By Robert W. Colby, Senior Analyst TraderPlanet.com
Government rescue plan inspires hope.
Standard & Poor’s 500 index (1,507.34) penetrated Potential Resistance at 1,492.14, which was the high of 11/14/2007.
Crude Oil rebounded and energy stocks were strong.
Consumer Discretionary Relative Strength ratio fell to its lowest level in 6 years.
NYSE volume fell, suggesting a somewhat more tentative attitude toward the 8-day market stock market rebound.
The news seemed to be focused on hopes for President Bush’s plan to help home owners pay for subprime house mortgages. In addition, investors are counting on a cut in interest rates when the Fed meets next Tuesday.
Breadth ended 58% net Bullish, with more Advancing stocks than Declining stocks on the NYSE.
Up-Down Volume finished the day 69% net Bullish, with greater Up Volume than Down Volume on the NYSE.
New Highs-New Lows on the NYSE ended at 4% net Bullish.
The Art of Contrary Thinking: The business and financial news took an abrupt turn toward the Bullish side over the past 8 trading days. Previously, the news was all gloom and doom. 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.
Sentiment/Contrary Opinion: Bullish Opinion rose moderately. According to the weekly Investors Intelligence newsletter survey as of 12/6/07, there were 49.4% Bulls and 27.6 % Bears. The ratio of Bullish advisors to Bearish advisors rose to 1.79 to 1, which is still below its 3-year median of 2.32 to 1 and down from a peak of 3.21 to 1 as of 10/17/07.
VIX “Fear Index” fell to 20.96, down from 22.53, the lowest level in a month. VIX reverted to its 10-year mean. 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” fell to 24.89, down from 26.91, the lowest level in a month. VXN is down from 34.94, which was a 4-year closing high on 11/12/07. VXN measures Nasdaq Volatility using a method comparable to that used for VIX.
CBOE Put/Call Ratio fell to a relatively low level of 0.55, down from 0.63, which was near the median. This indicates above-average optimism.
ISEE Call/Put Ratio rose to 1.32, down from 1.27, and still shows below-average optimism. Relatively low numbers indicate that customers opened somewhat fewer long call options and more long put options than they normally do.
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
2.72% , PMR , Retail, PMR
10.53% , XHB , Homebuilders SPDR, XHB
1.72% , VO , MidCap VIPERs, VO
3.84% , KSU , Kansas City Southern, KSU
1.69% , TMW , Wilshire 5000 ST TM, TMW
12.73% , PHM , PULTE HOMES
16.14% , KBH , KB HOME
7.78% , TRB , TRIBUNE
15.26% , LEN , Lennar Corp. (LEN)
16.12% , CFC , COUNTRYWIDE FNCL
11.80% , DHI , D.R. HORTON, DHI
12.66% , CTX , CENTEX
4.06% , RZV , Value SmallCap S&P 600, RZV
1.53% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
1.55% , PWB , Lg Cap Growth PSD, PWB
0.86% , FDV , Value 40 Large Low P/E FT DB, FDV
1.93% , RFV , Value MidCap S&P 400, RFV
7.61% , R , RYDER SYSTEM
2.76% , IJS , Value SmallCap S&P 600 B, IJS
1.90% , PIV , Value Line Timeliness MidCap Gr, PIV
6.31% , CAG , CONAGRA FOODS
2.28% , IYM , Basic Materials DJ US, IYM
5.28% , TIN , TEMPLE INLAND
6.07% , MAS , MASCO
3.08% , PXJ , Oil & Gas, PXJ
2.27% , DSV , Value Small Cap DJ, DSV
5.68% , HES , AMERADA HESS
11.50% , MTG , MGIC INVESTMENT
6.52% , VC , VISTEON
4.98% , FLR , FLUOR
2.62% , JKJ , SmallCap Core iS M, JKJ
0.75% , ANDW , ANDREW
2.06% , IXC , Energy Global, IXC
5.18% , GPS , GAP
4.58% , XRX , XEROX
5.69% , EQR , EQUITY RESIDENT BEN INT
1.41% , EFV , Value EAFE MSCI, EFV
3.48% , TJX , TJX
1.40% , NYC , LargeCap Blend NYSE Composite iS, NYC
2.50% , ROST , Ross Stores Inc
2.12% , AM , AMER GREETINGS STK A
5.02% , CVG , CONVERGYS
2.62% , NWS.A , NEWS CORP STK A
1.16% , EWS , Singapore Index, EWS
4.05% , X , US STEEL CORP
1.35% , DGT , Global Titans, DGT
2.97% , CEPH , Cephalon Inc
3.72% , SNDK , SanDisk Corporation
1.07% , EZU , EMU Europe Index, EZU
3.51% , PKB , Building & Construction, PKB
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-8.28% , FDO , FAMILY DLR STRS
-7.58% , TGT , TARGET
-4.93% , RYAAY , Ryanair Holdings plc
-4.99% , NCR , NCR
-1.31% , SH , Short 100% S&P 500, SH
-2.36% , AES , AES
-1.22% , LLL , L-3 COMMS HLDGS
-2.31% , MYY , Short 100% MidCap 400, MYY
-3.39% , DLTR , Dollar Tree Stores Inc
-2.27% , FPL , FPL GROUP INC
-1.18% , DRI , DARDEN REST
-0.83% , PSQ , Short 100% QQQ, PSQ
-1.00% , HAS , HASBRO
-2.20% , JCP , JC PENNEY
-1.30% , MCK , MCKESSON CORP
-1.12% , FRX , FOREST LABS STK A
-1.45% , CCE , COCA COLA ENTER
-1.29% , ADSK , AUTODESK
-0.21% , SHY , Bond, 1-3 Year Treasury, SHY
-0.91% , DDS , DILLARD STK A
-1.04% , CNP , CENTERPNT ENERGY
-0.30% , TIP , Bond, TIPS, TIP
-0.70% , ED , CON ED
-0.88% , TLT , Bond, 20+ Years Treasury, TLT
-0.77% , NIHD , NII Holdings, Inc.
-0.86% , MDT , MEDTRONIC
-0.14% , MYL , MYLAN LABS
-0.11% , AGG , Bond, Aggregate, AGG
-0.61% , MHP , MCGRAW HILL
-0.65% , GENZ , GENZYME GEN
-0.78% , CTL , CENTURYTEL
-0.16% , MHS , MEDCO HEALTH
-0.03% , XLP , Consumer Staples SPDR, XLP
-0.09% , BIIB , BIOGEN IDEC
-0.06% , CTSH , Cognizant Technology Solutions
-0.08% , AOC , AON
-0.06% , TIF , TIFFANY
-0.04% , PGN , PROGRESS ENERGY
-0.09% , DIS , WALT DISNEY
-3.24% , SANM , SANMINA
2.79% , SSO , Ultra S&P500 Double, SSO
0.04% , VFC , VF
0.42% , PETM , PETsMART Inc
2.90% , VRSN , VeriSign Inc
0.46% , CEG , CONSTELL ENERGY
0.15% , VPU , Utilities VIPERs, VPU
0.67% , UPS , UNITED PARCEL STK B
0.77% , NVLS , NOVELLUS SYS
0.69% , PGJ , China LargeCap Growth G D H USX PS, PGJ
2.43% , AAPL , APPLE COMPUTER
Sectors: among the 9 major U.S. sectors, 7 rose, and 2 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
2.84% Financial
2.40% Energy
1.60% Materials
1.14% Industrial
1.02% Technology
0.87% Consumer Discretionary
0.68% Health Care
-0.03% Consumer Staples
-0.59% Utilities
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 12/6/07.
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.
Consumer Staples (XLP) Bullish, Overweight. This defensive sector’s price made a new all-time high on 12/6/07, and Relative Strength made a new 6-year high on 11/26/07.
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.
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 12/6/07, 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 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 were mostly higher in price but underperformed U.S. stock indices for the second consecutive day. 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 finally bounced. Small Cap Relative Strength turned up after falling to new lows on 12/4/07. 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 reversed upward to a 3-day high after first falling to a new 6-week low. The short-term trend seems questionable. Watch to see if the day’s 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 appear to have entered a correction since their 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 recovered weakly after moving steadily down since 11/23/07. 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 Bonds prices broke down below 12-day lows. A correction appears to be underway since the price peak on 11/26/07. 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 broke out to a new 5-week high but reversed to close slightly lower. The short-term trend is still up. 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”.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
3.71% Paper
3.68% Broker Dealers
3.29% REITs
3.25% Commodity Related
3.23% Oil Services
2.84% Financial
2.78% Russell 2000
2.78% S&P Small Caps
2.57% Disk Drives
2.52% Brazil
2.51% Natural Gas
2.40% Energy
2.26% Value Line
2.26% Oil
2.24% Dow Transports
2.20% AMEX Composite
2.05% S&P Mid Caps
2.02% Gold Mining
1.98% Biotechs
1.91% Australia
1.90% Banks
1.85% Mexico
1.78% Insurance
1.70% Semiconductors
1.70% Austria
1.70% Malaysia
1.69% Hospitals
1.66% Airlines
1.63% Russell 3000
1.60% Nasdaq Composite
1.60% Wilshire 5000
1.60% Materials
1.55% Hardware
1.55% South Korea
1.54% Computer Tech
1.53% Russell 1000
1.50% S&P 500
1.49% Belgium
1.47% Chemicals
1.44% NYSE Composite
1.41% S&P 100
1.40% Sweden
1.35% Nasdaq 100
1.35% Netherlands
1.34% Internet
1.34% DOT
1.33% France
1.30% Dow Industrial
1.28% Network
1.27% Japan
1.25% Dow Composite
1.16% Singapore
1.14% Industrial
1.04% Canada
1.02% Technology
0.97% Hong Kong
0.93% Italy
0.89% Germany
0.87% Consumer Discretionary
0.70% Switzerland
0.68% Health Care
0.50% Health Care
0.42% Australian Dollar
0.34% Health Care Products
0.31% Taiwan
0.30% Canadian Dollar
0.23% United Kingdom
0.15% Spain
0.12% Drugs
0.07% Retailers
0.06% Euro Index
0.00% British Pound
-0.03% Consumer Staples
-0.13% US Dollar Index
-0.19% Dow Utilities
-0.27% Swiss Franc
-0.59% Utilities
-0.72% Japanese Yen
-0.90% 30Y T-Bond
