By Robert W. Colby, Senior Analyst TraderPlanet.com
Seeing a lot of red on Valentine’s Day.
All major indexes fell.
Technology, Financial, and Industrial Stock Sectors were weakest, down 1.98% to 1.49%.
These Sectors are sensitive to a deteriorating economic outlook.
CRB commodity price index soared to a new all-time high, suggesting inflation.
In the news, Fed Chairman Bernanke told the Senate Banking Committee that the U.S. may be nearing a recession. He emphasized downside risks and suggested that financial companies may face further write-downs. Also, major bond insurer FGIC lost its AAA rating, and some fear that could precede a wider wave of downgrades and write-downs ahead in the not-too-distant future.
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, and it is to late to do anything about them. On the other hand, some days, there still seems to be hope that the government or somebody (PLEASE!) might come up with an effective solution to the ongoing financial crisis. The markets vacillate back and forth between these opposing points of view day to day, depending on the news and rumors of the day, which leak out bit by bit seemingly at random. This makes for a high-risk environment for stock trading, both for longs and for shorts. You don’t know what will hit next.
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
12.38% , ABK , AMBAC FINL GRP
7.39% , GT , GOODYEAR TIRE
6.12% , WPI , WATSON PHARM
4.36% , CTL , CENTURYTEL
10.12% , CAR , Avis Budget Group, Inc. (CAR)
8.03% , CMCSA , COMCAST HOLDINGS STK A
2.17% , CCU , CLEAR CHANNEL
8.42% , MBI , MBIA
2.02% , DBC , Commodity Tracking, DBC
2.81% , AW , ALLIED WASTE IND
4.78% , NYT , NY TIMES STK A
2.59% , STLD , Steel Dynamics, STLD
1.47% , MYY , Short 100% MidCap 400, MYY
2.28% , OXY , OCCIDENTAL
0.85% , HSIC , Henry Schein Inc
1.21% , XMSR , XM Satellite R
0.89% , SH , Short 100% S&P 500, SH
2.00% , MIL , MILLIPORE
0.64% , ITF , Japan LargeCap Blend TOPIX 150, ITF
0.69% , ITT , ITT INDS
1.23% , BJS , BJ SERVICES
1.30% , NUE , NUCOR
2.23% , USO , Oil, Crude, U.S. Oil Fund, USO
0.65% , DOG , Short 100% Dow 30, DOG
0.95% , EWY , South Korea Index, EWY
0.52% , BCR , C R BARD
0.49% , EWS , Singapore Index, EWS
0.24% , EZA , South Africa Index, EZA
0.98% , SDS , Short 200% S&P 500 PS, SDS
2.27% , EWT , Taiwan Index, EWT
0.23% , WOR , WORTHINGTON INDS
0.61% , DVN , DEVON ENERGY
0.45% , VPL , Pacific VIPERs, VPL
0.99% , EWJ , Japan Index, EWJ
0.54% , IGT , INTL GAME TECH
0.27% , UST , UST
0.19% , IAU , Gold COMEX iS, IAU
0.27% , EWA , Australia Index, EWA
0.10% , VDE , Energy VIPERs, VDE
0.15% , IXC , Energy Global, IXC
0.74% , MCK , MCKESSON CORP
0.18% , HES , AMERADA HESS
0.30% , EP , EL PASO
0.31% , SIRI , Sirius Satellite
0.22% , MRO , MARATHON OIL
0.09% , BDX , BECTON DICKINSON
0.04% , IYE , Energy DJ, IYE
0.08% , EWL , Switzerland Index, EWL
0.03% , PDCO , Patterson Dental Company
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-18.37% , LIZ , LIZ CLAIRBORNE
-1.72% , FDL , Dividend Leaders, FDL
-3.04% , RZV , Value SmallCap S&P 600, RZV
-3.38% , IGW , Semiconductor iS GS, IGW
-16.32% , NVDA , NVIDIA
-2.18% , XSD , Semiconductor SPDR, XSD
-2.02% , PXQ , Networking, PXQ
-0.81% , PIC , Insurance, PIC
-0.96% , XLG , LargeCap Rydex Rus Top 50, XLG
-2.39% , IYG , Financial Services DJ, IYG
-1.16% , PHJ , Dividend Growth PS, PHJ
-1.02% , UTH , Utilities H, UTH
-1.00% , VDC , Consumer Staples VIPERs, VDC
-7.49% , APOL , APOLLO GROUP
-0.62% , FPX , IPOs, First Tr IPOX-100, FPX
-1.21% , KLD , LargeCap Blend Socially Responsible iS, KLD
-8.93% , LVLT , LEVEL 3 COMMUNICATIONS
-3.56% , SSCC , Smurfit-Stone Container Corporation
-1.06% , VV , LargeCap VIPERs, VV
-5.46% , NIHD , NII Holdings, Inc.
-6.55% , FLEX , Flextronics International Ltd
-2.26% , PWO , OTC Dynamic PS, PWO
-1.25% , ISI , LargeCap Blend S&P 1500 iS, ISI
-1.73% , DSV , Value Small Cap DJ, DSV
-8.05% , OMX , OFFICEMAX INC., OMX
-1.33% , VO , MidCap VIPERs, VO
-4.21% , NVLS , NOVELLUS SYS
-0.91% , ADRU , Europe 100 BLDRS, ADRU
-1.30% , JKL , Value SmallCap iS M, JKL
-1.28% , EWI , Italy Index, EWI
-2.76% , PMR , Retail, PMR
-1.14% , IOO , Global 100, IOO
-1.77% , VB , Small Cap VIPERs, VB
-1.40% , JKI , Value MidCap iS M, JKI
-3.19% , RYAAY , Ryanair Holdings plc
-2.77% , SRCL , Stericycle, SRCL
-0.98% , RPG , Growth S&P 500, RPG
-3.97% , WB , WACHOVIA
-1.23% , IYY , LargeCap Blend Total Market DJ, IYY
-2.07% , VOX , Telecom Services VIPERs, VOX
-1.09% , PPA , Aerospace & Defense, PPA
-1.82% , DSG , Growth Small Cap DJ, DSG
-2.75% , MVV , Ultra MidCap400 Double, MVV
-3.55% , SBUX , STARBUCKS
-2.39% , IWN , Value SmallCap Russell 2000, IWN
-3.87% , SPLS , STAPLES
-1.67% , JKH , MidCap Growth iS M, JKH
-1.25% , ELV , Value Large Cap DJ, ELV
-2.20% , WFMI , Whole Foods Market Inc
-1.28% , IWV , LargeCap Blend Russell 3000, IWV
Sectors: among the 9 major U.S. sectors, all 9 fell.
Major Sectors Ranked for the Day
% Price Change Sector
-0.42% Health Care
-0.51% Consumer Staples
-0.86% Energy
-0.96% Consumer Discretionary
-1.26% Utilities
-1.28% Materials
-1.49% Industrial
-1.93% Financial
-1.98% Technology
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 popped up to a new 5-week high. The short-term trend is up. Oil could test resistance at the high of 99.77 set on 1/3/08. 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 firmed up, after losing downside momentum. The main trend is still Bullish.
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. Clearly, this seems odd in light of rising commodity prices.
U.S. Treasury Bond prices plunged to a new 6-week low within their ongoing downtrend. Bonds generally have been 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 resumed its 5-day downtrend, which still appears relatively moderate. The trend since late November appears choppy and sideways. 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 25.54, 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 26.52, 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.
CBOE Put/Call Ratio is 0.74, which indicates moderately Bearish sentiment. Its 4-year simple moving average and median are 0.62, and its 4- year range is 0.35 to 1.28.
ISEE Call/Put Ratio is 0.88, 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.
0.99% Japan
0.96% Australian Dollar
0.95% South Korea
0.93% Swiss Franc
0.49% Singapore
0.39% Euro Index
0.27% Australia
0.26% British Pound
0.25% Oil
0.16% Japanese Yen
0.08% Switzerland
-0.18% Chemicals
-0.27% Belgium
-0.27% Canadian Dollar
-0.31% US Dollar Index
-0.42% Health Care
-0.49% AMEX Composite
-0.51% Consumer Staples
-0.52% Spain
-0.57% France
-0.61% Austria
-0.61% Sweden
-0.65% Natural Gas
-0.76% Commodity Related
-0.80% Germany
-0.81% Canada
-0.86% Energy
-0.87% United Kingdom
-0.95% Oil Services
-0.96% Consumer Discretionary
-0.97% Mexico
-1.04% Dow Utilities
-1.05% Biotechs
-1.16% NYSE Composite
-1.17% Netherlands
-1.24% Health Care Products
-1.26% Utilities
-1.28% Materials
-1.28% Italy
-1.31% Health Care
-1.33% S&P 100
-1.33% Russell 1000
-1.34% S&P 500
-1.34% Dow Composite
-1.35% Wilshire 5000
-1.40% Dow Industrial
-1.40% 30Y T-Bond
-1.41% Russell 3000
-1.43% Gold Mining
-1.44% Dow Transports
-1.46% Drugs
-1.49% Industrial
-1.58% S&P Mid Caps
-1.60% Insurance
-1.65% Internet
-1.74% Nasdaq Composite
-1.78% Broker Dealers
-1.80% Value Line
-1.84% Computer Tech
-1.88% Hong Kong
-1.92% Malaysia
-1.93% Financial
-1.94% Nasdaq 100
-1.98% Technology
-2.06% Hospitals
-2.12% REITs
-2.13% Brazil
-2.15% S&P Small Caps
-2.16% DOT
-2.24% Banks
-2.29% Hardware
-2.30% Russell 2000
-2.58% Network
-2.81% Semiconductors
-2.84% Retailers
-3.04% Paper
-3.37% Disk Drives
-3.93% Airlines
