By Robert W. Colby, Senior Analyst TraderPlanet.com
Stocks fell below 2-day lows but showed some resilience by the close.
Financial stocks rebounded but remain weakest Sector long term.
The stocks beat down the most often rebound the most during temporary Bear Market rallies…only to fall hard again when the main trend resumes.
In the afternoon, stocks rose to recover nearly all of the morning’s loss and closed near their highs of the day, thereby demonstrating some resilience. But still, market internals, breadth, up/down volume, and New Highs/Lows finished in the red.
Volume on the NYSE fell 2%. It was the third consecutive day of less active trading, and that suggests 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, and it is to late to do much about them. On the other hand, on some days at least, 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
5.51% , BSC , BEAR STEARNS
6.13% , CPB , CAMPBELL SOUP
5.20% , HNZ , HJ HEINZ
5.36% , AW , ALLIED WASTE IND
5.72% , HANS , Hansen Natural, HANS
5.71% , CI , CIGNA
3.18% , CIEN.O , CIENA
3.23% , CAG , CONAGRA FOODS
7.37% , CCU , CLEAR CHANNEL
2.19% , ETFC.O , E*TRADE FINANCIAL
3.29% , AET , AETNA
2.59% , EWS , Singapore Index, EWS
2.91% , EXPD , Expeditors International WA
3.25% , QCOM , QUALCOMM
1.20% , CBS , CBS CORP.
0.71% , DISCA , Discovery Holding Co.
0.92% , CVX , CHEVRONTEXACO
1.91% , BSX , BOSTON SCIENT
2.66% , HIG , HARTFORD FINL
2.12% , MDT , MEDTRONIC
2.12% , MKC , MCCORMICK
1.58% , PPL , PPL
1.91% , FITB , FIFTH THIRD BANC
1.21% , EQR , EQUITY RESIDENT BEN INT
1.27% , GRMN , GARMIN LTD
0.89% , DTE , DTE ENERGY
1.01% , HSY , HERSHEY FOODS
1.16% , VPL , Pacific VIPERs, VPL
2.05% , PGJ , China LargeCap Growth G D H USX PS, PGJ
2.50% , HBAN , HUNTINGTON
0.52% , VIA.B , VIACOM STK B
0.35% , ELV , Value Large Cap DJ, ELV
1.60% , PBG , PEPSI BOTTLING
1.08% , RX , IMS HEALTH
0.37% , IWW , Value LargeCap Russell 3000, IWW
2.64% , GNW , GENWORTH FINANCIAL (NYSE:GNW)
1.67% , TMK , TORCHMARK
0.53% , XTO , XTO ENERGY INC
1.96% , EDS , ELECTR DATA
0.96% , THC , TENET HEALTHCARE
1.68% , LLY , ELI LILLY
2.52% , SANM , SANMINA
0.26% , VHT , Health Care VIPERs, VHT
1.69% , K , KELLOGG
1.54% , FPL , FPL GROUP INC
0.14% , AEP , AM ELEC POWER
1.34% , MRK , MERCK & CO
0.49% , PPH , Pharmaceutical H, PPH
1.52% , EWA , Australia Index, EWA
0.40% , IYK , Consumer Non-Cyclical, IYK
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-0.90% , RFG , Growth MidCap S&P 400, RFG
-2.56% , HON , HONEYWELL INTL
-2.51% , BBY , BEST BUY
-0.59% , RPG , Growth S&P 500, RPG
-3.87% , NCR , NCR
-4.96% , CC , CIRCUIT CITY STR
-6.42% , LVLT , LEVEL 3 COMMUNICATIONS
-0.74% , PSJ , Software, PSJ
-1.93% , LAMR , Lamar Advertising Company
-3.60% , XHB , Homebuilders SPDR, XHB
-4.16% , WFMI , Whole Foods Market Inc
-1.67% , XRAY , DENTSPLY International Inc
-3.75% , AMZN , Amazoncom Inc
-3.03% , LEN , Lennar Corp. (LEN)
-3.13% , FNM , FANNIE MAE
-2.00% , MOT , MOTOROLA
-2.65% , SNDK , SanDisk Corporation
-4.59% , CTX , CENTEX
-1.42% , MAT , MATTEL
-1.27% , AXP , AMERICAN EXPRESS
-0.75% , RZV , Value SmallCap S&P 600, RZV
-1.79% , PETM , PETsMART Inc
-1.58% , DD , DU PONT
-0.59% , MTK , Technology MS sT, MTK
-0.67% , XME , Metals & Mining SPDR, XME
-1.00% , PZI , Micro Cap Zachs, PZI
-0.44% , DSG , Growth Small Cap DJ, DSG
-1.25% , LMT , LOCKHEED MARTIN
-1.40% , PWT , Growth SmallCap Dynamic PS, PWT
-2.49% , KBH , KB HOME
-1.63% , PHO , Water Resources, PHO
-2.15% , SRCL , Stericycle, SRCL
-0.89% , LM , LEGG MASON
-0.58% , SNV , SYNOVUS
-2.41% , GLW , CORNING
-3.89% , VC , VISTEON
-1.73% , PTV , PACTIV
-0.22% , MO , ALTRIA GROUP
-0.52% , VOX , Telecom Services VIPERs, VOX
-2.21% , BBBY , BED BATH BEYOND
-1.24% , S , SPRINT NEXTEL
-1.54% , UTX , UNITED TECH
-1.80% , ETN , EATON
-1.06% , WMT , WAL MART STORES
-2.33% , NSM , NATL SEMICONDUCT
-1.62% , BAX , BAXTER INTL
-1.24% , IGN , Networking, IGN
-0.66% , VLO , VALERO ENERGY
-0.99% , IWC , Microcap Russell, IWC
-3.02% , URBN , Urban Outfitters Inc.
Sectors: among the 9 major U.S. sectors, 7 rose and 2 fell.
Major Sectors Ranked for the Day
% Price Change Sector
1.59% Financial
1.40% Utilities
0.62% Materials
0.53% Consumer Discretionary
0.44% Consumer Staples
0.18% Energy
0.09% Health Care
-0.35% Technology
-0.62% Industrial
Energy (XLE) Neutral, Market Weight. On 1/3/08, the XLE/SPY Relative Strength Ratio rose to new all-time high, confirming a major uptrend.
Materials (XLB) Neutral, Market Weight. On 2/12/08, the XLB/SPY Relative Strength Ratio rose to a new all-time high, confirming a major uptrend.
Utilities (XLU) Neutral, Market Weight. On 1/9/08, the XLU/SPY Relative Strength Ratio rose to new all-time high, confirming a major uptrend.
Consumer Staples (XLP) Neutral, Market Weight. On 1/17/08, the XLP/SPY Relative Strength Ratio rose to new 3-year high, confirming a major uptrend.
Industrial (XLI) Neutral, Market Weight. On 2/13/08, the XLI/SPY Relative Strength Ratio made a new all-time high, confirming a major uptrend.
Health Care (XLV) Neutral, Market Weight. On 1/17/08, the XLV/SPY Relative Strength Ratio rose to new 2-year high, confirming a significant uptrend.
Consumer Discretionary (XLY) Bearish, Underweight. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to a new 6-year low, confirming a major downtrend.
Technology (XLK) Bearish, Underweight. On 2/8/08, the XLK/SPY Relative Strength Ratio fell to a new 7-month low, confirming a significant downtrend.
Financial (XLF) Bearish, Underweight. On 1/8/08, the XLF/SPY Relative Strength Ratio fell to a new 7-year low, confirming a major downtrend.
Foreign stock indexes turned up in recent days but 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, confirming a significant downtrend.
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 recovered of its January loss, then reversed to close below the midpoint of the day’s range. Friday may have been a pivotal day, and now the short-term trend may be questionable. Watch for resistance at the high of 96.67 set on 2/15/08 and 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 reversed to the downside with an Outside Day Reversal, but the main trend is still Bullish.
Silver’s main trend is Bearish compared to Gold. The iShares Silver Trust (AMEX: SLV) has outperformed Gold 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 28 years, since 1/2/80, Silver has underperformed Gold. So long term, Silver is tarnished.
The Gold Miners ETF (GDX) has underperformed Gold futures significantly since 10/31/07. GDX is Bearish relative to Gold itself.
Inflation expectations 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 consolidated with an Inside Day 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 slowed its downside momentum. Its 6-day downtrend has been relatively moderate, resembling a normal price pullback. The intermediate-term trend since late November appears choppy and sideways. On 1/30/08, the dollar reversed to the upside, hitting a low 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 toward pessimism as stock prices moved lower. But sentiment is not yet at 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 25.02, 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 26.69, 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 0.80, 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.
2.59% Singapore
2.18% Hong Kong
2.03% Airlines
1.59% Financial
1.52% Australia
1.40% Utilities
1.37% 30Y T-Bond
1.22% Japan
1.02% Hospitals
1.01% Broker Dealers
1.01% Sweden
0.88% REITs
0.76% Banks
0.62% Materials
0.60% Insurance
0.53% Consumer Discretionary
0.48% Swiss Franc
0.45% Health Care
0.45% Drugs
0.44% Consumer Staples
0.37% Italy
0.34% Commodity Related
0.32% Dow Utilities
0.32% Japanese Yen
0.31% Biotechs
0.29% Australian Dollar
0.28% Internet
0.25% Gold Mining
0.18% Energy
0.18% Euro Index
0.15% Netherlands
0.13% Health Care Products
0.12% S&P 100
0.09% Health Care
0.08% S&P 500
0.06% Russell 1000
0.06% Brazil
0.03% NYSE Composite
0.01% Russell 3000
-0.02% Wilshire 5000
-0.03% France
-0.07% Dow Transports
-0.07% Dow Composite
-0.08% Oil Services
-0.12% Austria
-0.15% US Dollar Index
-0.16% Retailers
-0.18% Spain
-0.23% Dow Industrial
-0.24% South Korea
-0.25% S&P Mid Caps
-0.25% Chemicals
-0.29% Germany
-0.30% Malaysia
-0.31% Value Line
-0.35% Technology
-0.35% Taiwan
-0.37% Oil
-0.40% Nasdaq 100
-0.42% DOT
-0.46% Nasdaq Composite
-0.46% United Kingdom
-0.54% Russell 2000
-0.54% Network
-0.57% Computer Tech
-0.57% Hardware
-0.57% British Pound
-0.58% S&P Small Caps
-0.62% Industrial
-0.62% Belgium
-0.65% Canada
-0.68% Canadian Dollar
-0.71% Natural Gas
-0.82% AMEX Composite
-0.83% Switzerland
-1.05% Disk Drives
-1.51% Mexico
-1.55% Paper
-1.61% Semiconductors
