By Robert W. Colby, Senior Analyst TraderPlanet.com
NASDAQ Advance-Decline Line Hits New 3-Month Low
New Lows > New Highs on the NYSE
The Advance-Decline balance was Bearish on both the NYSE and NASDAQ. The Cumulative Daily Advance-Decline Line for the NASDAQ fell to its lowest level since the March 2007 low.
The number of New Lows was greater than the number of New Highs on the NYSE. That is a sell signal.
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
3.86% , TIF , TIFFANY
2.30% , SWK , STANLEY WORKS
4.19% , TEK , TEKTRONIX
1.42% , GWW , WW GRAINGER
2.10% , CSC , COMPUTER SCIENCE
0.94% , EWT , Taiwan Index, EWT
1.93% , APOL , APOLLO GROUP
1.47% , FDX , FEDEX
0.54% , PHO , Water Resources, PHO
2.15% , OMC , OMNICOM
2.28% , GM , GENERAL MOTORS
1.82% , AEP , AM ELEC POWER
1.14% , WEN , WENDYS INTL
1.62% , NKE , NIKE STK B
0.55% , SH , Short 100% S&P 500, SH
0.33% , BIIB , BIOGEN IDEC
1.56% , IPG , INTERPUBLIC GRP
0.94% , MYY , Short 100% MidCap 400, MYY
1.05% , K , KELLOGG
2.25% , ABT , ABBOTT LABS
0.21% , IYT , Transportation Av DJ, IYT
2.06% , MZZ , Short 200% MidCap 400 PS, MZZ
0.60% , LEG , LEGGETT & PLATT
0.30% , DOG , Short 100% Dow 30, DOG
0.83% , SDS , Short 200% S&P 500 PS, SDS
1.31% , QID , Short 200% QQQ PS, QID
1.05% , HUM , HUMANA
0.20% , HHH , Internet H, HHH
0.40% , TEVA , Teva Pharmaceutical Industries Limited
0.48% , CMS , CMS ENERGY
0.13% , USO , Oil, Crude, U.S. Oil Fund, USO
0.41% , MET , METLIFE
2.33% , R , RYDER SYSTEM
2.11% , FDO , FAMILY DLR STRS
0.67% , MCK , MCKESSON CORP
2.78% , RAI , RJR TOBACCO HLDS
0.36% , FNM , FANNIE MAE
1.76% , EXC , EXELON CORP
1.19% , SGP , SCHERING PLOUGH
0.96% , NWL , NEWELL RUBBER
0.24% , UTH , Utilities H, UTH
0.33% , CZN , CITIZENS COMMS STK B
0.23% , TIP , Bond, TIPS, TIP
0.54% , XLU , Utilities SPDR, XLU
0.59% , TE , TECO ENERGY
1.66% , HAS , HASBRO
0.84% , CTL , CENTURYTEL
0.60% , UPS , UNITED PARCEL STK B
1.75% , MCD , MCDONALDS
0.05% , IOO , Global 100, IOO
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-0.36% , RZG , Growth SmallCap S&P 600, RZG
-6.51% , CAR , Avis Budget Group, Inc. (CAR)
-1.45% , IIH , Internet Infrastructure H, IIH
-2.86% , VNQ , REIT VIPERs, VNQ
-0.36% , PMR , Retail, PMR
-0.89% , RZV , Value SmallCap S&P 600, RZV
-4.29% , ISIL , INTERSIL CORP
-0.72% , KLD , LargeCap Blend Socially Responsible iS, KLD
-0.89% , JKK , Growth SmallCap iS M, JKK
-2.49% , FLR , FLUOR
-0.84% , JKJ , SmallCap Core iS M, JKJ
-4.23% , BEAS , BEA Systems Inc
-0.63% , PWJ , Growth Mid Cap Dynamic PS, PWJ
-2.08% , CCU , CLEAR CHANNEL
-2.27% , IYR , Real Estate US DJ, IYR
-0.71% , IGN , Networking, IGN
-2.89% , NUE , NUCOR
-3.04% , PLD , PROLOGIS TRUST
-0.55% , IYC , Consumer Cyclical DJ, IYC
-0.93% , TBH , Telebras H, TBH
-1.66% , EWM , Malaysia Index, EWM
-0.41% , RPV , Value S&P 500, RPV
-1.15% , IWP , Growth MidCap Russell, IWP
-0.65% , PHJ , Dividend Growth PS, PHJ
-0.57% , IVW , Growth S&P 500/BARRA, IVW
-2.29% , ERTS , ELECTRONIC ARTS
-0.92% , EWG , Germany Index, EWG
-2.86% , EOG , EOG RESOURCES
-2.95% , DLX , DELUXE
-1.39% , SLV , Silver Trust iS, SLV
-1.00% , AV , AVAYA
-0.92% , IWS , Value MidCap Russell, IWS
-0.81% , MTK , Technology MS sT, MTK
-2.08% , BUD , ANHEUSER BUSCH
-1.37% , VFH , Financials VIPERs, VFH
-1.73% , ABK , AMBAC FINL GRP
-0.50% , PWO , OTC Dynamic PS, PWO
-3.23% , BSC , BEAR STEARNS
-1.89% , XHB , Homebuilders SPDR, XHB
-2.01% , ICF , Realty Cohen & Steers, ICF
-0.58% , IYY , LargeCap Blend Total Market DJ, IYY
-1.61% , TJX , TJX
-0.42% , VOX , Telecom Services VIPERs, VOX
-0.94% , MI , MARSHAL & ILSLEY
-1.71% , RWR , REIT Wilshire, RWR
-0.67% , NYC , LargeCap Blend NYSE Composite iS, NYC
-2.12% , DVN , DEVON ENERGY
-0.43% , BHH , Internet B2B H, BHH
-2.47% , LEN , Lennar Corp. (LEN)
-1.56% , XTO , XTO ENERGY INC
Sectors: among the nine major U.S. sectors, one rose and eight fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.54% Utilities
-0.17% Health Care
-0.26% Industrial
-0.35% Technology
-0.41% Consumer Discretionary
-0.44% Consumer Staples
-0.79% Financial
-0.80% Energy
-1.57% Materials
Materials (XLB) underperformed, but XLB’s major trend is Bullish. Relative strength made a new high on 6/22/07. XLB has been relatively strong compared to the S&P since 9/27/00. Overweight.
Industrial (XLI) outperformed, and XLI’s major trend is Bullish. XLI has been relatively strong compared to the S&P since 8/9/06. Overweight.
Technology (XLK) outperformed, and XLK’s relative strength trend is Bullish since its low on 7/24/06. In the big picture, however, XLK has been relatively weak compared to the S&P since 3/10/00.
Financial (XLF) underperformed again, and XLF’s major trend is Bearish. XLF has been relatively weak compared to the S&P since 3/23/04. Underweight.
Consumer Staples (XLP) underperformed, and XLP’s major trend is Bearish. XLP has been relatively weak compared to the S&P since 10/9/02. Underweight.
Utilities (XLU) outperformed, but XLU’s major trend is Bearish. XLU has been relatively weak compared to the S&P since 9/20/01. Underweight.
Health Care (XLV) outperformed, but XLV’s major trend is Bearish. XLV has been relatively weak compared to the S&P since 10/9/02. Underweight.
Consumer Discretionary (XLY) underperformed, and XLY’s major trend is Bearish. XLY has been relatively weak compared to the S&P since 1/5/05. Underweight.
Foreign Stocks outperformed, with Relative Strength at another new seven-week high. EFA has outperformed strongly since 6/13/07, and its short-term trend is still Bullish. Long term, EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) outperformed the S&P 500 since 3/19/03.
NASDAQ underperformed; relative strength trends are mixed. The NASDAQ Composite has been relatively strong since 5/17/07 but relatively weak compared to the S&P since 3/10/00.
Growth fell less than Value stocks in June, picking up relative strength. Longer term, the major trend of Growth/Value has been mostly Bearish for seven years.
Small Caps outperformed relative to Large Caps since 5/17/07. Longer term, the trend has been more Bearish than Bullish since the Small-Cap relative strength peak on 4/19/06.
Semiconductors fell, erasing all of last week’s gains in reaction to an analyst’s upgrade. SMH has outperformed since 5/30/07. But longer-term, SMH has underperformed the S&P 500 for more than seven years, since 3/10/00.
Crude Oil rose slightly. On 6/19/07, intraday, crude made a new ten-week high—but on below-average volume. Volume is not confirming price strength. From a longer perspective, USO has been chopping up and down in a trading range since February, and it is still stuck in that range. Previous lows at 47.30-47.39 appear to be offering technical support. Watch the April high at 54.22 for resistance. 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 fell, thereby underperforming USO. But generally, since 3/2/07, the stocks of the oil companies have been much stronger than oil as a commodity, not every day but most of the time, and that still looks like an important continuing trend. XLE is the Energy Select Sector SPDR ETF.
Gold has been weak since 4/20/07. Trading volume has declined to very low levels, suggesting little interest in trading gold. On 6/8/07, GLD price broke below April-May lows, confirming again an ongoing and significant downside correction. Longer term, StreetTRACKS Gold Trust ETF (NYSE: GLD), which reflects the market price of gold futures, topped out at 70.2 on 5/12/06, and so has been relatively weak for 13 months.
Silver underperformed Gold since 6/5/07 and has been mostly underperforming since 12/7/06. On an absolute price basis, the larger trend for iShares Silver Trust (AMEX: SLV) looks like a trading range since the top on 5/11/06.
The Gold Miners Index (XAU) underperformed GLD. XAU underperformed GLD since 5/31/1996, so the big trend is Bearish.
Inflation expectations are in a rising trend. The ratio of the price of bond TIPS to 10-year U.S. Treasury Notes eased slightly lower. It set a new nine-month high on 6/22/07, after rising for six months, since 1/16/07. This intermediate-term trend still points toward rising inflation expectations.
Bond prices rose above previous three-day ranges. Longer term, TLT hit a new three-year price low on 6/12/07, the lowest since June, 2004. That indicates a very serious price downtrend and yield uptrend. The main trend is clearly Bearish for iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT).
U.S. dollar continued its eight-day downside correction. The dollar has been heading down since 6/13/07. It has been mostly heading up since 5/1/07. Longer term, the dollar has been falling most of the time since its peak at 121.29 on 7/5/2001. In cases of such time-frame conflict, the longer-term trend usually wins.
Japanese Yen rose slightly. On 6/15/07, it fell to its lowest level in more than four years, confirming a Bearish trend. The yen has been weak since its peak at 12,625 on 4/19/1995.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
0.94% Taiwan
0.69% Australia
0.64% Dow Utilities
0.61% 30Y T-Bond
0.54% Utilities
0.33% Dow Transports
0.30% Spain
0.20% Dow Composite
0.11% Disk Drives
0.08% Drugs
0.08% United Kingdom
0.07% Japanese Yen
0.02% Swiss Franc
0.00% Health Care
0.00% Canadian Dollar
-0.01% US Dollar Index
-0.01% Australian Dollar
-0.06% Dow Industrial
-0.06% Euro Index
-0.07% British Pound
-0.09% Insurance
-0.10% Computer Tech
-0.15% S&P 100
-0.17% Health Care
-0.18% Hong Kong
-0.23% South Korea
-0.25% Belgium
-0.26% Industrial
-0.26% DOT
-0.26% Italy
-0.31% Network
-0.32% S&P 500
-0.35% Technology
-0.36% Banks
-0.39% Russell 1000
-0.41% Consumer Discretionary
-0.42% NYSE Composite
-0.42% Wilshire 5000
-0.42% Internet
-0.43% AMEX Composite
-0.43% Russell 3000
-0.43% Retailers
-0.43% Netherlands
-0.44% Consumer Staples
-0.45% Health Care Products
-0.46% Nasdaq Composite
-0.46% Oil
-0.47% Nasdaq 100
-0.47% France
-0.55% Japan
-0.57% Chemicals
-0.61% Value Line
-0.65% Hospitals
-0.65% Switzerland
-0.68% S&P Small Caps
-0.69% Hardware
-0.71% S&P Mid Caps
-0.73% Sweden
-0.79% Financial
-0.80% Energy
-0.87% Russell 2000
-0.87% Canada
-0.92% Germany
-0.96% Biotechs
-1.15% Singapore
-1.16% Brazil
-1.19% Paper
-1.25% Natural Gas
-1.37% Commodity Related
-1.41% Airlines
-1.50% Semiconductors
-1.52% Austria
-1.53% REITs
-1.53% Broker Dealers
-1.57% Materials
-1.66% Malaysia
-2.01% Mexico
-2.11% Gold Mining
-2.29% Oil Services
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. Although that alone does not mean that stocks cannot continue to trend higher, nevertheless, it is good to remember that “no tree grows to the sky.” The cyclical nature of stock prices never really changes, although the turning points are not always easy to predict.
