By Robert W. Colby, Senior Analyst TraderPlanet.com
Stocks are showing signs of fatigue.
Indicators measuring short-term upside momentum have been slowing for stocks.
Stocks were overbought: last week RSI (14) at 64.29 was higher than it had been anytime since the October top, as calculated based on the S&P 500.
Stock trading volume has been failing. Volume should rise on rallies, but volume has remained low during the April-May rally.
Stocks were overbought: last week RSI (14) at 64.29 was higher than it had been anytime since the October top, as calculated based on the S&P 500. The recent 7-week upward tilting stock price correction had been more persistent than any rally since the one that ended on 10/11/07. The March-May rally still may prove to be nothing more than a Secondary Reaction Continuation Pattern within the context of a Primary Bearish Trend. It is not clear that the Bear has gone into hibernation–he may be merely hiding out for a while. The conflict between the short-term trend and the longer-term trend seems to be unresolved, in my judgment.
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
10.52% , S , SPRINT NEXTEL
6.01% , AMD , ADV MICRO DEV
0.63% , EWI , Italy Index, EWI
2.68% , SSCC , Smurfit-Stone Container Corporation
2.55% , RHT , Red Hat Inc.
2.15% , PXE , Energy Exploration & Prod, PXE
0.69% , FPX , IPOs, First Tr IPOX-100, FPX
6.23% , X , US STEEL CORP
0.63% , EWD , Sweden Index, EWD
4.24% , KBH , KB HOME
1.44% , TE , TECO ENERGY
2.25% , BUD , ANHEUSER BUSCH
0.63% , EWA , Australia Index, EWA
0.85% , EWG , Germany Index, EWG
2.67% , ABI , Applera Corp-Applied Biosystems Group (ABI)
3.89% , KG , KING PHARM
2.02% , SNDK , SanDisk Corporation
2.84% , UST , UST
3.38% , FLR , FLUOR
0.16% , EZU , EMU Europe Index, EZU
1.47% , SNA , SNAP ON
2.96% , MV , METAVANTE TECHNOLOGIES, MV
1.27% , ACV , Alberto-Culver Co.
0.07% , PHW , Hardware & Electronics, PHW
1.18% , LNCR , Lincare Holdings Inc
1.45% , MAS , MASCO
1.51% , HSIC , Henry Schein Inc
1.95% , AET , AETNA
1.41% , THC , TENET HEALTHCARE
1.85% , CC , CIRCUIT CITY STR
0.67% , WOR , WORTHINGTON INDS
1.27% , EZA , South Africa Index, EZA
1.48% , IPG , INTERPUBLIC GRP
3.58% , USO , Oil, Crude, U.S. Oil Fund, USO
0.52% , EWK , Belgium Index, EWK
2.58% , GAS , NICOR
0.47% , EDS , ELECTR DATA
1.35% , VDE , Energy VIPERs, VDE
0.46% , LTR , LOEWS
0.11% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-32.41% , IIH , Internet Infrastructure H, IIH
-15.00% , YHOO , YAHOO
-1.11% , PHJ , Dividend Growth PS, PHJ
-10.37% , CFC , COUNTRYWIDE FNCL
-1.06% , UTH , Utilities H, UTH
-6.81% , CZN , CITIZENS COMMS STK B
-8.50% , XL , XL CAPITAL STK A
-4.45% , CEG , CONSTELL ENERGY
-1.34% , RZV , Value SmallCap S&P 600, RZV
-4.10% , FNM , FANNIE MAE
-2.22% , PBW , WilderHill Clean Energy PS, PBW
-0.60% , IWW , Value LargeCap Russell 3000, IWW
-0.43% , EWU , United Kingdom Index, EWU
-2.52% , CCE , COCA COLA ENTER
-2.71% , ADSK , AUTODESK
-4.29% , HHH , Internet H, HHH
-0.18% , PBJ , Food & Beverage, PBJ
-1.86% , STJ , ST JUDE MEDICAL
-2.63% , RX , IMS HEALTH
-1.66% , SRCL , Stericycle, SRCL
-3.38% , CMS , CMS ENERGY
-1.53% , TMK , TORCHMARK
-0.45% , NY , Value LargeCap NYSE 100 iS, NY
-2.46% , RDC , ROWAN COMPANIES
-0.74% , VPU , Utilities VIPERs, VPU
-2.75% , LPX , LOUISIANA PAC
-3.61% , DISCA , Discovery Holding Co.
-4.50% , AW , ALLIED WASTE IND
-3.48% , TIF , TIFFANY
-1.90% , FPL , FPL GROUP INC
-2.07% , IR , INGER RAND
-1.48% , PLL , PALL
-2.15% , ROK , ROCKWELL AUTOMAT
-3.04% , SHLD , SEARS HOLDINGS
-0.19% , JKK , Growth SmallCap iS M, JKK
-2.75% , LBTYA , Liberty Global Inc. (LBTYA)
-2.43% , PNW , PINNACLE WEST
-2.90% , LRCX , LAM RESEARCH CORP
-1.16% , BCR , C R BARD
-2.32% , NWL , NEWELL RUBBER
Sectors: among the 9 major U.S. sectors, 2 rose and 8 fell.
Major Sectors Ranked for the Day
% Price Change Sector
2.26% Materials SPDR, XLB
1.45% Energy SPDR, XLE
-0.26% Industrial SPDR, XLI
-0.28% Health Care SPDR, XLV
-0.36% Consumer Staples SPDR, XLP
-0.44% Technology SPDR, XLK
-1.11% Consumer Discretionary SPDR, XLY
-1.44% Utilities SPDR, XLU
-1.73% Financial SPDR, XLF
Energy (XLE) Neutral, Market Weight. On 4/22/08, both the XLE price close and the XLE/SPY Relative Strength Ratio rose to new all-time highs, again 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.
Industrial (XLI) Neutral, Market Weight. On 5/1/08, the XLI/SPY Relative Strength Ratio rose to a new 3-month high, confirming an improving intermediate-term trend.
Consumer Staples (XLP) Neutral, Market Weight. On 5/2/08, the XLP/SPY Relative Strength Ratio fell to a new 3-month low, confirming a corrective intermediate-term trend.
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.
Technology (XLK) Neutral, Market Weight. On 4/24/08, the XLK/SPY Relative Strength Ratio rose to a new 3-month high, signaling an improving intermediate-term trend.
Consumer Discretionary (XLY) Bearish, Underweight. On 4/30/08, the XLY/SPY Relative Strength Ratio fell to a new 3-month 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 4/22/08, the XLV/SPY Relative Strength Ratio fell to a new 6-year low, again confirming the existing Primary Bearish trend.
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 underperformed short-term, over the past 2 weeks. 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 June futures jumped up to another new all-time high, confirming uptrends in all time frames. 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 June futures recovered over the past two trading days but are still in an intermediate-term Secondary Reaction, downside correction. Last week, Gold fell to a new 4-month low. Gold has been in a correction phase since 3/17/08. Longer term, the 7-year trend is still 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) / Gold Bullion Relative Strength Ratio fell to another new low on 4/29/08. Longer-term, GDX significantly underperformed Gold since 10/31/07. Therefore, GDX trends are Bearish relative to Gold itself.
U.S. Treasury Bond prices still could be in a Secondary Reaction, intermediate-term downside correction phase. Bond prices benefit from fears of financial crisis, and they correct to the downside when financial crisis takes a back seat to some other news of the day.
The U.S. dollar corrected moderately within its minor up trend. The U.S. dollar has been rising since its low on 4/22/08. The major trend of the dollar remains down, however.
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 40.9% Bulls versus 31.8% Bears as of 4/30/08, according to the weekly Investors Intelligence survey of newsletter advisors. The Bull/Bear ratio rose to 1.29, up from 1.10 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 18.90, is very 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 22.43, is very 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 0.63, which indicates relatively 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 1.28, which indicates relatively neutral sentiment. The ratio’s 4-year simple moving average is 1.50, 4-year median is 1.47, and 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 still may 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.
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 (1,407.49):
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
1,435.65, low of 12/18/2007
1,430.28, high of 1/8/08
Potential Support
1,383.07, low of 5/1/2008
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:
3.62% Metals & Mining SPDR, XME
3.58% Oil, Crude, U.S. Oil Fund, USO
2.26% Materials SPDR, XLB
2.15% Energy Exploration & Prod, PXE
2.08% Commodity Tracking, DBC
2.00% Gold Shares S.T., GLD
2.00% Basic Materials DJ US, IYM
1.95% Silver Trust iS, SLV
1.69% Materials VIPERs, VAW
1.61% Natural Resource iS GS, IGE
1.47% Short 200% Dow 30 PS, DXD
1.45% Energy SPDR, XLE
1.42% Short 200% S&P 500 PS, SDS
1.35% Mexico Index, EWW
1.35% Energy VIPERs, VDE
1.27% South Africa Index, EZA
1.17% Short 200% QQQ PS, QID
1.16% Energy DJ, IYE
1.15% Biotech H, BBH
1.14% Oil & Gas, PXJ
1.13% Oil Services H, OIH
1.09% Latin Am 40, ILF
1.03% Energy Global, IXC
0.85% Germany Index, EWG
0.84% Short 100% Dow 30, DOG
0.76% Short 200% MidCap 400 PS, MZZ
0.69% IPOs, First Tr IPOX-100, FPX
0.64% Spain Index, EWP
0.63% Italy Index, EWI
0.63% Sweden Index, EWD
0.63% Australia Index, EWA
0.63% Pacific ex-Japan, EPP
0.52% Belgium Index, EWK
0.48% Brazil Index, EWZ
0.42% Malaysia Index, EWM
0.40% Japan LargeCap Blend TOPIX 150, ITF
0.40% Canada Index, EWC
0.34% Value EAFE MSCI, EFV
0.33% Growth EAFE MSCI, EFG
0.32% Short 100% S&P 500, SH
0.30% Telecommunications Global, IXP
0.29% Austria Index, EWO
0.27% Short 100% QQQ, PSQ
0.24% Value Line Timeliness MidCap Gr, PIV
0.24% Bond, TIPS, TIP
0.23% Growth MidCap 400 B, IJK
0.19% European VIPERs, VGK
0.17% EAFE Index, EFA
0.16% Europe 100 BLDRS, ADRU
0.16% EMU Europe Index, EZU
0.15% Japan Index, EWJ
0.15% Bond, 10 Year Treasury, IEF
0.14% Bond, Corp, LQD
0.13% MidCap S&P 400 iS, IJH
0.13% Emerging 50 BLDRS, ADRE
0.12% Growth Large Cap, ELG
0.11% Value LargeCap Euro STOXX 50 DJ, FEU
0.11% Bond, 1-3 Year Treasury, SHY
0.07% Nanotech Lux, PXN
0.07% Short 100% MidCap 400, MYY
0.07% Europe 350 S&P Index, IEV
0.07% Hardware & Electronics, PHW
0.06% Financials Global LargeCap Value, IXG
0.06% Semiconductor SPDR, XSD
0.06% MidCap Growth iS M, JKH
0.06% Growth LargeCap iS M, JKE
0.06% Biotech & Genome, PBE
0.05% France Index, EWQ
0.04% Euro STOXX 50, FEZ
0.04% Bond, Aggregate, AGG
0.03% Biotechnology, IBB
0.03% SmallCap Core iS M, JKJ
0.01% Developed 100 BLDRS, ADRD
0.00% Bond, 20+ Years Treasury, TLT
0.00% Internet B2B H, BHH
0.00% Pharmaceuticals, PJP
0.00% Singapore Index, EWS
-0.03% Growth SmallCap VIPERs, VBK
-0.04% Value 40 Large Low P/E FT DB, FDV
-0.04% Growth Mid Cap Dynamic PS, PWJ
-0.05% Networking, PXQ
-0.06% Lg Cap Growth PSD, PWB
-0.06% Realty Cohen & Steers, ICF
-0.07% Asia 50 BLDRS, ADRA
-0.07% China LargeCap Growth G D H USX PS, PGJ
-0.07% MidCap VIPERs, VO
-0.07% Biotech SPDR, XBI
-0.07% Emerging Markets, EEM
-0.08% Switzerland Index, EWL
-0.08% Healthcare Global, IXJ
-0.09% Homebuilders SPDR, XHB
-0.10% Growth Small Cap DJ, DSG
-0.10% Growth MidCap Russell, IWP
-0.10% LargeCap Blend Dynamic PS, PWC
-0.11% REIT Wilshire, RWR
-0.13% Growth S&P 500/BARRA, IVW
-0.14% Growth VIPERs, VUG
-0.16% Consumer Staples VIPERs, VDC
-0.16% Value MidCap S&P 400 B, IJJ
-0.17% Netherlands Index, EWN
-0.17% Value MidCap Dynamic PS, PWP
-0.18% Food & Beverage, PBJ
-0.18% Consumer Non-Cyclical, IYK
-0.19% Extended Mkt VIPERs, VXF
-0.19% Health Care VIPERs, VHT
-0.19% Growth SmallCap iS M, JKK
-0.20% MidCap Russell, IWR
-0.20% Growth BARRA Small Cap 600, IJT
-0.20% Growth S&P 500, RPG
-0.21% Growth LargeCap Russell 3000, IWZ
-0.24% Water Resources, PHO
-0.24% Value MidCap iS M, JKI
-0.24% Real Estate US DJ, IYR
-0.25% MidCap Blend Core iS M, JKG
-0.25% Wilshire 5000 ST TM, TMW
-0.26% Industrial SPDR, XLI
-0.27% Global 100, IOO
-0.27% Pacific VIPERs, VPL
-0.27% LargeCap VIPERs, VV
-0.27% Growth 1000 Russell, IWF
-0.28% REIT VIPERs, VNQ
-0.28% Health Care SPDR, XLV
-0.29% Growth LargeCap NASDAQ 100, QQQQ
-0.29% LargeCap Blend Russell 3000, IWV
-0.29% LargeCap Blend Total Market DJ, IYY
-0.29% MidCap S&P 400 SPDRs, MDY
-0.29% Dividend SPDR, SDY
-0.30% LargeCap Blend NYSE Composite iS, NYC
-0.31% Ultra MidCap400 Double, MVV
-0.31% Info Tech VIPERs, VGT
-0.31% Value MidCap Russell, IWS
-0.32% Emerging VIPERs, VWO
-0.32% LargeCap Blend S&P 1500 iS, ISI
-0.33% Healthcare DJ, IYH
-0.33% Transportation Av DJ, IYT
-0.33% Building & Construction, PKB
-0.34% Technology GS, IGM
-0.34% SmallCap Russell 2000, IWM
-0.35% Value SmallCap iS M, JKL
-0.36% Growth MidCap S&P 400, RFG
-0.36% Growth SmallCap R 2000, IWO
-0.36% Value SmallCap Russell 2000, IWN
-0.36% Small Cap VIPERs, VB
-0.36% Consumer Staples SPDR, XLP
-0.36% Micro Cap Zachs, PZI
-0.38% LargeCap 1000 R, IWB
-0.38% Internet Architecture H, IAH
-0.39% Growth LargeCap NASDAQ Fidelity, ONEQ
-0.40% LargeCap Blend Core iS M, JKD
-0.40% Value SmallCap VIPERS, VBR
-0.41% LargeCap Blend Socially Responsible iS, KLD
-0.41% LargeCap Blend S&P 100, OEF
-0.43% Insurance, PIC
-0.43% United Kingdom Index, EWU
-0.44% Software, PSJ
-0.44% Microcap Russell, IWC
-0.44% Technology SPDR, XLK
-0.45% Value LargeCap NYSE 100 iS, NY
-0.46% Industrial LargeCap Blend DJ US, IYJ
-0.46% Telecom DJ US, IYZ
-0.47% Aerospace & Defense, PPA
-0.47% Dividend Appreciation Vipers, VIG
-0.47% South Korea Index, EWY
-0.47% S&P 500 iS LargeCap Blend, IVV
-0.47% Value 1000 Russell, IWD
-0.48% Value SmallCap S&P 600 B, IJS
-0.48% Value Small Cap DJ, DSV
-0.48% S&P 500 SPDRs LargeCap Blend, SPY
-0.48% Technology Global, IXN
-0.49% Pharmaceutical H, PPH
-0.49% SmallCap S&P 600, IJR
-0.49% Dividend DJ Select, DVY
-0.50% Hong Kong Index, EWH
-0.50% OTC Dynamic PS, PWO
-0.50% Technology DJ US, IYW
-0.51% Blend Total Market VIPERs, VTI
-0.52% Value Large Cap DJ, ELV
-0.52% Telecom H, TTH
-0.52% Networking, IGN
-0.54% Software H, SWH
-0.54% Industrials VIPERs, VIS
-0.54% Value LargeCap Dynamic PS, PWV
-0.57% LargeCap Blend S&P=Weight R, RSP
-0.59% Value MidCap S&P 400, RFV
-0.60% Dividend International, PID
-0.60% Value LargeCap Russell 3000, IWW
-0.61% Dividend Achievers PS, PFM
-0.61% Value S&P 500 B, IVE
-0.61% Value VIPERs, VTV
-0.62% Software, IGV
-0.62% Utilities, PUI
-0.63% Growth SmallCap Dynamic PS, PWT
-0.66% Global Titans, DGT
-0.68% Value SmallCap Dynamic PS, PWY
-0.69% Ultra S&P500 Double, SSO
-0.69% Semiconductor H, SMH
-0.71% Semiconductors, PSI
-0.72% Semiconductor iS GS, IGW
-0.73% Broadband H, BDH
-0.74% Utilities VIPERs, VPU
-0.74% Value LargeCap Fundamental RAFI 1000, PRF
-0.76% Value LargeCap iS M, JKF
-0.76% Bank Regional H, RKH
-0.80% Utilities DJ, IDU
-0.81% Value S&P 500, RPV
-0.83% LargeCap Rydex Rus Top 50, XLG
-0.84% DIAMONDS (DJIA), DIA
-0.85% Technology MS sT, MTK
-0.86% Dividend Leaders, FDL
-0.88% SmallCap PS Zacks, PZJ
-0.91% China 25 iS, FXI
-0.93% Consumer Cyclical DJ, IYC
-0.97% Leisure & Entertainment, PEJ
-1.04% Telecommunications & Wireless, PTE
-1.06% Utilities H, UTH
-1.09% Telecom Services VIPERs, VOX
-1.11% Dividend Growth PS, PHJ
-1.11% Consumer Discretionary SPDR, XLY
-1.17% Financials VIPERs, VFH
-1.18% Consumer D. VIPERs, VCR
-1.19% Financial Services DJ, IYG
-1.21% Ultra Dow30 Double, DDM
-1.22% Financial DJ US, IYF
-1.29% Ultra QQQ Double, QLD
-1.34% Value SmallCap S&P 600, RZV
-1.42% Capital Markets KWB ST, KCE
-1.43% Retail H, RTH
-1.44% Utilities SPDR, XLU
-1.73% Financial SPDR, XLF
-1.79% Dividend High Yield Equity PS, PEY
-2.01% Retail, PMR
-2.13% Taiwan Index, EWT
-2.22% WilderHill Clean Energy PS, PBW
-4.29% Internet H, HHH
-32.41% Internet Infrastructure H, IIH
