By Robert W. Colby, Senior Analyst TraderPlanet.com
S&P 500 hit resistance.
Energy and Materials Relative Strength Ratios rose to new all-time highs, confirming major uptrends.
Health Care Relative Strength Ratio fell to a new 6-year low, confirming a major downtrend.
Consumer Discretionary Relative Strength Ratio fell to a new 13-week low, suggesting renewed weakness.
Consumer Staples and Industrial Relative Strength Ratios fell to new 7-week lows.
The current 3-month correction/consolidation phase may be a Secondary Reaction within the context of a Major Bearish Trend. Preexisting Major Trends tend to resume after such Secondary Reactions run their course.
The “reports” of the week were mixed, some good and some bad. Financial stocks, the worst performers over the past year, rallied on hopes that the worst of the credit crisis might be over. It is by no means clear that such hopes are justified, however.
The main technical trend may still be down for the broad-based stock price indexes. From time to time, serious fundamental worries seem to be temporarily displaced by hopes that the worst of the credit crisis might be over, or hopes for some kind of a rescue, from the Fed, the government, or big investors. The Wall Street pendulum swings from hope to fear–just as it always has.
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, short-term traders need to be nimble, be quick, and control risk. Investors need to be cautious and risk averse.
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
1.57% , RFV , Value MidCap S&P 400, RFV
11.94% , CMI , CUMMINS
2.06% , PSJ , Software, PSJ
3.71% , HHH , Internet H, HHH
1.76% , TMW , Wilshire 5000 ST TM, TMW
1.99% , PEJ , Leisure & Entertainment, PEJ
17.90% , PMCS , PMC SIERRA
1.21% , DSV , Value Small Cap DJ, DSV
3.83% , PXQ , Networking, PXQ
2.19% , IAH , Internet Architecture H, IAH
8.18% , AMZN , Amazoncom Inc
6.87% , SLB , SCHLUMBERGER
0.68% , IXP , Telecommunications Global, IXP
4.84% , CTL , CENTURYTEL
1.34% , IXC , Energy Global, IXC
6.31% , FISV , FISERV
6.96% , GRMN , GARMIN LTD
8.51% , CAT , CATERPILLAR
2.54% , PKB , Building & Construction, PKB
5.31% , MRVL , MARVELL TECHNOLOGY
2.83% , BHH , Internet B2B H, BHH
1.85% , JKK , Growth SmallCap iS M, JKK
1.13% , VIG , Dividend Appreciation Vipers, VIG
6.25% , HON , HONEYWELL INTL
19.99% , GOOG , Google
4.47% , NTAP , NETWK APPLIANCE
6.88% , ETN , EATON
3.97% , DISCA , Discovery Holding Co.
6.19% , DLTR , Dollar Tree Stores Inc
4.18% , TLAB , TELLABS
5.05% , HAL , HALLIBURTON
4.80% , RSH , RADIOSHACK
4.92% , BBBY , BED BATH BEYOND
4.48% , CVG , CONVERGYS
9.67% , ETFC.O , E*TRADE FINANCIAL
7.92% , LPX , LOUISIANA PAC
2.01% , XSD , Semiconductor SPDR, XSD
3.02% , MCK , MCKESSON CORP
4.77% , DDS , DILLARD STK A
2.68% , JKE , Growth LargeCap iS M, JKE
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-3.13% , ACV , Alberto-Culver Co.
-1.65% , DOG , Short 100% Dow 30, DOG
-2.03% , IAU , Gold COMEX iS, IAU
-1.67% , PGN , PROGRESS ENERGY
-2.63% , NEM , NEWMONT MINING
-1.30% , DGX , QUEST DIAG
-1.11% , MYL , MYLAN LABS
-1.07% , SH , Short 100% S&P 500, SH
-2.10% , GLD , Gold Shares S.T., GLD
-2.25% , BEN , FRANKLIN RSC
-1.23% , EP , EL PASO
-1.56% , MZZ , Short 200% MidCap 400 PS, MZZ
-3.14% , COF , CAPITAL ONE FNCL
-1.28% , FPL , FPL GROUP INC
-1.06% , PCL , PLUM CREEK TIMB
-0.26% , BEAS , BEA Systems Inc
-0.20% , MV , METAVANTE TECHNOLOGIES, MV
-1.48% , MYY , Short 100% MidCap 400, MYY
-1.57% , PSQ , Short 100% QQQ, PSQ
-4.27% , QID , Short 200% QQQ PS, QID
-1.17% , PNW , PINNACLE WEST
-0.84% , SLE , SARA LEE
-0.75% , BUD , ANHEUSER BUSCH
-1.08% , HOLX , Hologic, Inc., HOLX
-2.17% , SDS , Short 200% S&P 500 PS, SDS
-0.57% , VNQ , REIT VIPERs, VNQ
-1.29% , AMD , ADV MICRO DEV
-1.60% , BK , BANK OF NEW YORK
-2.29% , DXD , Short 200% Dow 30 PS, DXD
-0.82% , ZMH , ZIMMER HLDGS
-1.25% , BIIB , BIOGEN IDEC
-0.68% , XLP , Consumer Staples SPDR, XLP
-2.24% , ATI , ALLEGHENY TECH
-0.74% , MET , METLIFE
-0.94% , KO , COCA COLA
-0.66% , FII , FED INVESTORS STK B
-0.53% , K , KELLOGG
-0.30% , LRCX , LAM RESEARCH CORP
-1.88% , NCC , NATIONAL CITY
-0.37% , GPS , GAP
Sectors: among the 9 major U.S. sectors, 8 rose and 1 fell.
Major Sectors Ranked for the Day
% Price Change Sector
3.01% Industrial SPDR, XLI
2.20% Financial SPDR, XLF
1.91% Consumer Discretionary SPDR, XLY
1.75% Technology SPDR, XLK
1.53% Energy SPDR, XLE
0.96% Health Care SPDR, XLV
0.55% Materials SPDR, XLB
0.32% Utilities SPDR, XLU
-0.68% Consumer Staples SPDR, XLP
Energy (XLE) Neutral, Market Weight. On 4/18/08, both the XLE price and the XLE/SPY Relative Strength Ratio rose to new all-time highs, confirming a major uptrend.
Materials (XLB) Neutral, Market Weight. On 4/16/08, both the XLB price and the XLB/SPY Relative Strength Ratio rose to new all-time highs, confirming a major uptrend.
Utilities (XLU) Neutral, Market Weight. The XLU/SPY Relative Strength Ratio has been in a moderately rising trend since 3/25/08, and so Utilities have improved somewhat in these rankings.
Consumer Staples (XLP) Neutral, Market Weight. On 4/18/08, the XLP/SPY Relative Strength Ratio fell to a new 7-week low.
Industrial (XLI) Bearish, Underweight. On 4/17/08, the XLI/SPY Relative Strength Ratio fell to a new 7-week 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 4/16/08, the XLY/SPY Relative Strength Ratio fell to a new 13-week low, suggesting renewed weakness. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to a new 6-year low, confirming a major downtrend.
Health Care (XLV) Bearish, Underweight. On 4/18/08, the XLV/SPY Relative Strength Ratio fell to a new 6-year low.
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 since 11/7/07. The minor Ripple trend has improved only slightly since 3/3/08 and appears questionable at best. 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 been in an uptrend for the intermediate term, since 2/1/08. Long term, the Growth/Value ratio (IWF/IWD) has been in an uptrend since 8/8/06.
The Small Cap/Large Cap Relative Strength Ratio broke down to a new 2.5-year low on 1/11/08. It has been trending down since 4/19/06. The main long-term trend is Relatively Bearish for Small Caps.
Crude Oil futures rose to another new high. All trends are obviously Bullish. 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 sharply. The trend since 3/17/08 has been corrective. Long term, the 7-year trend is Bullish.
Silver sharply underperformed Gold since 3/5/08. 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 every day last week. Bonds’ 5-day trend has been Bearish, but downside momentum may be slowing. Bond prices benefit from fears of financial crisis, and they correct when financial crisis takes a back seat to some other news of the day. U.S. governments have been strong ,while corporate bonds have been weak.
The U.S. dollar has been consolidating losses since its low on 3/17/08. The minor trend may appear uncertain, 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 37.8% Bulls versus 38.9% Bears as of 4/16/08, according to the weekly Investors Intelligence survey of newsletter advisors. The Bull/Bear ratio remained at 0.97, unchanged from 0.97 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 20.13, is relatively low 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 23.58, is 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 0.59, which indicates neutral 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 1.19, 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.
A Secondary Reaction was signaled on 4/18/28, when the Dow-Jones Industrials and Transports both closed at 3-month highs. But the Primary Tide Major Trend may still be Bearish. 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 (1,390.33):
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
Potential Support
1,324.35, low of 4/15/2008
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:
6.03% Value SmallCap Dynamic PS, PWY
4.88% Semiconductors, PSI
4.77% Oil Services H, OIH
3.99% Ultra QQQ Double, QLD
3.83% Networking, PXQ
3.73% Networking, IGN
3.71% Internet H, HHH
3.50% IPOs, First Tr IPOX-100, FPX
3.48% Oil & Gas, PXJ
3.43% Technology MS sT, MTK
3.33% Hardware & Electronics, PHW
3.20% Technology DJ US, IYW
3.18% Growth LargeCap NASDAQ 100, QQQQ
3.17% Technology GS, IGM
3.01% Industrial SPDR, XLI
3.00% Technology Global, IXN
2.90% Dividend International, PID
2.83% Internet B2B H, BHH
2.75% Japan Index, EWJ
2.68% Growth LargeCap iS M, JKE
2.58% Industrial LargeCap Blend DJ US, IYJ
2.58% Industrials VIPERs, VIS
2.54% Building & Construction, PKB
2.47% Growth LargeCap NASDAQ Fidelity, ONEQ
2.44% Aerospace & Defense, PPA
2.44% Software H, SWH
2.39% Value Line Timeliness MidCap Gr, PIV
2.37% Ultra S&P500 Double, SSO
2.37% Ultra Dow30 Double, DDM
2.35% Japan LargeCap Blend TOPIX 150, ITF
2.23% Transportation Av DJ, IYT
2.20% Growth VIPERs, VUG
2.20% Financial SPDR, XLF
2.19% Energy DJ, IYE
2.19% Internet Architecture H, IAH
2.17% Water Resources, PHO
2.17% Info Tech VIPERs, VGT
2.16% Energy VIPERs, VDE
2.15% Semiconductor iS GS, IGW
2.12% MidCap Growth iS M, JKH
2.12% Growth S&P 500/BARRA, IVW
2.11% Growth SmallCap R 2000, IWO
2.11% Growth MidCap S&P 400, RFG
2.10% Growth LargeCap Russell 3000, IWZ
2.09% Growth 1000 Russell, IWF
2.06% Retail, PMR
2.06% Software, PSJ
2.05% Broadband H, BDH
2.01% Semiconductor SPDR, XSD
2.01% Growth Mid Cap Dynamic PS, PWJ
1.99% Financial Services DJ, IYG
1.99% MidCap Blend Core iS M, JKG
1.99% Leisure & Entertainment, PEJ
1.98% Global Titans, DGT
1.94% LargeCap Rydex Rus Top 50, XLG
1.92% LargeCap Blend Russell 3000, IWV
1.91% Growth MidCap Russell, IWP
1.91% Consumer Discretionary SPDR, XLY
1.88% Lg Cap Growth PSD, PWB
1.87% S&P 500 iS LargeCap Blend, IVV
1.87% LargeCap Blend S&P 100, OEF
1.87% Consumer D. VIPERs, VCR
1.87% LargeCap Blend S&P 1500 iS, ISI
1.85% Growth SmallCap iS M, JKK
1.85% Capital Markets KWB ST, KCE
1.85% Asia 50 BLDRS, ADRA
1.85% SmallCap PS Zacks, PZJ
1.83% Natural Resource iS GS, IGE
1.82% MidCap Russell, IWR
1.81% LargeCap Blend Total Market DJ, IYY
1.79% Software, IGV
1.76% Wilshire 5000 ST TM, TMW
1.75% Technology SPDR, XLK
1.74% Telecom DJ US, IYZ
1.73% Growth SmallCap VIPERs, VBK
1.73% Switzerland Index, EWL
1.71% Value SmallCap S&P 600, RZV
1.71% Growth Small Cap DJ, DSG
1.70% Growth BARRA Small Cap 600, IJT
1.70% Value LargeCap Fundamental RAFI 1000, PRF
1.69% MidCap VIPERs, VO
1.69% Consumer Cyclical DJ, IYC
1.68% Financial DJ US, IYF
1.67% Value 1000 Russell, IWD
1.66% Microcap Russell, IWC
1.65% Dividend Growth PS, PHJ
1.64% Value S&P 500 B, IVE
1.64% Growth S&P 500, RPG
1.63% China 25 iS, FXI
1.63% Growth SmallCap Dynamic PS, PWT
1.61% LargeCap Blend S&P=Weight R, RSP
1.61% LargeCap VIPERs, VV
1.59% Netherlands Index, EWN
1.59% Ultra MidCap400 Double, MVV
1.58% Value S&P 500, RPV
1.57% Value MidCap S&P 400, RFV
1.54% Telecom Services VIPERs, VOX
1.54% Value MidCap S&P 400 B, IJJ
1.54% Value MidCap Dynamic PS, PWP
1.54% Oil, Crude, U.S. Oil Fund, USO
1.53% Growth MidCap 400 B, IJK
1.53% Value 40 Large Low P/E FT DB, FDV
1.53% Energy SPDR, XLE
1.53% OTC Dynamic PS, PWO
1.53% SmallCap Core iS M, JKJ
1.52% Malaysia Index, EWM
1.52% Hong Kong Index, EWH
1.52% Dividend Leaders, FDL
1.51% Emerging Markets, EEM
1.48% Value Large Cap DJ, ELV
1.48% Global 100, IOO
1.48% Telecommunications & Wireless, PTE
1.48% Energy Exploration & Prod, PXE
1.47% Growth Large Cap, ELG
1.46% Basic Materials DJ US, IYM
1.46% Internet Infrastructure H, IIH
1.46% LargeCap 1000 R, IWB
1.44% LargeCap Blend Socially Responsible iS, KLD
1.43% Financials Global LargeCap Value, IXG
1.42% Euro STOXX 50, FEZ
1.41% Value LargeCap Dynamic PS, PWV
1.41% SmallCap S&P 600, IJR
1.41% Value LargeCap NYSE 100 iS, NY
1.40% Nanotech Lux, PXN
1.40% Value SmallCap Russell 2000, IWN
1.39% Retail H, RTH
1.38% Healthcare Global, IXJ
1.38% Value LargeCap iS M, JKF
1.38% MidCap S&P 400 iS, IJH
1.38% Blend Total Market VIPERs, VTI
1.36% Germany Index, EWG
1.36% Materials VIPERs, VAW
1.34% Energy Global, IXC
1.34% Bank Regional H, RKH
1.33% Value SmallCap S&P 600 B, IJS
1.32% United Kingdom Index, EWU
1.32% Micro Cap Zachs, PZI
1.32% LargeCap Blend NYSE Composite iS, NYC
1.31% Value LargeCap Euro STOXX 50 DJ, FEU
1.30% Taiwan Index, EWT
1.29% Biotechnology, IBB
1.25% Canada Index, EWC
1.24% Value VIPERs, VTV
1.23% Extended Mkt VIPERs, VXF
1.22% Value MidCap Russell, IWS
1.22% Value EAFE MSCI, EFV
1.22% Spain Index, EWP
1.22% Financials VIPERs, VFH
1.21% Value LargeCap Russell 3000, IWW
1.21% Europe 350 S&P Index, IEV
1.21% Italy Index, EWI
1.21% Value Small Cap DJ, DSV
1.20% Food & Beverage, PBJ
1.19% South Korea Index, EWY
1.19% Singapore Index, EWS
1.18% Europe 100 BLDRS, ADRU
1.16% EMU Europe Index, EZU
1.16% Pharmaceuticals, PJP
1.15% Value SmallCap iS M, JKL
1.13% LargeCap Blend Core iS M, JKD
1.13% Value MidCap iS M, JKI
1.13% Dividend Appreciation Vipers, VIG
1.06% Small Cap VIPERs, VB
1.06% SmallCap Russell 2000, IWM
1.06% European VIPERs, VGK
1.05% Developed 100 BLDRS, ADRD
1.04% S&P 500 SPDRs LargeCap Blend, SPY
1.03% Pharmaceutical H, PPH
1.02% Dividend DJ Select, DVY
1.02% Dividend SPDR, SDY
1.01% Emerging VIPERs, VWO
1.00% Austria Index, EWO
1.00% Health Care VIPERs, VHT
1.00% Semiconductor H, SMH
0.97% Biotech & Genome, PBE
0.96% Health Care SPDR, XLV
0.94% Dividend High Yield Equity PS, PEY
0.92% Emerging 50 BLDRS, ADRE
0.92% DIAMONDS (DJIA), DIA
0.91% France Index, EWQ
0.87% Dividend Achievers PS, PFM
0.87% Pacific VIPERs, VPL
0.82% Healthcare DJ, IYH
0.81% Telecom H, TTH
0.81% Sweden Index, EWD
0.77% Value SmallCap VIPERS, VBR
0.74% MidCap S&P 400 SPDRs, MDY
0.74% Growth EAFE MSCI, EFG
0.73% Belgium Index, EWK
0.71% EAFE Index, EFA
0.68% Telecommunications Global, IXP
0.68% Utilities, PUI
0.64% Biotech H, BBH
0.62% Metals & Mining SPDR, XME
0.55% Materials SPDR, XLB
0.54% Consumer Non-Cyclical, IYK
0.54% Utilities DJ, IDU
0.47% Utilities VIPERs, VPU
0.44% Bond, Corp, LQD
0.43% Mexico Index, EWW
0.38% Consumer Staples VIPERs, VDC
0.36% LargeCap Blend Dynamic PS, PWC
0.34% Utilities H, UTH
0.32% Utilities SPDR, XLU
0.31% Pacific ex-Japan, EPP
0.27% Bond, Aggregate, AGG
0.26% Biotech SPDR, XBI
0.25% Insurance, PIC
0.22% Homebuilders SPDR, XHB
0.19% China LargeCap Growth G D H USX PS, PGJ
0.18% WilderHill Clean Energy PS, PBW
0.10% Real Estate US DJ, IYR
0.05% Commodity Tracking, DBC
0.01% Latin Am 40, ILF
-0.02% Brazil Index, EWZ
-0.04% Australia Index, EWA
-0.06% Bond, 1-3 Year Treasury, SHY
-0.09% Bond, 20+ Years Treasury, TLT
-0.09% Bond, TIPS, TIP
-0.10% Bond, 10 Year Treasury, IEF
-0.11% REIT Wilshire, RWR
-0.13% South Africa Index, EZA
-0.13% Realty Cohen & Steers, ICF
-0.57% REIT VIPERs, VNQ
-0.68% Consumer Staples SPDR, XLP
-1.07% Short 100% S&P 500, SH
-1.48% Short 100% MidCap 400, MYY
-1.56% Short 200% MidCap 400 PS, MZZ
-1.57% Short 100% QQQ, PSQ
-1.65% Short 100% Dow 30, DOG
-1.88% Silver Trust iS, SLV
-2.10% Gold Shares S.T., GLD
-2.17% Short 200% S&P 500 PS, SDS
-2.29% Short 200% Dow 30 PS, DXD
-4.27% Short 200% QQQ PS, QID
