By Robert W. Colby, Senior Analyst TraderPlanet.com
S&P 500 confirms Bull Market by rising to a new all-time high.
Health Care made a new 14-month relative strength low on 7/13/07 and has been relatively weak compared to the S&P since 10/9/02.
U.S. dollar fell again to another new 2-year low and remains very Bearish long term.
Investors were cheered by news that General Electric boosted its 2007 stock buyback program to $14 billion. Corporate stock buybacks, M&A speculation, leveraged buyouts have provided substantial Bullish stimulus to stock prices for quite some time, and it does not appear to be over.
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
0.51% , IGN , Networking, IGN
4.83% , PAYX , PAYCHEX
5.59% , RIMM , RESEARCH IN MOTION LTD
4.93% , CTX , CENTEX
5.21% , DYN , DYNEGY
2.47% , FDX , FEDEX
2.93% , XHB , Homebuilders SPDR, XHB
0.77% , RFG , Growth MidCap S&P 400, RFG
1.22% , VPU , Utilities VIPERs, VPU
3.59% , LEN , Lennar Corp. (LEN)
3.69% , PHM , PULTE HOMES
3.43% , KBH , KB HOME
2.36% , AYE , ALLEGHENY ENERGY
2.63% , SIRI , Sirius Satellite
2.79% , VRSN , VeriSign Inc
1.71% , BEAS , BEA Systems Inc
2.61% , DHI , D.R. HORTON, DHI
0.61% , DSV , Value Small Cap DJ, DSV
1.99% , RZG , Growth SmallCap S&P 600, RZG
0.47% , JKH , MidCap Growth iS M, JKH
1.95% , LBTYA , Liberty Global Inc. (LBTYA)
1.53% , APA , APACHE
0.42% , KLD , LargeCap Blend Socially Responsible iS, KLD
0.23% , PTE , Telecommunications & Wireless, PTE
0.20% , JKI , Value MidCap iS M, JKI
1.41% , LM , LEGG MASON
2.78% , CMI , CUMMINS
1.28% , GE , GENERAL ELECTRIC
1.06% , DGX , QUEST DIAG
2.49% , PPL , PPL
1.40% , NBR , NABORS
1.93% , CTB , COOPER TIRE
0.52% , IJR , SmallCap S&P 600, IJR
2.73% , AAPL , APPLE COMPUTER
0.86% , EWC , Canada Index, EWC
1.74% , GWW , WW GRAINGER
1.90% , TE , TECO ENERGY
2.28% , EIX , EDISON INTL
1.21% , WEN , WENDYS INTL
1.80% , MAT , MATTEL
1.75% , AMGN , AMGEN
3.38% , JBL , JABIL CIRCUIT
0.45% , NYC , LargeCap Blend NYSE Composite iS, NYC
0.59% , IXC , Energy Global, IXC
2.57% , WY , WEYERHAEUSER
1.25% , GOOG , Google
1.17% , PUI , Utilities, PUI
1.96% , EXC , EXELON CORP
0.25% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
0.57% , PKB , Building & Construction, PKB
% Price Change, Symbol, Name
-5.76% , BHI , BAKER HUGHES
-6.45% , RSH , RADIOSHACK
-1.12% , EWD , Sweden Index, EWD
-0.58% , IGV , Software, IGV
-2.41% , AN , AUTONATION
-0.93% , PDCO , Patterson Dental Company
-3.38% , CIT , CIT GROUP
-0.63% , EWK , Belgium Index, EWK
-2.13% , MAR , MARRIOTT INTL STK A
-1.15% , CFC , COUNTRYWIDE FNCL
-0.24% , PSJ , Software, PSJ
-1.30% , AMAT , APPLIED MATERIAL
-0.41% , MYY , Short 100% MidCap 400, MYY
-0.25% , XLV , Health Care SPDR, XLV
-1.50% , MCHP , Microchip Technology Incorporated
-0.25% , IEV , Europe 350 S&P Index, IEV
-0.21% , EKH , Europe 2001 H, EKH
-0.68% , MDP , MEREDITH
-0.29% , ETN , EATON
-3.12% , CTXS , CITRIX SYSTEMS
-0.08% , EZA , South Africa Index, EZA
-0.61% , BMET , BIOMET
-0.05% , PZI , Micro Cap Zachs, PZI
-0.24% , RX , IMS HEALTH
-1.12% , PKI , PERKINELMER
-0.37% , VFC , VF
-0.46% , GNW , GENWORTH FINANCIAL (NYSE:GNW)
-0.10% , VIA , VIACOM INC. (New)
-0.37% , VC , VISTEON
-0.15% , SYMC , SYMANTEC
-0.19% , IGW , Semiconductor iS GS, IGW
-0.32% , EWQ , France Index, EWQ
-0.09% , ADRD , Developed 100 BLDRS, ADRD
-0.31% , TNB , THOMAS & BETTS
-0.07% , TUP , TUPPERWARE
-0.45% , NWS.A , NEWS CORP STK A
-0.18% , HAS , HASBRO
-1.36% , BJS , BJ SERVICES
-0.71% , CECO , CAREER EDUCATION CORP
-0.15% , ISIL , INTERSIL CORP
-0.08% , EFG , Growth EAFE MSCI, EFG
-1.11% , SUNW , SUN MICROSYS
-0.83% , NOC , NORTHROP GRUMMAN
-1.15% , NVLS , NOVELLUS SYS
-0.76% , KR , KROGER
-0.06% , XL , XL CAPITAL STK A
-0.06% , IYW , Technology DJ US, IYW
-0.02% , STJ , ST JUDE MEDICAL
-0.15% , TIN , TEMPLE INLAND
-0.07% , EFA , EAFE Index, EFA
Sectors: among the 9 major U.S. sectors, 8 rose and 1 fell.
% Price Change, Sector
1.49% Utilities
1.06% Materials
0.98% Energy
0.69% Consumer Staples
0.69% Industrial
0.50% Consumer Discretionary
0.38% Financial
0.23% Technology
-0.25% Health Care
Energy (XLE) Bullish. Both price and relative strength made new highs on 7/13/07. Relative strength has been strong compared to the S&P since 3/12/03. Overweight.
Materials (XLB) Bullish. Both price and relative strength made new highs on 7/13/07. XLB has been relatively strong compared to the S&P since 9/27/00. Overweight.
Industrial (XLI) Bullish. Price made a new high close and relative strength made a new high on 7/13/07. XLI has been relatively strong compared to the S&P since 8/9/06. Overweight.
Technology (XLK) Bullish. Price made a new 6-year high on 7/13/07, and relative strength made a new high on 7/10/07. XLK has been relatively Bullish compared to the S&P since its low on 7/24/06.
Financial (XLF) Bearish. XLF made a new 5-year low relative to the S&P 500 on 7/11/07. Underweight.
Consumer Staples (XLP) Bearish. Relative strength made a new 7-year low on 6/19/07. XLP has been relatively weak compared to the S&P since 10/9/02. Underweight.
Utilities (XLU) Bearish. XLU has been relatively weak compared to the S&P since 9/20/01. Underweight.
Health Care (XLV) Bearish. XLV made a new 14-month relative strength low on 7/13/07 and has been relatively weak compared to the S&P since 10/9/02. Underweight.
Consumer Discretionary (XLY) Bearish. XLY made a new 9-month relative strength low on 7/12/07 and has been relatively weak compared to the S&P since 1/5/05. Underweight.
Foreign stocks absorbed mild profit taking as the U.S. dollar fell further. EFA made a new absolute price high on 7/12/07 and outperformed strongly since 6/13/07. The EFA’s short-term relative strength 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 made a new 6-year price high on 7/13/07. The NASDAQ Composite has been relatively strong since 5/17/07 but relatively weak compared to the S&P since 3/10/00.
Growth beat Value. Growth stocks rose more (and fell less) than Value stocks since 5/16/07. But longer term, the major trend of Growth/Value has been mostly Bearish for seven years.
Small Caps failed to make a new price high and have underperformed relative to Large Caps since 6/27/07. Longer term, the trend has been more Bearish than Bullish since the Small-Cap relative strength peak on 4/19/06.
Crude Oil rose again and outperformed the SPY. The short-term trend is still up but the U.S. OIL FUND ETF (AMEX: USO) remains well below its peak at 73.29 on 7/13/06.
Energy stocks slightly underperformed USO. Long term, since 3/12/03, the stocks in the Energy Select Sector SPDR ETF (XLE) have significantly outperformed crude oil as a commodity as well as the S&P 500. So, the Relative Strength major trend is Bullish for the energy stocks.
Gold rose slightly but underperformed the SPY–again. 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 GLD has been relatively weak for 13 months.
Silver fell slightly but outperformed GLD modestly since 6/26/07. But the longer-term trend of SLV relative to GLD still looks Bearish. iShares Silver Trust (AMEX: SLV) broke down to a new 6-month low on 6/26/07. SLV sharply underperformed Gold since 6/5/07 and has been mostly underperforming since 12/7/06.
The Gold Miners Index (XAU) outperformed GLD since 6/26/07. On the other hand, XAU has underperformed GLD since 5/31/1996, so the long-term trend is questionable.
Inflation expectations eased moderately lower since 6/22/07. Still, for the longer term, the ratio of the price of bond TIPS to 10-year U.S. Treasury Notes has been rising since 1/16/07, indicating rising inflation expectations.
Bond prices rose slightly, but the flight to safety seems to be over. Longer term, TLT hit a new 3-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 fell again to another new 2-year low and remains very Bearish long term. The dollar has been heading down since 6/13/07. Longer term, the dollar has been falling most of the time since its peak at 121.29 on 7/5/2001.
Japanese Yen appears to be consolidating within its Bearish major trend. On 6/15/07, the Yen fell to its lowest level in more than four years. The Yen has been weak since its peak at 12,625 on 4/19/1995.
1.52% Paper
1.49% Utilities
1.06% Materials
1.01% Dow Utilities
1.00% Chemicals
0.98% Energy
0.92% Commodity Related
0.91% Malaysia
0.90% REITs
0.89% Natural Gas
0.86% Canada
0.84% DOT
0.79% Biotechs
0.76% Broker Dealers
0.72% Oil
0.69% Consumer Staples
0.69% Industrial
0.56% Internet
0.55% Nasdaq 100
0.55% Brazil
0.53% Dow Transports
0.53% Dow Composite
0.50% Consumer Discretionary
0.48% Japan
0.39% Network
0.38% Financial
0.36% S&P Mid Caps
0.34% S&P 100
0.34% Russell 1000
0.34% Australian Dollar
0.33% Dow Industrial
0.31% S&P 500
0.31% Russell 3000
0.31% Wilshire 5000
0.27% Australia
0.27% Japanese Yen
0.26% S&P Small Caps
0.25% Value Line
0.24% Retailers
0.23% NYSE Composite
0.23% Technology
0.22% Netherlands
0.21% Banks
0.20% Nasdaq Composite
0.19% Gold Mining
0.18% Taiwan
0.15% Hospitals
0.15% 30Y T-Bond
0.12% British Pound
0.10% Hardware
0.08% Mexico
0.07% Russell 2000
0.02% Euro Index
0.02% Swiss Franc
-0.01% Drugs
-0.02% Austria
-0.04% Computer Tech
-0.08% US Dollar Index
-0.14% Disk Drives
-0.15% Health Care Products
-0.16% Health Care
-0.16% Hong Kong
-0.16% Canadian Dollar
-0.19% AMEX Composite
-0.19% Insurance
-0.20% Semiconductors
-0.20% Spain
-0.21% Singapore
-0.25% Health Care
-0.26% Germany
-0.30% Oil Services
-0.32% France
-0.34% United Kingdom
-0.36% Italy
-0.40% Switzerland
-0.63% Belgium
-0.92% Airlines
-1.12% Sweden
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.