By Robert W. Colby, Senior Analyst TraderPlanet.com
Reversals…temporary or lasting?
The number of New Lows is still greater than the number of New Highs on the NYSE, and that is not a healthy sign.
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
10.94% , ANDW , ANDREW
2.07% , XSD , Semiconductor SPDR, XSD
1.05% , JKL , Value SmallCap iS M, JKL
1.38% , IYW , Technology DJ US, IYW
8.31% , NKE , NIKE STK B
8.11% , MKC , MCCORMICK
1.63% , IWC , Microcap Russell, IWC
0.88% , RZV , Value SmallCap S&P 600, RZV
1.27% , IWZ , Growth LargeCap Russell 3000, IWZ
4.46% , CAG , CONAGRA FOODS
1.52% , IJT , Growth BARRA Small Cap 600, IJT
1.33% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
2.15% , BHH , Internet B2B H, BHH
4.64% , HRB , H&R BLOCK
1.44% , PXQ , Networking, PXQ
0.56% , ADRU , Europe 100 BLDRS, ADRU
0.68% , PHW , Hardware & Electronics, PHW
1.07% , IWV , LargeCap Blend Russell 3000, IWV
3.95% , CTX , CENTEX
2.01% , KCE , Capital Markets KWB ST, KCE
4.28% , CEPH , Cephalon Inc
0.94% , IAH , Internet Architecture H, IAH
1.19% , VGT , Info Tech VIPERs, VGT
0.83% , XLV , Health Care SPDR, XLV
0.92% , IYH , Healthcare DJ, IYH
3.73% , BBY , BEST BUY
6.38% , MLNM , Millennium Pharmaceuticals Inc
2.31% , BIIB , BIOGEN IDEC
1.44% , VDE , Energy VIPERs, VDE
2.23% , SMH , Semiconductor H, SMH
3.07% , SYMC , SYMANTEC
0.87% , BDH , Broadband H, BDH
3.55% , RHT , Red Hat Inc.
3.39% , OMC , OMNICOM
3.57% , F , FORD MOTOR
3.14% , AMAT , APPLIED MATERIAL
1.66% , IYG , Financial Services DJ, IYG
1.22% , VOX , Telecom Services VIPERs, VOX
0.92% , PWV , Value LargeCap Dynamic PS, PWV
4.76% , FCX , FREEPRT MCMORAN STK B
1.27% , MTK , Technology MS sT, MTK
1.89% , EZA , South Africa Index, EZA
2.56% , HSY , HERSHEY FOODS
2.77% , ORCL , ORACLE
2.17% , IYR , Real Estate US DJ, IYR
0.91% , JKD , LargeCap Blend Core iS M, JKD
1.78% , EWH , Hong Kong Index, EWH
1.55% , MEL , MELLON FINANCIAL
3.35% , BJS , BJ SERVICES
1.77% , PBW , WilderHill Clean Energy PS, PBW
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-3.38% , BBH , Biotech H, BBH
-1.50% , ADM , ARCHER DANIELS
-1.50% , S , SPRINT NEXTEL
-1.51% , MYY , Short 100% MidCap 400, MYY
-1.31% , SUN , SUNOCO
-1.36% , CC , CIRCUIT CITY STR
-1.00% , MMC , MARSH & MCLENNAN
-1.93% , EWA , Australia Index, EWA
-1.02% , MRO , MARATHON OIL
-3.47% , MZZ , Short 200% MidCap 400 PS, MZZ
-0.90% , CLX , CLOROX
-1.50% , HES , AMERADA HESS
-0.70% , VLO , VALERO ENERGY
-0.53% , EPP , Pacific ex-Japan, EPP
-0.68% , PH , PARKER HANNIFIN
-0.97% , CAT , CATERPILLAR
-0.51% , CCL , CARNIVAL STK A
-0.35% , BMET , BIOMET
-0.70% , VIA , VIACOM INC. (New)
-0.58% , PKI , PERKINELMER
-0.18% , HMA , HEALTH MGMT STK A
-0.76% , EMR , EMERSON ELECTRIC
-1.32% , PTV , PACTIV
-0.28% , SHLD , SEARS HOLDINGS
-0.48% , AIG , AMER INTL GROUP
-0.34% , BDX , BECTON DICKINSON
-0.64% , FITB , FIFTH THIRD BANC
-0.44% , ITT , ITT INDS
-0.22% , CIT , CIT GROUP
-0.26% , COL , ROCKWELL COLLINS
-0.23% , BOL , BAUSCH & LOMB
-0.58% , VIA.B , VIACOM STK B
-0.52% , K , KELLOGG
-0.41% , NTRS , NORTHERN TRUST
-0.55% , FRX , FOREST LABS STK A
-0.39% , PGR , PROGRESSIVE OHIO
-0.75% , GOOG , Google
-0.15% , GT , GOODYEAR TIRE
-0.06% , JWN , NORDSTROM
-0.06% , BSX , BOSTON SCIENT
-0.14% , IVGN , Invitrogen Corporation
-0.30% , X , US STEEL CORP
-0.46% , WMI , WASTE MANAGEMENT
-0.59% , CBE , COOPER INDS STK A
-0.51% , SOV , SOVEREIGN BANC
-0.02% , GAS , NICOR
-0.60% , NWS.A , NEWS CORP STK A
-0.71% , HCR , MANOR CARE
-0.08% , ETN , EATON
-0.35% , BA , BOEING
Sectors: among the nine major U.S. sectors, all nine rose.
Major Sectors Ranked for the Day
% Price Change, Sector
1.03% Consumer Discretionary
0.83% Health Care
0.78% Consumer Staples
Materials (XLB) underperformed since 6/22/07, 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) underperformed, but XLI’s major trend is Bullish. XLI has been relatively strong compared to the S&P since 8/9/06. Overweight.
Technology (XLK) underperformed, but 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) outperformed, but 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) underperformed, and 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 underperformed as the U.S. dollar recovered. Still, the 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 outperformed; 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 stocks rose more than Value stocks in June. 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.
Crude Oil rose strongly with a wide range day on higher volume. 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 outperformed USO and SPY. 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 stabilized after breaking down to a new 3-month low. GLD has been weak since 4/20/07. Trading volume fell on the recovery attempt, suggesting a continuing 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 also stabilized after breaking down to a new 6-month low. iShares Silver Trust (AMEX: SLV) looks Bearish. SLV sharply underperformed Gold since 6/5/07 and has been mostly underperforming since 12/7/06.
The Gold Miners Index (XAU) outperformed, for a change. XAU underperformed GLD since 5/31/1996, so the big trend is Bearish.
Inflation expectations ticked up slightly but are still sharply lower since 6/22/07. The ratio of the price of bond TIPS to 10-year U.S. Treasury Notes broke six-week uptrend on 6/26/07, and that indicated a downward shift in inflation expectations for the short-term.
Bond prices rose to a new three-week high, which is Bullish for the short term. Longer term, TLT hit a new three-year price low on 6/12/07, the lowest since June, 2004. That indicates a very serious major 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 recovered slightly but remains in a short-term downtrend. 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 recovered to a two-week high. 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.
1.91% Oil Services
1.78% Hong Kong
1.74% Gold Mining
1.70% Dow Utilities
1.70% Disk Drives
1.51% Broker Dealers
1.49% Russell 2000
1.43% S&P Small Caps
1.28% Nasdaq 100
1.21% Nasdaq Composite
1.16% Value Line
1.11% S&P Mid Caps
1.07% Computer Tech
1.07% United Kingdom
1.05% Dow Transports
1.03% Consumer Discretionary
1.02% Natural Gas
1.00% Dow Composite
0.97% AMEX Composite
0.97% Russell 3000
0.95% Wilshire 5000
0.92% Russell 1000
0.90% S&P 500
0.90% S&P 100
0.89% South Korea
0.83% Health Care
0.81% Health Care Products
0.78% Consumer Staples
0.76% NYSE Composite
0.74% Japanese Yen
0.68% Dow Industrial
0.63% Commodity Related
0.58% Health Care
0.32% 30Y T-Bond
0.02% US Dollar Index
-0.02% British Pound
-0.07% Swiss Franc
-0.19% Euro Index
-0.19% Canadian Dollar
-1.16% Australian Dollar
To sum up the current position of the U.S. stock market:
Longer term, the U.S. stock market has shown impressive Bullish resilience since the major low on 10/10/02, more than four years ago. Stock prices have been buoyed by abundant global liquidly (following years of fiscal stimulation, rapid money supply growth, and rising corporate profits), M&A, and earnings comparisons above expectations.
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.