By Robert W. Colby, Senior Analyst TraderPlanet.com
A slow, grinding decline.
Downside/Upside Volume was less extreme at 2.35 to 1.
Bullish Sentiment actually rose, according to Investors’ Intelligence.
NASDAQ Composite and Technology Stock Sector Relative Strength fell to new 7-month lows.
Volume on the NYSE fell 7%, indicating waning demand for stocks. The ratio of the volume of declining stocks to the volume of advancing stocks at 2.35 to 1 moderated compared to Tuesday’s extreme.
The market 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, underlying fundamental trends appear to be deteriorating. 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—especially for longs.
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
7.58% , TMO , THERMO ELECTRON
4.96% , JBL , JABIL CIRCUIT
5.04% , VFC , VF
6.22% , CIEN.O , CIENA
4.76% , DIS , WALT DISNEY
2.05% , PSQ , Short 100% QQQ, PSQ
2.81% , TLAB , TELLABS
6.35% , IVGN , Invitrogen Corporation
1.94% , DVN , DEVON ENERGY
2.03% , CI , CIGNA
4.14% , NBR , NABORS
2.68% , EQR , EQUITY RESIDENT BEN INT
2.01% , TWX , TIME WARNER INC
1.95% , K , KELLOGG
1.30% , MYY , Short 100% MidCap 400, MYY
1.36% , TAP , ADOLPH COORS STK B, TAP
3.18% , R , RYDER SYSTEM
1.67% , MKC , MCCORMICK
0.86% , PTV , PACTIV
1.50% , LNCR , Lincare Holdings Inc
1.25% , STJ , ST JUDE MEDICAL
1.20% , ACE , ACE
1.78% , RAI , RJR TOBACCO HLDS
1.58% , AET , AETNA
1.00% , FEZ , Euro STOXX 50, FEZ
1.83% , SDS , Short 200% S&P 500 PS, SDS
0.97% , RIG , TRANSOCEAN
1.03% , LH , LAB CRP OF AMER
0.87% , RX , IMS HEALTH
0.81% , ACV , Alberto-Culver Co.
4.66% , QID , Short 200% QQQ PS, QID
0.70% , NWL , NEWELL RUBBER
0.68% , ABT , ABBOTT LABS
0.39% , ATVI , Activision Inc.
2.42% , SOV , SOVEREIGN BANC
0.57% , VGK , European VIPERs, VGK
1.04% , TER , TERADYNE
0.55% , PNC , PNC FINL SVC
0.88% , GPS , GAP
0.69% , ABI , Applera Corp-Applied Biosystems Group (ABI)
1.16% , CEG , CONSTELL ENERGY
0.83% , IR , INGER RAND
0.95% , DXD , Short 200% Dow 30 PS, DXD
1.25% , GPC , GENUINE PARTS
0.63% , SIAL , SIGMA ALDRICH
0.93% , IFF , INTL FLAV & FRAG
0.75% , UNM , UNUMPROVIDENT
0.79% , NEM , NEWMONT MINING
0.29% , DD , DU PONT
1.73% , DUK , DUKE ENERGY
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-4.05% , BHH , Internet B2B H, BHH
-1.66% , IIH , Internet Infrastructure H, IIH
-1.65% , RFG , Growth MidCap S&P 400, RFG
-10.20% , MRVL , MARVELL TECHNOLOGY
-1.00% , PHW , Hardware & Electronics, PHW
-5.48% , MYL , MYLAN LABS
-1.26% , IJJ , Value MidCap S&P 400 B, IJJ
-1.60% , PWO , OTC Dynamic PS, PWO
-6.97% , IACI , IAC/INTERACTIVCORP
-6.69% , NOV , NATIONAL OILWELL VARC0
-0.82% , PHJ , Dividend Growth PS, PHJ
-5.51% , APOL , APOLLO GROUP
-3.53% , ADBE , ADOBE SYS
-8.52% , TIN , TEMPLE INLAND
-1.42% , RPG , Growth S&P 500, RPG
-2.56% , CLX , CLOROX
-0.82% , TMW , Wilshire 5000 ST TM, TMW
-1.33% , PZJ , SmallCap PS Zacks, PZJ
-5.69% , AAPL , APPLE COMPUTER
-3.63% , HUM , HUMANA
-0.86% , FPX , IPOs, First Tr IPOX-100, FPX
-0.76% , PFM , Dividend Achievers PS, PFM
-1.52% , PTE , Telecommunications & Wireless, PTE
-4.99% , AMZN , Amazoncom Inc
-3.64% , MCK , MCKESSON CORP
-2.67% , GAS , NICOR
-0.70% , IWW , Value LargeCap Russell 3000, IWW
-3.14% , CVG , CONVERGYS
-4.48% , BSC , BEAR STEARNS
-2.47% , SRCL , Stericycle, SRCL
-4.55% , CTSH , Cognizant Technology Solutions
-4.24% , HES , AMERADA HESS
-3.44% , PBW , WilderHill Clean Energy PS, PBW
-2.80% , TBH , Telebras HOLDRS, TBH*
-0.93% , TDC , Teradata Corporation, TDC
-0.97% , IWZ , Growth LargeCap Russell 3000, IWZ
-1.80% , PEP , PEPSICO
-3.72% , VRSN , VeriSign Inc
-1.05% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-1.75% , ETN , EATON
-0.86% , FDL , Dividend Leaders, FDL
-2.27% , RF , REGIONS FINAN
-2.00% , JKH , MidCap Growth iS M, JKH
-3.97% , PGJ , China LargeCap Growth G D H USX PS, PGJ
-3.32% , TGT , TARGET
-2.42% , BC , BRUNSWICK
-2.66% , LAMR , Lamar Advertising Company
-1.83% , CEPH , Cephalon Inc
-2.80% , PXJ , Oil & Gas, PXJ
-1.54% , VWO , Emerging VIPERs, VWO
Sectors: among the 9 major U.S. sectors, 1 rose and 8 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.27% Health Care
-0.16% Industrial
-0.18% Utilities
-0.41% Consumer Staples
-0.69% Materials
-1.08% Consumer Discretionary
-1.11% Technology
-1.16% Financial
-1.37% Energy
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) Neutral, Market Weight. 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.
Energy (XLE) Neutral, Market Weight. 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.
Industrial (XLI) Neutral, Market Weight. Price touched a new 16-month low on 1/22/08. On 2/6/08, 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 2/6/08, 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. 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 remains Bearish. On 2/6/08, 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 Futures broke down below previous 8-day lows. This confirms again that the short-term trend is down. 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 recovered a moderate fraction of previous 5-day losses. The short-term trend appears uncertain, although my guess is that Gold has been staging a temporary minor correction within a major uptrend.
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 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 pulled back down into their 9-day trading range. Still, the short-term trend is probably up. And 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 rose slightly. This week, the dollar broke out above previous 7-day highs, turning the short-term trend up. The dollar held support around 74.66, which is shaping up as a critical 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 moderately below normal. According to the weekly Investors Intelligence newsletter survey as of 2/8/08, there were 41.6% Bulls and 32.6% Bears. The ratio of Bullish advisors to Bearish advisors rose to 1.28 to 1, up from 1.25 to 1. 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 28.97 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 32.68 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 0.80, 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 0.78, 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.
1.62% Spain
1.01% Germany
1.00% Gold Mining
0.73% Austria
0.72% Switzerland
0.66% Netherlands
0.55% Hospitals
0.43% France
0.34% Japanese Yen
0.28% Dow Transports
0.27% Health Care
0.27% Canada
0.25% Swiss Franc
0.22% Sweden
0.18% Drugs
0.17% Italy
0.11% AMEX Composite
0.05% US Dollar Index
0.04% Insurance
0.03% Health Care
0.02% Canadian Dollar
-0.05% Belgium
-0.09% Dow Utilities
-0.11% Brazil
-0.14% Euro Index
-0.16% Industrial
-0.16% Australian Dollar
-0.18% Utilities
-0.18% British Pound
-0.19% Dow Composite
-0.23% Malaysia
-0.31% Health Care Products
-0.32% United Kingdom
-0.34% Chemicals
-0.34% 30Y T-Bond
-0.37% Biotechs
-0.41% Consumer Staples
-0.47% Banks
-0.50% Mexico
-0.53% Dow Industrial
-0.64% NYSE Composite
-0.66% Network
-0.69% Materials
-0.72% S&P 100
-0.72% Australia
-0.75% Taiwan
-0.76% S&P 500
-0.80% Natural Gas
-0.82% Russell 1000
-0.86% Russell 3000
-0.87% Wilshire 5000
-0.97% Commodity Related
-1.03% S&P Small Caps
-1.05% Value Line
-1.08% Consumer Discretionary
-1.11% Technology
-1.16% Financial
-1.18% S&P Mid Caps
-1.29% Japan
-1.30% Russell 2000
-1.33% Nasdaq Composite
-1.37% Energy
-1.46% Computer Tech
-1.55% DOT
-1.60% Singapore
-1.61% REITs
-1.64% Hong Kong
-1.65% South Korea
-1.70% Oil Services
-1.78% Broker Dealers
-1.80% Internet
-1.82% Paper
-1.83% Nasdaq 100
-1.86% Oil
-1.91% Retailers
-1.94% Hardware
-2.86% Semiconductors
-3.61% Disk Drives
