By Robert W. Colby, Senior Analyst TraderPlanet.com
Energy led rally, but Financial fell.
Among the 9 major U.S. Stock Sectors, 4 rose and 5 fell.
Energy Stock Sector Price (up 2.43%) and Relative Strength made new 1-month highs.
Financial Stock Sector was weakest (down 1.17%), as it has been so much of the time over the past year.
Financial seems to be the critical sector at this juncture.
On Wednesday, major stock price indexes gapped higher on the open on news that retail sales were better than expected. Prices turned choppy after the open but managed to close above their open, midpoint, and previous close. Volume on the NYSE fell 5%, indicating waning demand for stocks.
The market certainly seems to be quite reactive to the news of the day. In the longer-term picture, major underlying technical trends remain Bearish for stocks. In addition, most of the data seems to indicate that underlying fundamental trends may be deteriorating. There has been a sense that big problems are already baked into the cake, in the pipeline. On the other hand, there is hope that the government or somebody might come up with a solution to the ongoing financial crisis. For stock trading, it appears to be a high-risk environment, both for longs and for shorts.
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
8.30% , BHH , Internet B2B H, BHH
11.00% , JNY , JONES APPAREL
1.32% , PXN , Nanotech Lux, PXN
2.21% , EWN , Netherlands Index, EWN
1.17% , IWW , Value LargeCap Russell 3000, IWW
1.30% , IWB , LargeCap 1000 R, IWB
10.18% , AMAT , APPLIED MATERIAL
6.03% , AA , ALCOA
5.70% , PTEN , Patterson-UTI Energy Inc
3.63% , KSU , Kansas City Southern, KSU
6.01% , ROK , ROCKWELL AUTOMAT
3.83% , DISH , EchoStar Communications Corporation
2.24% , PSJ , Software, PSJ
2.44% , IGM , Technology GS, IGM
3.37% , CMCSA , COMCAST HOLDINGS STK A
6.56% , PBW , WilderHill Clean Energy PS, PBW
7.01% , NTAP , NETWK APPLIANCE
4.40% , PH , PARKER HANNIFIN
5.10% , CZN , CITIZENS COMMS STK B
1.05% , IWS , Value MidCap Russell, IWS
4.43% , BIIB , BIOGEN IDEC
2.74% , XSD , Semiconductor SPDR, XSD
3.84% , CC , CIRCUIT CITY STR
1.81% , EWM , Malaysia Index, EWM
2.76% , PWT , Growth SmallCap Dynamic PS, PWT
3.65% , IGN , Networking, IGN
4.76% , INTU , INTUIT
3.16% , NOVL , NOVELL
2.87% , RHI , ROBERT HALF
4.08% , LIZ , LIZ CLAIRBORNE
1.51% , VXF , Extended Mkt VIPERs, VXF
2.51% , LUV , SOUTHWEST AIRLS
3.26% , SNPS , Synopsys Inc
2.61% , A , AGILENT TECH
2.97% , PFG , PRINCIPAL FINL
4.51% , LRCX , LAM RESEARCH CORP
2.93% , VZ , VERIZON COMMS
1.52% , JKD , LargeCap Blend Core iS M, JKD
1.30% , IPG , INTERPUBLIC GRP
3.61% , BDK , BLACK & DECKER
2.61% , CFC , COUNTRYWIDE FNCL
1.24% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
1.37% , EWP , Spain Index, EWP
3.93% , AXP , AMERICAN EXPRESS
1.23% , VCR , Consumer D. VIPERs, VCR
3.48% , FAST , Fastenal Company
3.07% , VMC , VULCAN MATERIALS
3.26% , PHW , Hardware & Electronics, PHW
2.29% , WWY , WM WRIGLEY JR
1.88% , NWL , NEWELL RUBBER
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-11.07% , MTG , MGIC INVESTMENT
-1.76% , CEPH , Cephalon Inc
-2.69% , UNH , UNITEDHEALTH GRP
-7.45% , WYNN , Wynn Resorts L
-1.62% , HUM , HUMANA
-2.61% , AET , AETNA
-1.92% , WLP , WELLPOINT HEALTH
-1.36% , MV , METAVANTE TECHNOLOGIES, MV
-1.85% , GENZ , GENZYME GEN
-4.56% , BF.B , BROWN FORMAN STK B
-2.30% , MAR , MARRIOTT INTL STK A
-2.80% , LPX , LOUISIANA PAC
-2.72% , TE , TECO ENERGY
-1.92% , OMX , OFFICEMAX INC., OMX
-0.91% , TIP , Bond, TIPS, TIP
-1.80% , EWA , Australia Index, EWA
-1.09% , DE , DEERE & CO
-1.03% , SPG , SIMON PROP GRP
-1.78% , XL , XL CAPITAL STK A
-0.91% , ABI , Applera Corp-Applied Biosystems Group (ABI)
-0.51% , CI , CIGNA
-1.51% , DOG , Short 100% Dow 30, DOG
-1.06% , TLT , Bond, 20+ Years Treasury, TLT
-1.07% , DTE , DTE ENERGY
-0.68% , BBY , BEST BUY
-1.33% , LLY , ELI LILLY
-0.37% , TIN , TEMPLE INLAND
-0.62% , NWS.A , NEWS CORP STK A
-0.88% , KO , COCA COLA
-0.48% , XLU , Utilities SPDR, XLU
-2.44% , PNW , PINNACLE WEST
-0.73% , EWJ , Japan Index, EWJ
-0.61% , CAG , CONAGRA FOODS
-0.32% , CPB , CAMPBELL SOUP
-0.19% , SO , SOUTHERN
-0.11% , SEE , SEALED AIR
-0.13% , AMP , Ameriprise Financial Inc.
-0.07% , SLE , SARA LEE
-0.47% , SHW , SHERWIN WILLIAMS
-0.76% , AOC , AON
-0.91% , PCL , PLUM CREEK TIMB
-0.92% , TIF , TIFFANY
-0.17% , MCK , MCKESSON CORP
-0.07% , ED , CON ED
-3.90% , QID , Short 200% QQQ PS, QID
-2.02% , CAR , Avis Budget Group, Inc. (CAR)
-0.24% , ROH , ROHM & HAAS
-0.14% , HSP , HOSPIRA
-0.30% , SRE , SEMPRA ENERGY
Sectors: among the 9 major U.S. sectors, 4 rose and 5 fell.
Major Sectors Ranked for the Day
% Price Change Sector
1.28% Consumer Discretionary
-0.15% Health Care
-0.47% Consumer Staples
Energy (XLE) Neutral, Market Weight. On 2/13/08, both Price and Relative Strength made new 1-month highs. XLE has been strong compared to the S&P since 3/12/03.
Materials (XLB) Neutral, Market Weight. The XLB/SPY Relative Strength Ratio made a new all-time high on 2/12/08. The long-term Relative Strength trend has strongly outperformed since 9/27/2000.
Consumer Staples (XLP) Neutral, Market Weight. Price touched a new 15-month low on 1/22/08. Price made a new all-time high on 12/10/07, and Relative Strength made a new 3-year high on 1/17/08.
Utilities (XLU) Neutral, Market Weight. Price touched a new 12-month low on 1/22/08. Relative Strength made a new all-time high on 1/9/08, and Price made a new all-time high on 12/10/07.
Industrial (XLI) Neutral, Market Weight. On 2/13/08, Relative Strength made a new all-time high.
Health Care (XLV) Neutral, Market Weight. Price touched a new 18-month low on 1/22/08. Relative Strength moved up to a new 26-month high on 1/17/08.
Technology (XLK) Bearish, Underweight. Price touched a new 17-month low on 1/22/08. On 2/8/08, Relative Strength fell to a new 7-month low. XLK/SPY has underperformed since 11/5/07.
Consumer Discretionary (XLY) Bearish, Underweight. Price touched a new 4-year low on 1/22/08. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to its lowest level in 6 years.
Financial (XLF) Bearish, Underweight. Price touched a new 4-year low on 1/22/08. On 1/8/08, Relative Strength fell to a new 7-year low. These confirmed a Bearish major trend.
Foreign stock indexes remain in downtrends. Relative Strength of EFA/SPY fell to a new 13-month low on 2/8/08. EFA price fell to a new 17-month low on 1/23/08. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) underperformed since 11/27/07.
NASDAQ Composite price remains Bearish. On 2/7/08, Relative Strength fell to a new 7-month low. Relative Strength underperformed the S&P since 11/7/07. On 1/23/08, price touched a new 15-month price low.
Growth Stock/Value Stock Relative Strength Ratio made a new 3-month low on 2/1/08 and has underperformed since the peak on 11/7/07. The Growth/Value ratio (IWF/IWD) appears to be in an intermediate-term correction phase.
The Small Cap/Large Cap Relative Strength Ratio broke down to a new 2.5-year low on 1/11/07. It has been trending down since 4/19/06. The main long-term trend is Relatively Bearish for Small Caps.
Crude Oil moved modestly higher within its short-term uptrend. Oil appears to have support near December’s low at 85.37. Resistance is evident at recent highs at 92.71 and 99.77. 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 underperformed Crude Oil since 12/10/07.
Gold eased slightly lower, losing downside momentum, and closed in the upper third of its range.
Silver’s main trend is Bearish compared to Gold. The iShares Silver Trust (AMEX: SLV) has outperformed slightly since 12/14/07. But that is nothing compared to the long-term trend. Silver has been relatively weak compared to Gold since 12/7/06. In addition, for the past 27 years, since 1/2/80, Silver has underperformed Gold.
The Gold Miners ETF (GDX) has underperformed Gold futures significantly since 10/31/07. GDX is Bearish relative to Gold itself.
Inflation expectations fell sharply. They have been trending down since 1/30/08, based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bond prices fell again within their short-term downtrend. On Thursday, 2/7/08, prices fell below the lowest lows of the previous 5-weeks, signaling a downtrend for the short term. The major long-term trend may still be up. 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 rose slightly after falling moderately over the previous 3 days. On 2/7/08, the dollar broke out above the highs of the previous 11 trading-days, thereby confirming the preexisting short-term uptrend. On 1/30/08, the dollar reversed to the upside at a price of 74.66, which could be a critical support level. The main long-term trend remains Bearish.
The Art of Contrary Thinking: The mood has been moving away from optimism as stock prices move lower. Sentiment is far from a level associated with extreme pessimism. So, crowd psychology could get more Bearish before it is over. The business and financial news has flipped from Bearish to Bullish and back again. Investors’ moods and stock volatility have jumped up and down abruptly with the latest news. When everything shifts so dramatically from one day to the next, risk control becomes more important than aggressive profit seeking. Stay flexible.
Sentiment/Contrary Opinion: Bullish opinion is below normal. According to the weekly Investors Intelligence newsletter survey as of 2/13/08, there were 36.7% Bulls and 35.6% Bears. The ratio of Bullish advisors to Bearish advisors fell to 1.03 to 1, down from 1.28 to 1 the previous week. This is below its 38-year median at 1.47 to 1. The ratio’s 38-year range is 0.28 to 17.51.
VIX “Fear Index”, now at 24.88 and falling, is relatively normal by Bear Market standards (around 20 to 40) but relatively high by Bull Market standards (around 10 to 20). Longer term, VIX has been in a rising trend since it hit a 13-year low of 9.89 on 1/24/07. The all-time high was 45.74 on 10/8/98. 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”, now at 23.35 and falling, is relatively low by Bear Market standards (around 35 to 80) but relatively high by Bull Market standards (around 12 to 26). Longer term, VXN has been in a rising trend since it hit its all-time low of 12.61 on 7/29/05. The all-time high was 114.23 on 10/8/98. VXN measures Nasdaq Volatility using a method comparable to that used for VIX.
ISEE Call/Put Ratio is 0.72, which indicates Bearish sentiment. It is below its 4-year simple moving average at 1.50 and its 4-year median at 1.47. That means customers opened fewer long call options and more long put options than normal. Its 4-year range is 0.51 to 3.04.
Fundamentals: The 2003-2007 Bull Market was fed by abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and the net balance of positive earnings surprises. The unfolding fallout from the subprime credit market crisis has derailed that engine. Economic statistics and corporate earnings have been weakening.
The Primary Tide Major Trend turned Bearish, and that is a strong force. The Dow Theory confirmed a Primary Bear Market on 11/21/07 when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their respective closing price lows of August, 2007. On 11/7/07, the Transports closed below their 8/16/07 closing price low of 4,671.88. Then on 11/21/07, the Dow-Jones Industrial Average closed below its 8/16/07 closing price low of 12,845.78, thereby turning the Primary Tide Bearish.
4.25% Oil Services
2.75% Disk Drives
2.47% Computer Tech
2.38% Nasdaq 100
2.33% Russell 2000
2.32% Nasdaq Composite
2.05% S&P Small Caps
1.93% Commodity Related
1.76% Value Line
1.75% Natural Gas
1.57% Gold Mining
1.45% Dow Industrial
1.44% Wilshire 5000
1.43% Russell 3000
1.39% S&P 100
1.36% S&P 500
1.35% Russell 1000
1.29% AMEX Composite
1.28% Consumer Discretionary
1.27% S&P Mid Caps
1.22% Broker Dealers
1.22% Hong Kong
1.21% NYSE Composite
1.21% United Kingdom
1.03% Dow Composite
0.87% Dow Transports
0.84% Health Care Products
0.57% Health Care
0.44% Canadian Dollar
0.27% Dow Utilities
0.16% British Pound
0.08% US Dollar Index
-0.04% Euro Index
-0.15% Health Care
-0.21% South Korea
-0.37% 30Y T-Bond
-0.46% Swiss Franc
-0.47% Consumer Staples
-0.71% Japanese Yen
-1.05% Australian Dollar