By Robert W. Colby, Senior Analyst TraderPlanet.com
What happened to the short-term stock bounce?
Overwhelmed by major trends.
U.S. Treasury Bond prices jumped up steeply to a new 1-month price high, suggesting flight to safety.
Crude Oil jumped up above 110, another new high, confirming that all trends are Bullish for oil. But high and rising oil prices are no good for the economy and the stock market.
The U.S. dollar plunged steeply to a new all-time low.
Commentators attributed the downturn to the soaring price of Crude Oil, which rose despite a report that inventories rose more than expected. Meanwhile, the U.S. dollar fell to new all-time lows, which is bad for its purchasing power in world markets.
Tuesday’s strong momentum appears to have faded all too quickly. Now, the short-term trend seems uncertain. Apparently, there are still a lot of fundamental problems, and the main technical trend is still down for the broad-based stock price indexes. Day to day, the stock market has been quite reactive to the news, rumors, and “reports” of the day. On Tuesday, the Fed rescue “reports” cheered. But on Wednesday, attention shifted back to the weak dollar and rising oil, gold, and commodity price trends. If it is not one thing, its another. And it is all subject to change at any moment. In such a shifty market, be nimble, be quick.
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
3.03% , BHH , Internet B2B H, BHH
4.30% , NYT , NY TIMES STK A
3.56% , ABI , Applera Corp-Applied Biosystems Group (ABI)
4.61% , GRMN , GARMIN LTD
3.82% , STLD , Steel Dynamics, STLD
4.06% , XMSR , XM Satellite R
3.64% , CAT , CATERPILLAR
1.21% , LQD , Bond, Corp, LQD
4.57% , VFC , VF
4.73% , SIRI , Sirius Satellite
2.47% , HMA , HEALTH MGMT STK A
3.93% , CIEN.O , CIENA
2.66% , GNTX , Gentex Corporation
3.22% , TAP , ADOLPH COORS STK B, TAP
4.70% , HANS , Hansen Natural, HANS
1.93% , TLT , Bond, 20+ Years Treasury, TLT
1.69% , SWK , STANLEY WORKS
3.69% , SLE , SARA LEE
1.01% , PBE , Biotech & Genome, PBE
3.86% , HES , AMERADA HESS
1.78% , TUP , TUPPERWARE
1.78% , MHS , MEDCO HEALTH
1.23% , BBH , Biotech H, BBH
0.90% , DYN , DYNEGY
1.99% , LTD , LIMITED BRANDS
0.54% , IBB , Biotechnology, IBB
1.99% , COF , CAPITAL ONE FNCL
0.65% , RTN , RAYTHEON
0.71% , KSU , Kansas City Southern, KSU
1.60% , ETN , EATON
1.09% , DBC , Commodity Tracking, DBC
1.43% , HSY , HERSHEY FOODS
1.27% , MMC , MARSH & MCLENNAN
0.62% , CA , COMPUTER ASSOC
3.35% , SNDK , SanDisk Corporation
2.00% , CMI , CUMMINS
2.95% , BIIB , BIOGEN IDEC
1.09% , DLTR , Dollar Tree Stores Inc
0.95% , GWW , WW GRAINGER
1.99% , PMCS , PMC SIERRA
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-9.85% , KLAC , KLA TENCOR
-13.72% , HUM , HUMANA
-7.34% , LUV , SOUTHWEST AIRLS
-8.68% , PGR , PROGRESSIVE OHIO
-7.34% , SUN , SUNOCO
-0.74% , IGW , Semiconductor iS GS, IGW
-5.86% , VLO , VALERO ENERGY
-1.48% , IXP , Telecommunications Global, IXP
-1.04% , VBR , Value SmallCap VIPERS, VBR
-0.36% , VBK , Growth SmallCap VIPERs, VBK
-3.43% , TMK , TORCHMARK
-0.86% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
-5.04% , SAF , SAFECO
-0.89% , PUI , Utilities, PUI
-1.66% , IYT , Transportation Av DJ, IYT
-2.47% , CNP , CENTERPNT ENERGY
-2.98% , CB , CHUBB
-2.73% , FISV , FISERV
-1.15% , LH , LAB CRP OF AMER
-5.06% , RSH , RADIOSHACK
-0.58% , PFM , Dividend Achievers PS, PFM
-5.25% , MU , MICRON TECH
-2.59% , LPX , LOUISIANA PAC
-1.81% , IYZ , Telecom DJ US, IYZ
-0.64% , VUG , Growth VIPERs, VUG
-0.85% , FDV , Value 40 Large Low P/E FT DB, FDV
-1.87% , TNB , THOMAS & BETTS
-2.69% , ALTR , ALTERA
-0.74% , CSC , COMPUTER SCIENCE
-1.95% , CECO , CAREER EDUCATION CORP
-1.01% , VTV , Value VIPERs, VTV
-3.71% , ALL , ALLSTATE
-2.78% , MLNM , Millennium Pharmaceuticals Inc
-0.94% , EWI , Italy Index, EWI
-1.21% , LRCX , LAM RESEARCH CORP
-2.08% , UST , UST
-0.88% , IVE , Value S&P 500 B, IVE
-1.82% , IVGN , Invitrogen Corporation
-0.19% , PIV , Value Line Timeliness MidCap Gr, PIV
-1.44% , SSCC , Smurfit-Stone Container Corporation
Sectors: among the 9 major U.S. sectors, 7 fell and 2 were unchanged.
Major Sectors Ranked for the Day
% Price Change Sector
0.00% Utilities SPDR, XLU
0.00% Health Care SPDR, XLV
-0.19% Industrial SPDR, XLI
-0.25% Consumer Staples SPDR, XLP
-0.56% Consumer Discretionary SPDR, XLY
-1.02% Technology SPDR, XLK
-1.44% Materials SPDR, XLB
-1.67% Financial SPDR, XLF
-2.22% Energy SPDR, XLE
Energy (XLE) Neutral, Market Weight. On 3/6/08, the XLE/SPY Relative Strength Ratio rose to new all-time high, confirming a major uptrend.
Materials (XLB) Neutral, Market Weight. On 3/6/08, the XLB/SPY Relative Strength Ratio rose to a new all-time high, confirming a major uptrend.
Consumer Staples (XLP) Neutral, Market Weight. On 3/10/08, the XLP/SPY Relative Strength Ratio rose to new 4-year high.
Utilities (XLU) Neutral, Market Weight. The XLU/SPY Relative Strength Ratio has eroded significantly since its all-time high on 1/9/08, and so Utilities have been slipping in these rankings.
Industrial (XLI) Neutral, Market Weight. On 3/6/08, the XLI/SPY Relative Strength Ratio made a new all-time high.
Health Care (XLV) Bearish, Underweight. On 3/11/08, the XLV/SPY Relative Strength Ratio made a new 4-month low.
Technology (XLK) Bearish, Underweight. On 2/25/08, the XLK/SPY Relative Strength Ratio fell to a new 10-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 3/10/08, the XLF/SPY Relative Strength Ratio fell to a new 7-year low, and price fell to a new 5-year low.
Foreign stock indexes have been relatively strong for the short term since 2/11/08.
NASDAQ Composite price remains Bearish. On 3/3/08, Relative Strength fell to a new 9-month low, confirming a significant downtrend.
Growth Stock/Value Stock Relative Strength Ratio has recovered significantly from a low on 2/1/08 but still has underperformed since the peak on 11/7/07. The Growth/Value ratio (IWF/IWD) appears to be in an intermediate-term uncertain 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 (April futures contract) moved above 110, and all trends are Bullish. 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) firmed slightly and the trends are still Bullish.
Silver outperformed Gold since 12/14/07. Although Silver has been strong over this intermediate term, iShares Silver Trust (AMEX: SLV) has been relatively weak compared to Gold longer term, since 12/7/06. In addition, for the past 28 years, since 1/2/80, Silver has underperformed Gold.
The Gold Miners ETF (GDX) fell sharply since 3/4/08. And longer-term, GDX significantly underperformed Gold since 10/31/07. Therefore, GDX trends have been Bearish relative to Gold itself.
U.S. Treasury Bond prices jumped up steeply to a new 1-month price high. Bonds benefit from financial crisis. U.S. governments have been much stronger than corporates. 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 plunged steeply to a new all-time low.
The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood of late. Beyond the day-to-day swings, sentiment never really reached levels associated with extreme pessimism. So, crowd psychology could get more Bearish before it is over. The business and financial news has flipped from fear to hope and back again every few days. Investors’ moods and stock volatility have jumped up and down abruptly with the latest “reports”. When mass psychology shifts so dramatically and unpredictably from hope to fear from one day to the next, risk control becomes more important than aggressive profit seeking. Stay flexible.
Sentiment/Contrary Opinion: There are more Bears than Bulls for the first time in years. According to the weekly Investors Intelligence newsletter survey as of 3/12/08, there were 31.1% Bulls and 43.6% Bears. The ratio of Bullish advisors to Bearish advisors fell to 0.71, the lowest level in more than 5 years, and down from 1.14 the previous week. The ratio’s 38-year range is 0.28 to 17.51, and the median is 1.47.
VIX “Fear Index”, now at 27.22, 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 30.05, 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 0.89, which indicates 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 0.85, 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.Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
1.86% Hang Seng
1.60% Tokyo Nikkei
1.51% London FTSE
1.48% 30Y T-Bond
1.20% Euro Top 100
1.15% German DAX
0.42% Health Care Products
0.30% AMEX Composite
0.22% CDNX Composite
-0.25% Consumer Staples
-0.33% Nasdaq 100
-0.35% Toronto 300
-0.38% Dow Industrial
-0.38% Health Care
-0.48% S&P Mid Caps
-0.53% Nasdaq Composite
-0.56% Consumer Discretionary
-0.67% Comp. Tech
-0.69% NYSE Composite
-0.70% Value Line
-0.75% Disk Drives
-0.78% S&P 100
-0.81% Wilshire 5000
-0.85% Russell 1000
-0.86% Russell 3000
-0.96% Russell 2000
-0.96% Dow Composite
-1.05% S&P Small Caps
-1.06% Natural Gas
-1.34% Dow Utilities
-1.61% Dow Transports
-1.61% Oil Services
-1.72% Broker Dealers
1,576.09, high of 10/11/2007
1,552.76, high of 10/31/2007
1,523.57, high of 12/11/2007
1,498.85, high of 12/26/2007
1,403.45, low of 1/7/2008
1,396.02, high of 2/1/2008
1,388.34, high of 2/27/2008
1,272.66, low of 3/10/2008
1,270.05, low of 1/23/2008
1,261.30, low of 8/10/2006
1,224.54, low of 7/18/2006
1,219.29, low of 6/14/2006
1,214.45, low of 11/4/2005
1,201.07, low of 11/2/2005
1,168.20, low of 10/13/2005
1,163.23, high of 3/5/2004
1,159.86, low of 5/17/2005
1,153.64, low of 5/16/2005
1,146.18, low of 5/13/2005
1,139.14, low of 4/29/2005
1,136.37, low of 4/20/2005