By Robert W. Colby, Senior Analyst TraderPlanet.com
Stock price momentum turned down.
Lower volume suggests waning demand for stocks.
Gold and the CRB commodity price index jumped up to new all-time price highs, again confirming major uptrends.
On Thursday, major stock price indexes gapped higher on the open on news of a drop in weekly jobless claims. But stocks fell after the 10:00 a.m. news of a sharp drop in the Philadelphia Manufacturing Index. Stock prices never recovered from that blow, and they continued to work their way lower most of the session, closing in the lower third of the day’s range. Volume on the NYSE fell by 5%, reflecting waning demand for stocks.
The market certainly appears 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
8.97% , RIMM , RESEARCH IN MOTION LTD
3.35% , PFG , PRINCIPAL FINL
2.45% , PWER , POWER ONE
1.79% , EWT , Taiwan Index, EWT
2.54% , FLR , FLUOR
2.13% , SNPS , Synopsys Inc
2.46% , LPX , LOUISIANA PAC
1.11% , PDCO , Patterson Dental Company
1.71% , PMCS , PMC SIERRA
1.77% , QLGC , QLOGIC
3.28% , ADI , ANALOG DEVICES
2.74% , SHW , SHERWIN WILLIAMS
0.77% , MWV , MEADWESTVACO
1.06% , TLT , Bond, 20+ Years Treasury, TLT
1.61% , CPB , CAMPBELL SOUP
1.22% , WAG , WALGREEN
0.69% , LQD , Bond, Corp, LQD
1.37% , SNDK , SanDisk Corporation
0.45% , DTE , DTE ENERGY
1.46% , ADSK , AUTODESK
0.59% , ITF , Japan LargeCap Blend TOPIX 150, ITF
0.62% , MO , ALTRIA GROUP
0.54% , FCX , FREEPRT MCMORAN STK B
1.90% , AMD , ADV MICRO DEV
0.59% , DGT , Global Titans, DGT
1.08% , ETN , EATON
0.85% , ABI , Applera Corp-Applied Biosystems Group (ABI)
0.18% , ADM , ARCHER DANIELS
0.82% , AGG , Bond, Aggregate, AGG
0.64% , COST , COSTCO WHOLESAL
0.56% , PSQ , Short 100% QQQ, PSQ
1.51% , KLAC , KLA TENCOR
0.32% , CLX , CLOROX
0.17% , JCP , JC PENNEY
0.31% , PHO , Water Resources, PHO
0.09% , AW , ALLIED WASTE IND
0.37% , XLP , Consumer Staples SPDR, XLP
0.25% , A , AGILENT TECH
3.72% , HMA , HEALTH MGMT STK A
1.76% , DXD , Short 200% Dow 30 PS, DXD
0.14% , IXN , Technology Global, IXN
0.96% , UIS , UNISYS
0.10% , EFG , Growth EAFE MSCI, EFG
0.06% , EFX , EQUIFAX
0.49% , PPG , PPG INDUSTRIES
0.16% , SNA , SNAP ON
0.01% , GLD , Gold Shares S.T., GLD
0.18% , WMT , WAL MART STORES
0.29% , WFC , WELLS FARGO
0.02% , TMK , TORCHMARK
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-10.23% , CECO , CAREER EDUCATION CORP
-2.15% , EWO , Austria Index, EWO
-7.38% , DGX , QUEST DIAG
-7.14% , SWY , SAFEWAY
-8.63% , APOL , APOLLO GROUP
-3.40% , EWM , Malaysia Index, EWM
-2.14% , HHH , Internet H, HHH
-5.08% , AMZN , Amazoncom Inc
-3.75% , HOLX , Hologic, Inc., HOLX
-2.13% , RRD , RR DONNELLEY SON
-1.21% , PJP , Pharmaceuticals, PJP
-2.81% , F , FORD MOTOR
-5.20% , DLX , DELUXE
-1.67% , PXQ , Networking, PXQ
-1.67% , PXN , Nanotech Lux, PXN
-4.86% , GM , GENERAL MOTORS
-5.51% , MU , MICRON TECH
-1.22% , ISI , LargeCap Blend S&P 1500 iS, ISI
-6.26% , CAR , Avis Budget Group, Inc. (CAR)
-1.52% , TDC , Teradata Corporation, TDC
-3.76% , KR , KROGER
-2.68% , ABC , AMERISOURCEBERGN
-1.30% , IWB , LargeCap 1000 R, IWB
-0.80% , CVG , CONVERGYS
-1.93% , LMT , LOCKHEED MARTIN
-1.49% , RPG , Growth S&P 500, RPG
-4.36% , PETM , PETsMART Inc
-3.82% , TGT , TARGET
-2.97% , PH , PARKER HANNIFIN
-3.02% , CTB , COOPER TIRE
-1.00% , TMW , Wilshire 5000 ST TM, TMW
-0.94% , PFM , Dividend Achievers PS, PFM
-3.66% , GILD , Gilead Sciences Inc
-2.23% , RWR , REIT Wilshire, RWR
-2.51% , USO , Oil, Crude, U.S. Oil Fund, USO
-3.87% , FXI , China 25 iS, FXI
-2.74% , XLE , Energy SPDR, XLE
-1.00% , NY , Value LargeCap NYSE 100 iS, NY
-2.78% , ORCL , ORACLE
-2.46% , PKI , PERKINELMER
-4.68% , RYAAY , Ryanair Holdings plc
-4.99% , STI , SUNTRUST BANKS
-1.46% , SPG , SIMON PROP GRP
-1.03% , EWK , Belgium Index, EWK
-4.26% , X , US STEEL CORP
-2.83% , XMSR , XM Satellite R
-1.71% , PWY , Value SmallCap Dynamic PS, PWY
-4.02% , OXY , OCCIDENTAL
-3.23% , CC , CIRCUIT CITY STR
-3.46% , EWH , Hong Kong Index, EWH
Sectors: among the 9 major U.S. sectors, 1 rose and 8 fell .
Major Sectors Ranked for the Day
% Price Change Sector
0.37% Consumer Staples
-0.18% Technology
-0.78% Industrial
-1.04% Health Care
-1.35% Materials
-1.48% Financial
-2.20% Utilities
-2.38% Consumer Discretionary
-2.74% Energy
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
Energy (XLE) Neutral, Market Weight. On 2/20/08, the XLE/SPY Relative Strength Ratio rose to new all-time high, confirming a major uptrend.
Materials (XLB) Neutral, Market Weight. On 2/20/08, the XLB/SPY Relative Strength Ratio rose to a 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.
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.
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.
Technology (XLK) Bearish, Underweight. On 2/20/08, the XLK/SPY Relative Strength Ratio fell to a new 8-month low, confirming a significant downtrend.
Consumer Discretionary (XLY) Bearish, Underweight. On 2/21/08, the XLY/SPY Relative Strength Ratio fell to a new 3-week low, suggesting short-term weakness. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to a new 6-year low, confirming a major 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 2/19/08, Relative Strength fell to a new 8-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 may be finding resistance just above 100. On 2/20/08, the April futures contract price hit 100.86 intraday but closed at 99.70. Although the major trend is up, big round numbers such as 100 sometimes function as resistance. 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 (April futures contract) jumped up to another new all-time high, thereby confirming once again that Gold’s main trend remains 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.
U.S. Treasury Bond prices rebounded sharply higher to close above the highest highs of the previous 4 trading days. 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 dropped sharply lower, below the lowest lows of the previous 11 trading days. The short-term trend is down, and the intermediate-term trend since late November appears choppy and sideways. November and January price lows at 74.50 and 74.66 might be watched for potential support. 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 rose last week. According to the weekly Investors Intelligence newsletter survey as of 2/22/08, there were 41.6% Bulls and 33.7% Bears. The ratio of Bullish advisors to Bearish advisors rose to 1.23, up from 1.03 to 1 the previous week. Still, 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 25.12, 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 26.92, 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 0.70, 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.
1.16% 30Y T-Bond
0.99% Swiss Franc
0.96% British Pound
0.79% Switzerland
0.75% Euro Index
0.74% Japanese Yen
0.73% Japan
0.53% Gold Mining
0.37% Consumer Staples
0.19% Canadian Dollar
0.16% Australian Dollar
0.05% United Kingdom
0.03% Disk Drives
-0.06% Canada
-0.07% Brazil
-0.15% Netherlands
-0.18% Technology
-0.22% DOT
-0.26% Australia
-0.27% AMEX Composite
-0.28% Semiconductors
-0.43% Spain
-0.44% Paper
-0.48% Drugs
-0.48% France
-0.70% US Dollar Index
-0.73% Mexico
-0.73% Sweden
-0.76% Internet
-0.78% Industrial
-0.85% Network
-0.89% Health Care Products
-0.90% Hardware
-0.99% Computer Tech
-0.99% Germany
-1.03% Belgium
-1.04% Health Care
-1.04% Singapore
-1.05% Dow Transports
-1.06% NYSE Composite
-1.10% Health Care
-1.11% S&P 100
-1.15% Dow Industrial
-1.17% Nasdaq Composite
-1.18% Nasdaq 100
-1.21% Dow Composite
-1.23% South Korea
-1.28% Russell 1000
-1.29% S&P 500
-1.31% Commodity Related
-1.32% Wilshire 5000
-1.33% S&P Mid Caps
-1.33% Russell 3000
-1.35% Materials
-1.38% Insurance
-1.41% Broker Dealers
-1.44% Italy
-1.46% Value Line
-1.48% Financial
-1.54% Biotechs
-1.62% Dow Utilities
-1.77% S&P Small Caps
-1.79% Chemicals
-1.85% Hospitals
-1.88% Retailers
-1.90% Banks
-1.94% Russell 2000
-1.96% Oil
-2.15% Austria
-2.20% Utilities
-2.22% REITs
-2.25% Natural Gas
-2.38% Consumer Discretionary
-2.41% Airlines
-2.74% Energy
-2.82% Oil Services
-3.40% Malaysia
-3.46% Hong Kong
