 11/6/07. 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.
Health Care (XLV) Bullish, Overweight. XLV price moved up to a new 6-month high on 11/30/07. Relative Strength moved up to a new 13-month high on 11/27/07.
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.
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 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. The oversold bounce in late November did not change the main trend. 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 sharply underperformed in the wake of the Dell’s announcement of a cautious outlook. 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 fell sharply on Friday and 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 Cap Relative Strength fell to new lows on 11/30/07 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 broke down below November lows, for a new 4-week low. On 11/30/07, Crude Oil fell below potential support at previous lows of 90.13 and 88.92. 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 fell for 4 consecutive days. 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 new 4-week low suggests that a downside correction may be underway, based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bonds prices consolidated with an Inside Day. 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 rallied significantly for 2 consecutive days–a change of character. Previously, all rally attempts were limited 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, moving it into “oversold”.
3.14% Banks
2.85% Paper
2.48% Financial
2.38% Taiwan
2.11% Mexico
1.93% Dow Transports
1.79% REITs
1.63% Brazil
1.46% Consumer Discretionary
1.45% Retailers
1.39% South Korea
1.25% Hong Kong
1.20% Singapore
1.13% AMEX Composite
0.97% Oil
0.95% Materials
0.90% Dow Composite
0.90% Broker Dealers
0.89% Australia
0.86% Chemicals
0.85% NYSE Composite
0.83% United Kingdom
0.78% S&P 500
0.78% Russell 1000
0.78% Health Care Products
0.77% Value Line
0.75% Belgium
0.74% Russell 3000
0.74% Wilshire 5000
0.70% US Dollar Index
0.68% S&P Mid Caps
0.66% Utilities
0.66% Biotechs
0.65% S&P 100
0.57% Dow Utilities
0.48% Insurance
0.45% Dow Industrial
0.45% S&P Small Caps
0.45% Drugs
0.38% Industrial
0.37% Hospitals
0.36% Network
0.34% Health Care
0.33% France
0.30% Energy
0.29% Netherlands
0.28% Commodity Related
0.24% Malaysia
0.22% Russell 2000
0.21% Japan
0.20% Germany
0.14% Health Care
0.14% Consumer Staples
0.09% Spain
0.08% Austria
0.08% Italy
0.00% Australian Dollar
-0.04% Switzerland
-0.24% Natural Gas
-0.27% Nasdaq Composite
-0.30% Canadian Dollar
-0.33% DOT
-0.36% Sweden
-0.37% British Pound
-0.51% Internet
-0.53% Technology
-0.53% 30Y T-Bond
-0.63% Nasdaq 100
-0.65% Oil Services
-0.75% Euro Index
-1.02% Disk Drives
-1.02% Gold Mining
-1.06% Computer Tech
-1.17% Swiss Franc
-1.21% Japanese Yen
-1.32% Semiconductors
-1.54% Canada
-2.20% Hardware
