By Robert W. Colby, Senior Analyst TraderPlanet.com
Dow-Jones Transportation Average Relative Strength Ratio broke out to a new 5-month high.
Health Care Stock Sector Relative Strength Ratio broke down to a new 5-month low.
On Tuesday, major stock price indexes opened substantially higher, continued to work irregularly higher most of the day, and closed near the highs of the day. NYSE volume rose by 15%, and the volume of advancing stocks was greater than the volume of declining stocks, indicating net buying pressure on balance.The “reports” of the day were taken as good news. Lehman Brothers raised $4 billion of new capital by selling convertible preferred shares. This eased fears of a Bear Stearns style collapse for Lehman, which had been rumored, falsely according to Lehman management. In addition, a further price decline for commodities and an uptick in the U.S. dollar helped ease fears of inflation.
The main technical trend still may be down for the broad-based stock price indexes. But some days, the fundamental worries are temporarily displaced by hopes for some kind of a rescue, from the Fed, the government, or big investors. Day to day, the stock market has been quite reactive to the news, rumors, and “reports” of the day, which certainly have been plentiful, although not always accurate. These “reports” strike at any unpredictable moment, like bolts out of the blue, disrupting trends and making short-term trading risky. In such a shifty market, be nimble, be quick, and control your risk.
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
3.23% , PFM , Dividend Achievers PS, PFM
4.05% , BHH , Internet B2B H, BHH
3.26% , VOX , Telecom Services VIPERs, VOX
3.43% , NYC , LargeCap Blend NYSE Composite iS, NYC
10.59% , HMA , HEALTH MGMT STK A
3.02% , PID , Dividend International, PID
3.10% , IJK , Growth MidCap 400 B, IJK
2.74% , JKD , LargeCap Blend Core iS M, JKD
17.80% , LEH , LEHMAN BROS HLDG
6.04% , IXG , Financials Global LargeCap Value, IXG
3.57% , EWU , United Kingdom Index, EWU
3.22% , IYJ , Industrial LargeCap Blend DJ US, IYJ
3.57% , IYY , LargeCap Blend Total Market DJ, IYY
3.28% , XSD , Semiconductor SPDR, XSD
2.86% , IJJ , Value MidCap S&P 400 B, IJJ
3.38% , PWO , OTC Dynamic PS, PWO
12.27% , HANS , Hansen Natural, HANS
3.37% , JKE , Growth LargeCap iS M, JKE
15.40% , FRE , FREDDIE MAC
7.45% , FXI , China 25 iS, FXI
3.28% , VV , LargeCap VIPERs, VV
19.68% , FNM , FANNIE MAE
6.01% , RWR , REIT Wilshire, RWR
8.44% , PMR , Retail, PMR
2.23% , IDU , Utilities DJ, IDU
2.79% , EWO , Austria Index, EWO
13.66% , LEN , Lennar Corp. (LEN)
7.98% , XHB , Homebuilders SPDR, XHB
3.37% , PIC , Insurance, PIC
2.61% , EFG , Growth EAFE MSCI, EFG
3.51% , PWJ , Growth Mid Cap Dynamic PS, PWJ
2.63% , ITF , Japan LargeCap Blend TOPIX 150, ITF
5.29% , PEY , Dividend High Yield Equity PS, PEY
3.53% , PWV , Value LargeCap Dynamic PS, PWV
5.69% , VNQ , REIT VIPERs, VNQ
4.35% , VCR , Consumer D. VIPERs, VCR
4.08% , IVE , Value S&P 500 B, IVE
2.90% , IAH , Internet Architecture H, IAH
9.43% , JPM , J P MORGAN CHASE
2.53% , UTH , Utilities H, UTH
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-2.47% , SANM , SANMINA
-3.78% , SH , Short 100% S&P 500, SH
-2.97% , DOG , Short 100% Dow 30, DOG
-3.07% , PSQ , Short 100% QQQ, PSQ
-6.43% , TDC , Teradata Corporation, TDC
-7.20% , SDS , Short 200% S&P 500 PS, SDS
-3.93% , GLD , Gold Shares S.T., GLD
-7.83% , QID , Short 200% QQQ PS, QID
-6.69% , DXD , Short 200% Dow 30 PS, DXD
-3.99% , IAU , Gold COMEX iS, IAU
-0.56% , SHY , Bond, 1-3 Year Treasury, SHY
-1.08% , AGG , Bond, Aggregate, AGG
-7.04% , MZZ , Short 200% MidCap 400 PS, MZZ
-2.04% , TLT , Bond, 20+ Years Treasury, TLT
-1.21% , IEF , Bond, 10 Year Treasury, IEF
-2.59% , SLV , Silver Trust iS, SLV
-0.75% , APC , ANADARKO PETRO
-1.10% , NEM , NEWMONT MINING
-1.49% , YHOO , YAHOO
-0.47% , LVLT , LEVEL 3 COMMUNICATIONS
-0.23% , MO , ALTRIA GROUP
-3.04% , MYY , Short 100% MidCap 400, MYY
-0.15% , S , SPRINT NEXTEL
-0.10% , PEP , PEPSICO
-0.11% , XTO , XTO ENERGY INC
Sectors: among the 9 major U.S. sectors, all 9 rose.
Major Sectors Ranked for the Day
% Price Change Sector
7.04% Financial SPDR, XLF
4.49% Consumer Discretionary SPDR, XLY
3.19% Materials SPDR, XLB
2.90% Technology SPDR, XLK
2.58% Utilities SPDR, XLU
2.27% Industrial SPDR, XLI
1.88% Energy SPDR, XLE
1.60% Health Care SPDR, XLV
1.22% Consumer Staples SPDR, XLP
Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):
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 3/28/08, the XLP/SPY Relative Strength Ratio rose to new 5-year high.
Industrial (XLI) Neutral, Market Weight. On 3/31/08, the XLI/SPY Relative Strength Ratio rose to another new all-time 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.
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.
Health Care (XLV) Bearish, Underweight. On 4/1/08, the XLV/SPY Relative Strength Ratio made a new 4-month low.
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 3/17/08, both absolute price and the XLF/SPY Relative Strength Ratio fell to their lowest levels in nearly 5-years, again confirming a major Bearish trend.
Foreign stock indexes have shown better relative strength short-term, since 3/24/08. Intermediate term, the EFA (the EAFE, international developed country stock markets, (ex the U.S. and Canada) has underperformed since 11/27/07.
NASDAQ Composite price underperformed. The minor Ripple trend appears questionable. But longer term, on 3/3/08, Relative Strength fell to a new 9-month low, confirming a significant downtrend.
Growth Stock/Value Stock Relative Strength Ratio turned down since 3/6/08 and 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 fell slightly. The Crude Oil short-term trend might be questioned since it failed to make a new high on the 3-day upward drive. Oil appears to have support in the 98-100 area. 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 fell steeply again, breaking 2-month lows. The short-term is down, and the intermediate-term trend appears to be broken as well. The long-term trend still could be Bullish.
Silver sharply underperformed Gold since 3/5/07. In addition, iShares Silver Trust (AMEX: SLV) has been relatively weak compared to Gold longer term, since 12/7/06. Finally, for the past 28 years, since 1/2/80, Silver has underperformed Gold.
The Gold Miners ETF (GDX) fell hard since 3/14/08. 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 fell steeply, breaking down below previous 11-day lows. The short-term trend is down. Bond prices benefit from fears of financial crisis, and they correct when crisis takes a back seat to some other news of the day. U.S. governments have been strong ,while corporate have been weak.
The U.S. dollar rose steeply, breaking out above previous 4-day highs. The minor trend may be questionable, but the major trend of the dollar is down.
The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood of late. The business and financial news has flipped from fear to hope and back again many times in recent weeks, creating an extremely choppy trading environment. 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, without warning, risk control becomes more important than aggressive profit seeking. Stay flexible.
Sentiment/Contrary Opinion: There were 36.7% Bulls versus 41.4% Bears as of 3/26/08, according to the weekly Investors Intelligence survey of newsletter advisors. The Bull/Bear ratio rose to 0.89, up from 0.69 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 22.68, 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 26.56, 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 0.85, 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 0.72, which indicates moderately 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.
To discover the next Resistance, traders probably will be watching how the market acts at the following levels for the Standard & Poor’s 500 cash index (1,370.18):
Potential Resistance
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
To discover the next Support, traders probably will be watching how the market acts at the following levels for the S&P 500 cash index (1,370.18):
Potential Support
1,256.98, low of 3/17/2008
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
Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
8.44% Retail, PMR
8.41% Ultra QQQ Double, QLD
7.98% Homebuilders SPDR, XHB
7.83% Financial Services DJ, IYG
7.45% China 25 iS, FXI
7.24% Bank Regional H, RKH
7.04% Financial SPDR, XLF
7.03% Financial DJ US, IYF
6.89% Ultra S&P500 Double, SSO
6.87% Ultra MidCap400 Double, MVV
6.75% Financials VIPERs, VFH
6.74% Capital Markets KWB ST, KCE
6.41% Ultra Dow30 Double, DDM
6.13% Realty Cohen & Steers, ICF
6.04% Financials Global LargeCap Value, IXG
6.01% REIT Wilshire, RWR
5.93% China LargeCap Growth G D H USX PS, PGJ
5.69% REIT VIPERs, VNQ
5.29% Dividend High Yield Equity PS, PEY
4.92% Real Estate US DJ, IYR
4.88% Value S&P 500, RPV
4.78% Singapore Index, EWS
4.66% Value MidCap S&P 400, RFV
4.61% Dividend DJ Select, DVY
4.59% Mexico Index, EWW
4.55% Value LargeCap iS M, JKF
4.49% Consumer Discretionary SPDR, XLY
4.49% LargeCap Blend S&P=Weight R, RSP
4.47% Retail H, RTH
4.35% Consumer D. VIPERs, VCR
4.34% South Korea Index, EWY
4.28% Growth LargeCap NASDAQ 100, QQQQ
4.23% Value SmallCap S&P 600, RZV
4.18% Hong Kong Index, EWH
4.18% Semiconductor iS GS, IGW
4.17% Dividend Growth PS, PHJ
4.15% Transportation Av DJ, IYT
4.15% Emerging 50 BLDRS, ADRE
4.11% Value LargeCap Fundamental RAFI 1000, PRF
4.10% Value SmallCap Russell 2000, IWN
4.08% Value S&P 500 B, IVE
4.05% Internet B2B H, BHH
4.03% Dividend Leaders, FDL
3.96% Value VIPERs, VTV
3.96% Dividend SPDR, SDY
3.93% Growth SmallCap R 2000, IWO
3.92% Value MidCap iS M, JKI
3.91% Consumer Cyclical DJ, IYC
3.84% Emerging Markets, EEM
3.84% Value Large Cap DJ, ELV
3.82% Value LargeCap Russell 3000, IWW
3.81% Internet H, HHH
3.79% SmallCap S&P 600, IJR
3.78% Latin Am 40, ILF
3.76% Networking, PXQ
3.75% Technology MS sT, MTK
3.74% MidCap VIPERs, VO
3.73% Internet Infrastructure H, IIH
3.70% Value SmallCap VIPERS, VBR
3.70% Brazil Index, EWZ
3.68% LargeCap Blend S&P 100, OEF
3.68% S&P 500 iS LargeCap Blend, IVV
3.68% LargeCap Rydex Rus Top 50, XLG
3.67% Value MidCap Russell, IWS
3.66% SmallCap Russell 2000, IWM
3.64% LargeCap Blend S&P 1500 iS, ISI
3.62% Building & Construction, PKB
3.61% Software, IGV
3.61% Technology GS, IGM
3.60% Growth LargeCap NASDAQ Fidelity, ONEQ
3.59% Value LargeCap Euro STOXX 50 DJ, FEU
3.59% Biotech SPDR, XBI
3.57% United Kingdom Index, EWU
3.57% LargeCap Blend Total Market DJ, IYY
3.56% Asia 50 BLDRS, ADRA
3.54% MidCap S&P 400 SPDRs, MDY
3.53% Value LargeCap Dynamic PS, PWV
3.52% Networking, IGN
3.52% Info Tech VIPERs, VGT
3.52% Semiconductor H, SMH
3.52% S&P 500 SPDRs LargeCap Blend, SPY
3.51% Growth Mid Cap Dynamic PS, PWJ
3.51% Telecom DJ US, IYZ
3.50% Wilshire 5000 ST TM, TMW
3.50% Value SmallCap S&P 600 B, IJS
3.48% Euro STOXX 50, FEZ
3.47% Value LargeCap NYSE 100 iS, NY
3.47% Technology DJ US, IYW
3.46% Industrials VIPERs, VIS
3.44% LargeCap Blend Russell 3000, IWV
3.43% LargeCap 1000 R, IWB
3.43% LargeCap Blend NYSE Composite iS, NYC
3.42% Small Cap VIPERs, VB
3.41% Blend Total Market VIPERs, VTI
3.40% Global Titans, DGT
3.40% Semiconductors, PSI
3.39% Growth MidCap Russell, IWP
3.38% OTC Dynamic PS, PWO
3.37% Insurance, PIC
3.37% Global 100, IOO
3.37% Growth LargeCap iS M, JKE
3.35% South Africa Index, EZA
3.34% SmallCap Core iS M, JKJ
3.31% Growth 1000 Russell, IWF
3.30% MidCap Blend Core iS M, JKG
3.30% Developed 100 BLDRS, ADRD
3.29% Biotechnology, IBB
3.28% Semiconductor SPDR, XSD
3.28% LargeCap VIPERs, VV
3.27% Lg Cap Growth PSD, PWB
3.26% Telecom Services VIPERs, VOX
3.26% Leisure & Entertainment, PEJ
3.26% Growth VIPERs, VUG
3.24% Broadband H, BDH
3.24% MidCap Growth iS M, JKH
3.23% Dividend Achievers PS, PFM
3.22% Software H, SWH
3.22% Technology Global, IXN
3.22% MidCap Russell, IWR
3.22% Extended Mkt VIPERs, VXF
3.22% Industrial LargeCap Blend DJ US, IYJ
3.21% Value Small Cap DJ, DSV
3.21% Growth S&P 500/BARRA, IVW
3.21% France Index, EWQ
3.20% Value 1000 Russell, IWD
3.19% Telecom H, TTH
3.19% Materials SPDR, XLB
3.18% Europe 350 S&P Index, IEV
3.16% EAFE Index, EFA
3.14% Value EAFE MSCI, EFV
3.12% Growth LargeCap Russell 3000, IWZ
3.10% Growth MidCap 400 B, IJK
3.10% LargeCap Blend Socially Responsible iS, KLD
3.08% Hardware & Electronics, PHW
3.08% Value MidCap Dynamic PS, PWP
3.07% EMU Europe Index, EZU
3.06% MidCap S&P 400 iS, IJH
3.06% Growth SmallCap VIPERs, VBK
3.06% Value SmallCap iS M, JKL
3.05% Pacific ex-Japan, EPP
3.05% Growth S&P 500, RPG
3.02% Dividend International, PID
3.00% DIAMONDS (DJIA), DIA
2.99% Sweden Index, EWD
2.98% Taiwan Index, EWT
2.95% Emerging VIPERs, VWO
2.94% Dividend Appreciation Vipers, VIG
2.94% Value Line Timeliness MidCap Gr, PIV
2.92% Growth Large Cap, ELG
2.91% Water Resources, PHO
2.91% Japan Index, EWJ
2.90% Technology SPDR, XLK
2.90% Internet Architecture H, IAH
2.86% Value MidCap S&P 400 B, IJJ
2.85% Europe 100 BLDRS, ADRU
2.84% LargeCap Blend Dynamic PS, PWC
2.84% Pacific VIPERs, VPL
2.82% Value SmallCap Dynamic PS, PWY
2.81% WilderHill Clean Energy PS, PBW
2.79% Austria Index, EWO
2.78% Materials VIPERs, VAW
2.75% Value 40 Large Low P/E FT DB, FDV
2.74% Telecommunications & Wireless, PTE
2.74% Biotech & Genome, PBE
2.74% LargeCap Blend Core iS M, JKD
2.74% Spain Index, EWP
2.73% European VIPERs, VGK
2.71% Growth Small Cap DJ, DSG
2.68% Growth SmallCap Dynamic PS, PWT
2.66% Growth SmallCap iS M, JKK
2.66% Aerospace & Defense, PPA
2.66% Belgium Index, EWK
2.63% Japan LargeCap Blend TOPIX 150, ITF
2.62% Software, PSJ
2.61% Growth EAFE MSCI, EFG
2.58% Utilities SPDR, XLU
2.58% Telecommunications Global, IXP
2.57% IPOs, First Tr IPOX-100, FPX
2.55% Utilities VIPERs, VPU
2.53% Utilities, PUI
2.53% Utilities H, UTH
2.52% Micro Cap Zachs, PZI
2.50% Health Care VIPERs, VHT
2.48% Germany Index, EWG
2.47% Netherlands Index, EWN
2.46% SmallCap PS Zacks, PZJ
2.45% Microcap Russell, IWC
2.45% Australia Index, EWA
2.40% Italy Index, EWI
2.36% Healthcare Global, IXJ
2.35% Metals & Mining SPDR, XME
2.33% Healthcare DJ, IYH
2.33% Oil & Gas, PXJ
2.29% Growth BARRA Small Cap 600, IJT
2.27% Industrial SPDR, XLI
2.27% Switzerland Index, EWL
2.23% Utilities DJ, IDU
2.13% Food & Beverage, PBJ
2.02% Basic Materials DJ US, IYM
1.98% Consumer Non-Cyclical, IYK
1.88% Energy SPDR, XLE
1.82% Biotech H, BBH
1.80% Oil Services H, OIH
1.76% Pharmaceuticals, PJP
1.71% Energy DJ, IYE
1.71% Nanotech Lux, PXN
1.66% Consumer Staples VIPERs, VDC
1.60% Health Care SPDR, XLV
1.60% Energy VIPERs, VDE
1.51% Pharmaceutical H, PPH
1.47% Energy Global, IXC
1.30% Natural Resource iS GS, IGE
1.22% Canada Index, EWC
1.22% Consumer Staples SPDR, XLP
1.16% Energy Exploration & Prod, PXE
1.10% Malaysia Index, EWM
-0.35% Growth MidCap S&P 400, RFG
-0.37% Oil, Crude, U.S. Oil Fund, USO
-0.56% Commodity Tracking, DBC
-0.56% Bond, 1-3 Year Treasury, SHY
-0.65% Bond, Corp, LQD
-1.08% Bond, Aggregate, AGG
-1.21% Bond, 10 Year Treasury, IEF
-1.44% Bond, TIPS, TIP
-2.04% Bond, 20+ Years Treasury, TLT
-2.59% Silver Trust iS, SLV
-2.97% Short 100% Dow 30, DOG
-3.04% Short 100% MidCap 400, MYY
-3.07% Short 100% QQQ, PSQ
-3.78% Short 100% S&P 500, SH
-3.93% Gold Shares S.T., GLD
-6.69% Short 200% Dow 30 PS, DXD
-7.04% Short 200% MidCap 400 PS, MZZ
-7.20% Short 200% S&P 500 PS, SDS
-7.83% Short 200% QQQ PS, QID
