By Robert W. Colby, Senior Analyst TraderPlanet.com
Falling demand for stocks.
A high-risk environment.
Technology Stock Sector Relative Strength fell to a new 7-month low.
The market seems to be quite reactive to the news of the day, and the news seems to change every day. In the longer-term picture, major underlying technical trends remain Bearish for stocks. In addition, underlying fundamental trends appear difficult, at best. There has been a sense that big problems are already baked into the cake, in the pipeline. Therefore, it appears to be a high-risk environment.
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
5.89% , DYN , DYNEGY
5.69% , NBR , NABORS
3.88% , BSX , BOSTON SCIENT
5.68% , MV , METAVANTE TECHNOLOGIES, MV
3.44% , HGSI , Human Genome Sciences Inc
3.64% , UST , UST
1.07% , PPH , Pharmaceutical H, PPH
2.14% , AEP , AM ELEC POWER
1.33% , PUI , Utilities, PUI
0.61% , PXJ , Oil & Gas, PXJ
0.39% , HHH , Internet H, HHH
1.23% , RX , IMS HEALTH
1.18% , CMS , CMS ENERGY
1.67% , VPU , Utilities VIPERs, VPU
0.24% , IXC , Energy Global, IXC
1.78% , AEE , AMEREN
1.30% , PKI , PERKINELMER
0.79% , PJP , Pharmaceuticals, PJP
1.85% , DUK , DUKE ENERGY
2.91% , HAL , HALLIBURTON
1.99% , NOVL , NOVELL
0.64% , PSQ , Short 100% QQQ, PSQ
0.13% , VOX , Telecom Services VIPERs, VOX
3.20% , KG , KING PHARM
2.00% , ETR , ENTERGY
2.48% , BIIB , BIOGEN IDEC
1.91% , TEVA , Teva Pharmaceutical Industries Limited
0.03% , EWI , Italy Index, EWI
1.93% , WOR , WORTHINGTON INDS
1.48% , AGN , ALLERGAN
4.17% , NE , NOBLE
1.18% , RDC , ROWAN COMPANIES
3.22% , R , RYDER SYSTEM
1.75% , DBC , Commodity Tracking, DBC
0.77% , AM , AMER GREETINGS STK A
0.34% , Q , QWEST COMMUNICAT
0.22% , IGE , Natural Resource iS GS, IGE
1.29% , OMC , OMNICOM
1.55% , SLE , SARA LEE
1.44% , XLU , Utilities SPDR, XLU
0.20% , PXN , Nanotech Lux, PXN
0.07% , IXJ , Healthcare Global, IXJ
1.18% , BDX , BECTON DICKINSON
0.16% , CBS , CBS CORP.
1.89% , SNPS , Synopsys Inc
0.39% , VDE , Energy VIPERs, VDE
0.21% , UNM , UNUMPROVIDENT
0.20% , CEPH , Cephalon Inc
0.72% , PCG , PG&E
1.54% , LMT , LOCKHEED MARTIN
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-2.72% , RPV , Value S&P 500, RPV
-11.59% , CAR , Avis Budget Group, Inc. (CAR)
-0.82% , IWZ , Growth LargeCap Russell 3000, IWZ
-8.28% , RYAAY , Ryanair Holdings plc
-0.83% , PZJ , SmallCap PS Zacks, PZJ
-0.88% , EZU , EMU Europe Index, EZU
-3.49% , HUM , HUMANA
-1.46% , EWL , Switzerland Index, EWL
-2.04% , PKB , Building & Construction, PKB
-6.14% , CCL , CARNIVAL STK A
-2.31% , EWA , Australia Index, EWA
-0.81% , PBJ , Food & Beverage, PBJ
-0.67% , PTE , Telecommunications & Wireless, PTE
-0.46% , EWD , Sweden Index, EWD
-8.96% , FDO , FAMILY DLR STRS
-4.49% , CSCO , CISCO SYSTEMS
-8.33% , WB , WACHOVIA
-1.02% , KLD , LargeCap Blend Socially Responsible iS, KLD
-5.49% , AN , AUTONATION
-7.88% , BIG , BIG LOTS
-1.50% , FEZ , Euro STOXX 50, FEZ
-1.50% , IYT , Transportation Av DJ, IYT
-5.07% , TIF , TIFFANY
-0.64% , PHW , Hardware & Electronics, PHW
-8.14% , KBH , KB HOME
-5.42% , JNY , JONES APPAREL
-0.99% , ELV , Value Large Cap DJ, ELV
-0.71% , EWN , Netherlands Index, EWN
-4.96% , WEN , WENDYS INTL
-1.02% , PID , Dividend International, PID
-0.92% , PXQ , Networking, PXQ
-0.56% , PZI , Micro Cap Zachs, PZI
-1.20% , EWK , Belgium Index, EWK
-1.21% , IWW , Value LargeCap Russell 3000, IWW
-0.92% , EWQ , France Index, EWQ
-0.45% , EWU , United Kingdom Index, EWU
-0.66% , PWC , LargeCap Blend Dynamic PS, PWC
-4.39% , VFC , VF
-0.80% , NYC , LargeCap Blend NYSE Composite iS, NYC
-0.76% , NY , Value LargeCap NYSE 100 iS, NY
-0.11% , RFG , Growth MidCap S&P 400, RFG
-3.26% , AMP , Ameriprise Financial Inc.
-6.38% , FHN , FIRST TENNESSEE
-0.85% , VIS , Industrials VIPERs, VIS
-1.38% , IYW , Technology DJ US, IYW
-2.26% , PEJ , Leisure & Entertainment, PEJ
-1.28% , SDY , Dividend SPDR, SDY
-1.02% , DSG , Growth Small Cap DJ, DSG
-3.46% , FITB , FIFTH THIRD BANC
-2.44% , TMO , THERMO ELECTRON
Sectors: among the 9 major U.S. sectors, 3 rose and 6 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
1.44% Utilities
0.35% Health Care
0.07% Energy
-0.62% Consumer Staples
-1.08% Industrial
-1.43% Consumer Discretionary
-1.56% Materials
-2.07% Technology
-2.90% Financial
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
Energy (XLE) Bullish, Overweight. Price hit a new 5-month low on 1/22/08. On 1/3/08, both XLE Price and Relative Strength made new all-time highs. XLE has been strong compared to the S&P since 3/12/03.
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.
Materials (XLB) Bullish, Overweight. Price touched a new 5-month low on 1/23/08. The XLB/SPY Relative Strength Ratio made a new all-time high on 2/1/08. 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.
Industrial (XLI) Neutral, Market Weight. Price touched a new 16-month low on 1/22/08. On 1/30/08, 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) Neutral, Market Weight. Price touched a new 17-month low on 1/22/08. On 2/4/08, Relative Strength made 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. 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. Previously, EFA outperformed from 2002 to 11/27/07.
NASDAQ Composite price touched a new 15-month low on 1/23/08. Relative Strength underperformed the S&P since 11/7/07.
Growth Stock/Value Stock Relative Strength Ratio made a new 3-month low 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 Futures (March) recovered a fraction of Friday’s loss. Oil could test 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 Futures broke down below 7-day lows. Probably just a temporary correction within a powerful uptrend.
Silver’s main trend is Bearish compared to Gold. The iShares Silver Trust (AMEX: SLV) has been rising in price but has been relatively weak compared to Gold since 12/7/06.
The Gold Miners ETF (GDX) has underperformed Gold futures since 10/31/07.
Inflation expectations fell again, based on the behavior of the ratio of two ETFs, TIP/IEF.
U.S. Treasury Bond prices consolidated over the past 9 trading days. But the major long-term trend remains Bullish. 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 consolidated. Some consolidation is normal after the recent 7-day slide. The dollar held support around 74.66, which is shaping up as a critical level. The main 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 moderately below normal. According to the weekly Investors Intelligence newsletter survey as of 1/30/08, there were 40.2% Bulls and 32.2% Bears. The ratio of Bullish advisors to Bearish advisors fell to 1.25 to 1, which below its 38-year median at 1.47. The ratio’s 38-year range is 0.28 to 17.51.
VIX “Fear Index”, now at 25.99 and rising, 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 30.46 and rising, 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 0.68, which indicates slightly above-average 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 0.1.02, 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 August low. 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.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
1.44% Utilities
1.35% Dow Utilities
1.18% South Korea
1.17% Natural Gas
1.12% Oil Services
0.92% Health Care Products
0.80% Drugs
0.80% Singapore
0.55% Australian Dollar
0.44% Brazil
0.37% Health Care
0.35% Health Care
0.22% British Pound
0.10% Canadian Dollar
0.07% Energy
0.07% Euro Index
0.03% Italy
-0.02% AMEX Composite
-0.10% Germany
-0.14% Hospitals
-0.14% Insurance
-0.18% US Dollar Index
-0.20% Swiss Franc
-0.21% Austria
-0.27% Biotechs
-0.28% Mexico
-0.30% Japanese Yen
-0.31% Japan
-0.42% Chemicals
-0.45% United Kingdom
-0.46% Oil
-0.46% Sweden
-0.50% 30Y T-Bond
-0.53% Spain
-0.58% Dow Composite
-0.62% Consumer Staples
-0.71% Hardware
-0.71% Netherlands
-0.74% S&P Mid Caps
-0.77% Taiwan
-0.80% DOT
-0.81% NYSE Composite
-0.85% Dow Industrial
-0.91% Disk Drives
-0.92% France
-0.96% Russell 2000
-0.97% Wilshire 5000
-0.98% Malaysia
-1.01% Russell 1000
-1.01% Russell 3000
-1.02% Value Line
-1.05% S&P 500
-1.08% Industrial
-1.12% Paper
-1.14% REITs
-1.15% Internet
-1.20% Belgium
-1.22% S&P 100
-1.23% S&P Small Caps
-1.24% Commodity Related
-1.24% Hong Kong
-1.26% Nasdaq Composite
-1.43% Nasdaq 100
-1.43% Consumer Discretionary
-1.46% Switzerland
-1.48% Dow Transports
-1.56% Materials
-1.67% Canada
-1.82% Computer Tech
-1.83% Network
-2.07% Technology
-2.17% Semiconductors
-2.30% Broker Dealers
-2.31% Australia
-2.37% Gold Mining
-2.90% Financial
-3.17% Retailers
-4.11% Banks
-4.58% Airlines
