By Robert W. Colby, Senior Analyst TraderPlanet.com
Stock price indexes broke down. Rally could be over.
All 9 Stock Sectors fell, with Financials down the most.
Stocks had been overbought, with RSI (14) above 64, at its highest level since the top last October 2007, based on the S&P 500.
Crude Oil jumped up to another new high, which is not good for the economy.
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
3.03% , CEPH , Cephalon Inc
0.78% , PHW , Hardware & Electronics, PHW
4.12% , PBI , PITNEY BOWES
2.88% , DIS , WALT DISNEY
4.59% , PMCS , PMC SIERRA
1.48% , MYY , Short 100% MidCap 400, MYY
2.06% , SH , Short 100% S&P 500, SH
2.40% , AM , AMER GREETINGS STK A
2.39% , FDO , FAMILY DLR STRS
1.94% , PSQ , Short 100% QQQ, PSQ
1.44% , USO , Oil, Crude, U.S. Oil Fund, USO
0.92% , BDK , BLACK & DECKER
1.08% , DLX , DELUXE
1.19% , NCR , NCR
1.07% , IBM , IBM
1.35% , ERIC.O , LM Ericsson Telephone Company
1.90% , PTV , PACTIV
1.10% , PTE , Telecommunications & Wireless, PTE
1.37% , QLGC , QLOGIC
0.27% , LQD , Bond, Corp, LQD
0.38% , EP , EL PASO
1.05% , CIEN.O , CIENA
0.52% , WLP , WELLPOINT HEALTH
3.76% , QID , Short 200% QQQ PS, QID
0.76% , HANS , Hansen Natural, HANS
0.71% , PLL , PALL
0.44% , MRK , MERCK & CO
0.32% , ASH , ASHLAND
0.26% , ATVI , Activision Inc.
0.68% , DOV , DOVER
0.85% , WMT , WAL MART STORES
3.87% , SDS , Short 200% S&P 500 PS, SDS
0.53% , WWY , WM WRIGLEY JR
0.25% , TIP , Bond, TIPS, TIP
2.25% , MZZ , Short 200% MidCap 400 PS, MZZ
0.04% , XSD , Semiconductor SPDR, XSD
0.82% , RAI , RJR TOBACCO HLDS
1.73% , DOG , Short 100% Dow 30, DOG
0.24% , AA , ALCOA
0.65% , MMC , MARSH & MCLENNAN
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol , Name
-1.89% , PIC , Insurance, PIC
-2.55% , BDH , Broadband H, BDH
-1.68% , ISI , LargeCap Blend S&P 1500 iS, ISI
-2.17% , SWH , Software H, SWH
-1.69% , IWB , LargeCap 1000 R, IWB
-4.46% , TNB , THOMAS & BETTS
-1.73% , IWC , Microcap Russell, IWC
-1.95% , EWN , Netherlands Index, EWN
-7.00% , CTB , COOPER TIRE
-2.61% , EWP , Spain Index, EWP
-1.55% , KLD , LargeCap Blend Socially Responsible iS, KLD
-1.29% , PUI , Utilities, PUI
-2.46% , RZV , Value SmallCap S&P 600, RZV
-5.26% , BSC , BEAR STEARNS
-10.49% , CTSH , Cognizant Technology Solutions
-0.88% , IYC , Consumer Cyclical DJ, IYC
-2.86% , FDL , Dividend Leaders, FDL
-1.85% , MTK , Technology MS sT, MTK
-0.31% , PXQ , Networking, PXQ
-3.09% , XHB , Homebuilders SPDR, XHB
-1.69% , JKK , Growth SmallCap iS M, JKK
-5.10% , STI , SUNTRUST BANKS
-1.06% , IJK , Growth MidCap 400 B, IJK
-5.87% , FXI , China 25 iS, FXI
-3.86% , EPP , Pacific ex-Japan, EPP
-1.32% , IYW , Technology DJ US, IYW
-2.25% , PWT , Growth SmallCap Dynamic PS, PWT
-5.17% , CHRW.O , CH Robinson Worldwide Inc, CHRWD
-4.03% , EWH , Hong Kong Index, EWH
-1.97% , IWW , Value LargeCap Russell 3000, IWW
-3.50% , GLW , CORNING
-2.15% , IBB , Biotechnology, IBB
-3.41% , DDS , DILLARD STK A
-4.90% , CAR , Avis Budget Group, Inc. (CAR)
-1.70% , TMW , Wilshire 5000 ST TM, TMW
-2.41% , CVG , CONVERGYS
-3.26% , AGN , ALLERGAN
-1.84% , PXN , Nanotech Lux, PXN
-2.05% , EZU , EMU Europe Index, EZU
-1.71% , IGV , Software, IGV
Sectors: among the 9 major U.S. sectors, none rose and 9 fell.
Major Sectors Ranked for the Day
% Price Change Sector
-0.88% Health Care SPDR, XLV
-0.96% Consumer Staples SPDR, XLP
-1.12% Materials SPDR, XLB
-1.51% Utilities SPDR, XLU
-1.54% Industrial SPDR, XLI
-1.76% Technology SPDR, XLK
-1.86% Energy SPDR, XLE
-1.88% Consumer Discretionary SPDR, XLY
-3.60% 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 5/6/08, the XLP/SPY Relative Strength Ratio fell to a new 3-month low, confirming a corrective intermediate-term trend.
Technology (XLK) Neutral, Market Weight. On 5/6/08, the XLK/SPY Relative Strength Ratio rose to a new 3-month high, signaling an improving 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.
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 5/6/08, 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 reversed to the downside and 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 turned slightly higher but are still 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 reversed to the upside, resuming 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 19.73, 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 23.51, 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 0.67, 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 1.11, which indicates Bearish 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 (1,392.57):
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
1,422.72, high of 5/2/2008
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 (1,392.57):
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
3.76% Short 200% QQQ PS, QID
2.86% Short 200% Dow 30 PS, DXD
2.25% Short 200% MidCap 400 PS, MZZ
2.06% Short 100% S&P 500, SH
1.94% Short 100% QQQ, PSQ
1.73% Short 100% Dow 30, DOG
1.48% Short 100% MidCap 400, MYY
1.44% Oil, Crude, U.S. Oil Fund, USO
1.10% Telecommunications & Wireless, PTE
0.78% Hardware & Electronics, PHW
0.43% Bond, 20+ Years Treasury, TLT
0.40% Bond, 10 Year Treasury, IEF
0.29% Bond, Aggregate, AGG
0.27% Bond, Corp, LQD
0.25% Bond, TIPS, TIP
0.18% Commodity Tracking, DBC
0.12% Bond, 1-3 Year Treasury, SHY
0.04% Semiconductor SPDR, XSD
-0.28% Metals & Mining SPDR, XME
-0.31% Networking, PXQ
-0.35% Energy Exploration & Prod, PXE
-0.53% Semiconductor H, SMH
-0.57% Internet B2B H, BHH
-0.62% Internet Architecture H, IAH
-0.65% SmallCap PS Zacks, PZJ
-0.66% Food & Beverage, PBJ
-0.76% IPOs, First Tr IPOX-100, FPX
-0.77% Canada Index, EWC
-0.85% Telecom Services VIPERs, VOX
-0.88% Health Care SPDR, XLV
-0.88% Consumer Cyclical DJ, IYC
-0.93% Value MidCap Dynamic PS, PWP
-0.94% Gold Shares S.T., GLD
-0.94% Consumer Staples VIPERs, VDC
-0.96% MidCap S&P 400 SPDRs, MDY
-0.96% Consumer Staples SPDR, XLP
-0.96% Retail H, RTH
-0.97% Natural Resource iS GS, IGE
-0.98% Leisure & Entertainment, PEJ
-1.00% Oil Services H, OIH
-1.02% Japan LargeCap Blend TOPIX 150, ITF
-1.03% MidCap S&P 400 iS, IJH
-1.06% Growth MidCap 400 B, IJK
-1.06% Biotech & Genome, PBE
-1.10% Value MidCap S&P 400, RFV
-1.11% Healthcare DJ, IYH
-1.12% Materials SPDR, XLB
-1.13% Energy Global, IXC
-1.16% Growth S&P 500, RPG
-1.17% Semiconductors, PSI
-1.20% Switzerland Index, EWL
-1.21% Extended Mkt VIPERs, VXF
-1.22% Semiconductor iS GS, IGW
-1.23% Growth BARRA Small Cap 600, IJT
-1.23% Oil & Gas, PXJ
-1.23% Growth Large Cap, ELG
-1.24% Energy VIPERs, VDE
-1.25% Basic Materials DJ US, IYM
-1.26% Biotech H, BBH
-1.26% Japan Index, EWJ
-1.27% Consumer Non-Cyclical, IYK
-1.27% Utilities DJ, IDU
-1.29% Value SmallCap VIPERS, VBR
-1.29% Global Titans, DGT
-1.29% Utilities, PUI
-1.30% LargeCap Rydex Rus Top 50, XLG
-1.31% Value 40 Large Low P/E FT DB, FDV
-1.31% SmallCap S&P 600, IJR
-1.32% Technology GS, IGM
-1.32% Technology DJ US, IYW
-1.33% Austria Index, EWO
-1.34% Value MidCap S&P 400 B, IJJ
-1.34% Growth MidCap Russell, IWP
-1.34% Value SmallCap Russell 2000, IWN
-1.35% Small Cap VIPERs, VB
-1.36% Building & Construction, PKB
-1.36% Silver Trust iS, SLV
-1.37% Utilities VIPERs, VPU
-1.38% Micro Cap Zachs, PZI
-1.38% Growth Small Cap DJ, DSG
-1.38% Value MidCap iS M, JKI
-1.39% Value Small Cap DJ, DSV
-1.40% Dividend International, PID
-1.41% Blend Total Market VIPERs, VTI
-1.41% SmallCap Core iS M, JKJ
-1.41% MidCap VIPERs, VO
-1.42% DIAMONDS (DJIA), DIA
-1.43% MidCap Russell, IWR
-1.43% MidCap Blend Core iS M, JKG
-1.43% Biotech SPDR, XBI
-1.43% Materials VIPERs, VAW
-1.43% Energy DJ, IYE
-1.45% LargeCap Blend Dynamic PS, PWC
-1.45% Growth VIPERs, VUG
-1.46% Consumer D. VIPERs, VCR
-1.46% Growth SmallCap VIPERs, VBK
-1.46% Telecom H, TTH
-1.46% Water Resources, PHO
-1.46% Lg Cap Growth PSD, PWB
-1.47% Growth 1000 Russell, IWF
-1.47% Value MidCap Russell, IWS
-1.47% Health Care VIPERs, VHT
-1.47% Germany Index, EWG
-1.49% Technology Global, IXN
-1.49% Growth LargeCap Russell 3000, IWZ
-1.49% Value SmallCap S&P 600 B, IJS
-1.51% Utilities SPDR, XLU
-1.53% Networking, IGN
-1.53% Growth S&P 500/BARRA, IVW
-1.54% Growth SmallCap R 2000, IWO
-1.54% Industrial SPDR, XLI
-1.54% Growth MidCap S&P 400, RFG
-1.55% LargeCap Blend Core iS M, JKD
-1.55% LargeCap Blend Socially Responsible iS, KLD
-1.55% Growth LargeCap iS M, JKE
-1.55% Dividend SPDR, SDY
-1.55% Aerospace & Defense, PPA
-1.55% Sweden Index, EWD
-1.61% LargeCap Blend S&P=Weight R, RSP
-1.62% Telecommunications Global, IXP
-1.62% Global 100, IOO
-1.64% OTC Dynamic PS, PWO
-1.65% Value EAFE MSCI, EFV
-1.65% MidCap Growth iS M, JKH
-1.67% Value LargeCap Euro STOXX 50 DJ, FEU
-1.67% Dividend Appreciation Vipers, VIG
-1.67% LargeCap Blend Total Market DJ, IYY
-1.68% Taiwan Index, EWT
-1.68% LargeCap Blend S&P 1500 iS, ISI
-1.68% Pharmaceuticals, PJP
-1.69% Growth SmallCap iS M, JKK
-1.69% LargeCap 1000 R, IWB
-1.69% Industrials VIPERs, VIS
-1.70% Wilshire 5000 ST TM, TMW
-1.71% Software, IGV
-1.71% Pharmaceutical H, PPH
-1.72% Europe 350 S&P Index, IEV
-1.72% Value LargeCap Dynamic PS, PWV
-1.72% Telecom DJ US, IYZ
-1.73% Microcap Russell, IWC
-1.73% Developed 100 BLDRS, ADRD
-1.73% Value SmallCap Dynamic PS, PWY
-1.73% LargeCap Blend Russell 3000, IWV
-1.74% Malaysia Index, EWM
-1.75% EAFE Index, EFA
-1.75% Europe 100 BLDRS, ADRU
-1.75% Value Line Timeliness MidCap Gr, PIV
-1.75% LargeCap Blend S&P 100, OEF
-1.76% United Kingdom Index, EWU
-1.76% Technology SPDR, XLK
-1.77% Growth LargeCap NASDAQ Fidelity, ONEQ
-1.78% S&P 500 SPDRs LargeCap Blend, SPY
-1.78% SmallCap Russell 2000, IWM
-1.79% WilderHill Clean Energy PS, PBW
-1.79% Growth EAFE MSCI, EFG
-1.79% Utilities H, UTH
-1.81% S&P 500 iS LargeCap Blend, IVV
-1.81% LargeCap Blend NYSE Composite iS, NYC
-1.82% Growth LargeCap NASDAQ 100, QQQQ
-1.82% Industrial LargeCap Blend DJ US, IYJ
-1.82% European VIPERs, VGK
-1.83% Retail, PMR
-1.84% Nanotech Lux, PXN
-1.85% Technology MS sT, MTK
-1.86% Value LargeCap NYSE 100 iS, NY
-1.86% Energy SPDR, XLE
-1.88% LargeCap VIPERs, VV
-1.88% Consumer Discretionary SPDR, XLY
-1.89% Insurance, PIC
-1.92% Dividend DJ Select, DVY
-1.92% Value SmallCap iS M, JKL
-1.94% Pacific VIPERs, VPL
-1.94% France Index, EWQ
-1.94% Euro STOXX 50, FEZ
-1.95% Netherlands Index, EWN
-1.95% Value VIPERs, VTV
-1.97% Value LargeCap Russell 3000, IWW
-1.99% Value 1000 Russell, IWD
-1.99% Value S&P 500, RPV
-2.01% Internet Infrastructure H, IIH
-2.03% Mexico Index, EWW
-2.03% Healthcare Global, IXJ
-2.04% Value LargeCap Fundamental RAFI 1000, PRF
-2.05% EMU Europe Index, EZU
-2.05% Growth Mid Cap Dynamic PS, PWJ
-2.07% Dividend Achievers PS, PFM
-2.08% Software, PSJ
-2.10% Internet H, HHH
-2.15% Biotechnology, IBB
-2.16% Italy Index, EWI
-2.17% Software H, SWH
-2.20% Value S&P 500 B, IVE
-2.21% South Africa Index, EZA
-2.24% Value Large Cap DJ, ELV
-2.25% Growth SmallCap Dynamic PS, PWT
-2.26% Dividend Growth PS, PHJ
-2.30% Info Tech VIPERs, VGT
-2.35% Emerging VIPERs, VWO
-2.38% Value LargeCap iS M, JKF
-2.39% Realty Cohen & Steers, ICF
-2.41% Ultra MidCap400 Double, MVV
-2.46% Value SmallCap S&P 600, RZV
-2.48% Belgium Index, EWK
-2.55% Broadband H, BDH
-2.61% Spain Index, EWP
-2.68% REIT Wilshire, RWR
-2.68% Dividend High Yield Equity PS, PEY
-2.72% REIT VIPERs, VNQ
-2.73% Latin Am 40, ILF
-2.75% Financials Global LargeCap Value, IXG
-2.86% Dividend Leaders, FDL
-2.91% Asia 50 BLDRS, ADRA
-2.91% Ultra Dow30 Double, DDM
-2.94% Real Estate US DJ, IYR
-2.98% Emerging Markets, EEM
-3.06% Transportation Av DJ, IYT
-3.09% Homebuilders SPDR, XHB
-3.10% Capital Markets KWB ST, KCE
-3.16% Brazil Index, EWZ
-3.20% Singapore Index, EWS
-3.36% Emerging 50 BLDRS, ADRE
-3.39% Financial DJ US, IYF
-3.40% Australia Index, EWA
-3.49% Financials VIPERs, VFH
-3.60% Financial SPDR, XLF
-3.63% Ultra S&P500 Double, SSO
-3.63% Financial Services DJ, IYG
-3.68% Bank Regional H, RKH
-3.86% Pacific ex-Japan, EPP
-3.89% Ultra QQQ Double, QLD
-3.92% South Korea Index, EWY
-4.03% Hong Kong Index, EWH
-4.64% China LargeCap Growth G D H USX PS, PGJ
-5.87% China 25 iS, FXI