By Robert W. Colby, Senior Analyst TraderPlanet.com
Stocks fall on rising volume.
Short-term momentum oscillators fell sharply to their lowest levels in a week. They remain below their peaks from late April-early May. Momentum oscillators have been overbought and are diverging Bearishly from price, thereby giving warning that the time for a consolidation or correction might be approaching. MACD is below its falling signal line, and the MACD Histogram shows Bearish acceleration.
Here is a stock screen I designed to pick out potential “event” stocks. 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.
6.67% , CMI , CUMMINS
4.59% , AMZN , Amazoncom Inc
3.35% , EFX , EQUIFAX
2.97% , NVDA , NVIDIA
3.80% , BF.B , BROWN FORMAN STK B
0.96% , BUD , ANHEUSER BUSCH
1.85% , AV , AVAYA
2.16% , PCAR , PACCAR
1.37% , DOW , DOW CHEMICAL
1.44% , BRCM , BROADCOM STK A
1.40% , ISIL , INTERSIL CORP
3.12% , PLL , PALL
1.41% , SDS , Short 200% S&P 500 PS, SDS
2.52% , DLTR , Dollar Tree Stores Inc
2.32% , GOOG , Google
1.01% , IPG , INTERPUBLIC GRP
0.48% , F , FORD MOTOR
1.17% , DXD , Short 200% Dow 30 PS, DXD
1.35% , X , US STEEL CORP
1.76% , EK , EASTMAN KODAK
1.37% , MRVL , MARVELL TECHNOLOGY
1.04% , CCL , CARNIVAL STK A
0.63% , BDK , BLACK & DECKER
1.14% , NCR , NCR
0.70% , CSCO , CISCO SYSTEMS
1.06% , CTB , COOPER TIRE
1.89% , CHKP , Check Point Software Technologies Ltd
0.57% , DE , DEERE & CO
1.97% , FD , FED DEPT STRS
1.42% , ERIC.O , LM Ericsson Telephone Company
0.48% , PX , PRAXAIR
0.97% , SNA , SNAP ON
1.12% , CSC , COMPUTER SCIENCE
0.88% , MOLX , MOLEX
1.29% , GENZ , GENZYME GEN
0.38% , DOV , DOVER
1.20% , MZZ , Short 200% MidCap 400 PS, MZZ
0.73% , QCOM , QUALCOMM
1.15% , PMTC.O , PARAMETRIC
0.57% , ALTR , ALTERA
0.15% , PSQ , Short 100% QQQ, PSQ
0.67% , CEPH , Cephalon Inc
3.69% , NOVL , NOVELL
0.69% , MYY , Short 100% MidCap 400, MYY
0.25% , BDH , Broadband H, BDH
0.57% , DJ , DOW JONES
0.14% , QLD , Ultra QQQ Double, QLD
0.45% , SWK , STANLEY WORKS
1.23% , AMGN , AMGEN
0.44% , ADI , ANALOG DEVICES
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-5.44% , BBBY , BED BATH BEYOND
-4.85% , CIEN.O , CIENA
-4.19% , RYAAY , Ryanair Holdings plc
-0.77% , PIC , Insurance, PIC
-3.37% , GIS , GENERAL MILLS
-0.52% , ELV , Value Large Cap DJ, ELV
-1.21% , TRB , TRIBUNE
-0.56% , IWW , Value LargeCap Russell 3000, IWW
-0.60% , IYG , Financial Services DJ, IYG
-2.59% , BEN , FRANKLIN RSC
-2.31% , GTW , GATEWAY
-0.50% , ISI , LargeCap Blend S&P 1500 iS, ISI
-1.04% , RZV , Value SmallCap S&P 600, RZV
-1.91% , K , KELLOGG
-1.14% , EKH , Europe 2001 H, EKH
-1.45% , SNV , SYNOVUS
-0.60% , TMW , Wilshire 5000 ST TM, TMW
-2.52% , SPG , SIMON PROP GRP
-2.90% , WFMI , Whole Foods Market Inc
-0.39% , IYH , Healthcare DJ, IYH
-1.73% , PNC , PNC FINL SVC
-0.89% , EZU , EMU Europe Index, EZU
-2.61% , EBAY , EBAY
-1.73% , IYR , Real Estate US DJ, IYR
-0.66% , KLD , LargeCap Blend Socially Responsible iS, KLD
-0.61% , XLP , Consumer Staples SPDR, XLP
-0.71% , RKH , Bank Regional H, RKH
-2.56% , PETM , PETsMART Inc
-0.52% , IYK , Consumer Non-Cyclical, IYK
-0.27% , IGM , Technology GS, IGM
-1.76% , NTRS , NORTHERN TRUST
-0.51% , VV , LargeCap VIPERs, VV
-2.20% , MCK , MCKESSON CORP
-1.88% , FAST , Fastenal Company
-0.78% , PZI , Micro Cap Zachs, PZI
-1.42% , TIN , TEMPLE INLAND
-2.45% , HAS , HASBRO
-0.68% , EWN , Netherlands Index, EWN
-2.30% , MBI , MBIA
-1.53% , PPL , PPL
-2.16% , BEAS , BEA Systems Inc
-0.53% , IWR , MidCap Russell, IWR
-1.58% , PEG , PUBL SVC ENTER
-1.74% , GAS , NICOR
-1.24% , ITW , ILLINOIS TOOL
-1.16% , MNST , MONSTER WORLDWID
-1.03% , LMT , LOCKHEED MARTIN
-2.39% , ODP , OFFICE DEPOT
-1.29% , AGN , ALLERGAN
Utilities broke down. The Dow-Jones Utility Average fell steeply to a new seven-week closing price low. Utilities are below their 50-day moving average and have been relatively weak since 5/22/07.
Foreign Stocks remain relatively strong. The ratio of the EAFE (international developed country stock markets, ex the U.S. and Canada) relative to the S&P 500 ticked slightly lower on Tuesday but rose to a new three-week high on 6/4/07. In the bigger picture, foreign stocks outperformed U.S. stocks since the Bull Market started in 2002, and that is a powerful major trend that continues.
NASDAQ stocks remain weaker than the S&P, long term. The ratio of the NASDAQ Composite relative to the S&P 500 fell to a new seven-month low on 5/17/07, confirming the long term relative Bearish downtrend in force since 3/10/00.
Growth Stocks relatively firm since 5/16/07. The ratio of Growth stocks relative to Value stocks has been recovering slightly, but the larger trends remain Bearish.
Small Caps sagged. The ratio of Small Cap stocks relative to Large Caps (Russell 2000/Russell 1000) fell slightly. In longer-term perspective, the ratio has been heading down since 4/19/06, so the major trend is Bearish for Small Caps relative to Large Caps.
Semiconductors are underperforming. Semiconductor HOLDERS (SMH) fell over the past two sessions after recovering about half of its loss from its May peak, which was a normal bounce. The Semiconductor industry group has been underperforming for more than seven years, so the relative major trend remains Bearish.
Crude Oil is consolidating. USO fell slightly. It has been chopping up and down in a trading range since February. Previous lows at 47.30-47.39 appear to be offering technical support. Resistance appears in the 51-52 zone. The USO cyclical trend has been Bearish since USO peaked at 73.29 on 7/13/06. The U.S. OIL FUND ETF (AMEX: USO) is a good indicator for the market price of crude oil futures.
Energy Stocks paused in their uptrends. XLE eased slightly lower but remains in a strong major uptrend. Since 3/2/07, the stocks of the oil companies have been much stronger than oil as a commodity, and that still looks like an important continuing trend. XLE is the Energy Select Sector SPDR ETF.
Gold is falling down from resistance. StreetTRACKS Gold Trust ETF (NYSE: GLD), which reflects the market price of gold futures, moved slightly lower after previously recovering nearly half of April-May losses, which is normal for a countertrend bounce against a larger downtrend. GLD fell to a new two-month closing price low on 5/30/07, thereby confirming again an ongoing and significant downside correction.
Silver is stronger than Gold. iShares Silver Trust (AMEX: SLV) has been rising relative to gold over the most recent few weeks. But on an absolute basis, the larger silver trend looks like a trading range since the top on 5/11/06.
Gold Mines fell into neutral. The Gold Miners Index (XAU) has underperformed GLD since 5/31/1996.
Inflation Expections Rising. The ratio of the price of bond TIPS to 10-year U.S. Treasury Notes sagged slightly after rising to a new eight-month high on 6/4/07. This ratio has been rising since 1/16/07, thereby indicating a trend toward rising inflation expectations.
Bond prices fell steeply. On 6/5/07, TLT broke down to a new nine-month low, the lowest since August, 2006, confirmed by rising volume. The main trend is Bearish for iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT).
U.S. dollar continues down. On 6/5/07, the dollar broke down to its lowest level in nearly three weeks. The dollar has been in a major Bearish trend for nearly six years, since it peaked out at 121.29 on 7/5/2001.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
0.54% Swiss Franc
0.40% Japanese Yen
0.29% Euro Index
0.28% Australian Dollar
0.10% British Pound
-0.04% Computer Tech
-0.07% Nasdaq 100
-0.18% US Dollar Index
-0.25% Health Care
-0.27% Nasdaq Composite
-0.31% Oil Services
-0.37% Canadian Dollar
-0.42% South Korea
-0.46% 30Y T-Bond
-0.47% S&P 100
-0.47% Health Care
-0.47% Health Care Products
-0.47% United Kingdom
-0.49% Commodity Related
-0.53% S&P 500
-0.54% Russell 1000
-0.55% Wilshire 5000
-0.57% Russell 3000
-0.57% Natural Gas
-0.59% Dow Industrial
-0.59% Consumer Discretionary
-0.59% Hong Kong
-0.61% Consumer Staples
-0.62% NYSE Composite
-0.62% Value Line
-0.62% Disk Drives
-0.64% S&P Mid Caps
-0.74% Dow Transports
-0.80% Russell 2000
-0.81% S&P Small Caps
-0.82% Dow Composite
-0.84% AMEX Composite
-0.88% Broker Dealers
-1.04% Gold Mining
-1.48% Dow Utilities
To sum up the current position of the U.S. stock market:
Liquidity driven merger and acquisitions news has been helping to keep the old Bull alive. Both U.S. and foreign corporations hold excess cash after several years of rising profits, and so M&A speculation as well as leveraged buyouts and corporate stock buybacks have provided substantial Bullish stimulus to stock prices. In 2007, mergers and acquisitions are running about 60% ahead of 2006’s record pace, driven by rising stock prices and private-equity funds that raised more than $250 billion for takeovers since the start of 2006. Takeovers are on track to surpass 2006’s all-time high of $3.49 trillion, according to data compiled by Bloomberg.
Conservative earnings estimates also have been useful in keeping the old Bull alive. First quarter 2007 corporate earnings reflected a significant growth slowdown. Nevertheless, earnings were ahead of expectations, which had been lowered to very conservative levels in advance of actual reporting. Managements and Wall Street have learned that investors hate disappointments, so they simply don’t give them any–unless absolutely necessary.
Stocks generally are fully valued to over priced by long-term historical standards. But that alone does not mean that stocks cannot continue to trend higher.