By Robert W. Colby, Senior Analyst TraderPlanet.com
Profit taking would be normal and natural.
Health Care sector Bearish: relative strength made a new 14-month low.
Both Dow-Jones Industrial and Transportation Averages made new price highs—again—but DJIA encountered resistance near 14,000.
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
0.54% , PWB , Lg Cap Growth PSD, PWB
9.94% , ROH , ROHM & HAAS
10.16% , LRCX , LAM RESEARCH CORP
8.96% , KLAC , KLA TENCOR
11.25% , NVLS , NOVELLUS SYS
0.62% , SWH , Software H, SWH
5.72% , AMAT , APPLIED MATERIAL
3.50% , ASD , AMER STANDARD
4.59% , KEY , KEYCORP
6.31% , LSI , LSI LOGIC
4.65% , SNDK , SanDisk Corporation
4.62% , AXP , AMERICAN EXPRESS
0.48% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
0.73% , IGM , Technology GS, IGM
1.99% , PSI , Semiconductors, PSI
2.00% , XLNX , XILINX
1.74% , SMH , Semiconductor H, SMH
3.19% , NTAP , NETWK APPLIANCE
2.21% , CSC , COMPUTER SCIENCE
4.23% , RFMD , RF Micro Devices Inc
2.37% , NWS.A , NEWS CORP STK A
1.81% , EMN , EASTMAN CHEM
0.61% , RFV , Value MidCap S&P 400, RFV
4.13% , MRVL , MARVELL TECHNOLOGY
2.35% , TROW , T ROWE PRICE GP
2.97% , BEAS , BEA Systems Inc
2.73% , ZMH , ZIMMER HLDGS
2.39% , PPG , PPG INDUSTRIES
1.50% , NIHD , NII Holdings, Inc.
1.90% , GR , GOODRICH CORP
1.46% , INTC , INTEL
1.97% , DHR , DANAHER
2.43% , ALTR , ALTERA
0.99% , XSD , Semiconductor SPDR, XSD
2.87% , ERTS , ELECTRONIC ARTS
2.30% , BEN , FRANKLIN RSC
1.47% , SHW , SHERWIN WILLIAMS
2.50% , MSFT , MICROSOFT
3.10% , YHOO , YAHOO
0.71% , AV , AVAYA
0.13% , JKD , LargeCap Blend Core iS M, JKD
1.47% , AVP , AVON
1.54% , IGW , Semiconductor iS GS, IGW
2.10% , STT , STATE STREET
1.37% , PTV , PACTIV
0.47% , PWT , Growth SmallCap Dynamic PS, PWT
0.94% , AEE , AMEREN
1.58% , SLR , SOLECTRON
0.50% , PIV , Value Line Timeliness MidCap Gr, PIV
0.78% , TJX , TJX
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-4.07% , SUN , SUNOCO
-0.10% , NY , Value LargeCap NYSE 100 iS, NY
-0.88% , PEP , PEPSICO
-2.34% , SLM , SLM CORP
-1.69% , KSS , KOHLS
-1.22% , MBI , MBIA
-0.88% , RFG , Growth MidCap S&P 400, RFG
-0.42% , RZG , Growth SmallCap S&P 600, RZG
-1.66% , JNJ , JOHNSON&JOHNSON
-1.98% , CCE , COCA COLA ENTER
-1.82% , THC , TENET HEALTHCARE
-1.72% , ROST , Ross Stores Inc
-0.96% , WAG , WALGREEN
-0.54% , BBH , Biotech H, BBH
-1.95% , PMCS , PMC SIERRA
-1.36% , MER , MERRILL LYNCH
-1.14% , K , KELLOGG
-0.97% , TMK , TORCHMARK
-0.94% , SUNW , SUN MICROSYS
-1.26% , CBS , CBS CORP.
-0.98% , DISH , EchoStar Communications Corporation
-0.76% , NSM , NATL SEMICONDUCT
-2.30% , DHI , D.R. HORTON, DHI
-1.69% , MRO , MARATHON OIL
-0.39% , VHT , Health Care VIPERs, VHT
-2.51% , FRX , FOREST LABS STK A
-1.40% , BBY , BEST BUY
-3.31% , GRMN , GARMIN LTD
-1.80% , AMCC , APPLD MICRO CIRC
-1.15% , LXK , LEXMARK INTL STK A
-2.35% , DLTR , Dollar Tree Stores Inc
-1.05% , BIIB , BIOGEN IDEC
-0.89% , AGN , ALLERGAN
-1.02% , RAI , RJR TOBACCO HLDS
-1.87% , RF , REGIONS FINAN
-0.43% , XL , XL CAPITAL STK A
-1.10% , IGT , INTL GAME TECH
-0.66% , ADI , ANALOG DEVICES
-2.03% , ATVI , Activision Inc.
-1.33% , TYC , TYCO INTL
-1.29% , VLO , VALERO ENERGY
-1.15% , ADM , ARCHER DANIELS
-0.81% , CB , CHUBB
-0.83% , RX , IMS HEALTH
-1.38% , CTSH , Cognizant Technology Solutions
-0.50% , JKF , Value LargeCap iS M, JKF
-0.50% , ACE , ACE
-0.58% , PIC , Insurance, PIC
-1.10% , TXT , TEXTRON
-0.47% , XLP , Consumer Staples SPDR, XLP
Sectors: among the 9 major U.S. sectors, 6 rose and 3 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.89% Materials
0.59% Industrial
0.34% Technology
0.33% Financial
0.10% Consumer Discretionary
0.10% Utilities
-0.31% Health Care
-0.47% Consumer Staples
-1.30% Energy
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 7/17/07. XLB has been relatively strong compared to the S&P since 9/27/00. Overweight.
Industrial (XLI) Bullish. Price and relative strength made new highs on 7/17/07. 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 close and relative strength made a new 19-month high on 7/17/07. 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 7/16/07. 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 7/17/07 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 7/16/07 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 recovered slightly. 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 has outperformed since 5/17/07. But the NASDAQ Composite has been 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.
Large Caps beat Small Caps since 6/27/07. Longer term, Large Caps beat Small Caps since the Small-Cap relative strength peak on 4/19/06.
Crude Oil fell with a Bearish Engulfing Line, underperforming the SPY but outperforming the XLE. Volume rose, confirming the short-term trend reversal. Longer term, the U.S. OIL FUND ETF (AMEX: USO) appears to be in an uptrend since its shakeout low at 42.56 on 1/18/07.
Energy stocks underperformed both the USO and the SPY. 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 broke 2-day lows and 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 in price and underperformed GLD since 12/7/06. iShares Silver Trust (AMEX: SLV) broke down to a new 6-month low on 6/26/07.
The Gold Miners Index (XAU) fell but still has 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 appear to be consolidating within their Bearish major trends. TLT hit a new 3-year price low on 6/12/07, the lowest since June, 2004. That indicated 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 after Monday’s new 2-year low. The dollar has been heading nearly straight 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 and remains very Bearish.
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.
1.59% Chemicals
1.55% Disk Drives
1.13% Taiwan
0.99% Natural Gas
0.92% Brazil
0.90% Computer Tech
0.89% Materials
0.68% Nasdaq 100
0.62% Broker Dealers
0.59% Industrial
0.57% Hardware
0.55% Nasdaq Composite
0.48% Internet
0.44% DOT
0.44% British Pound
0.43% Banks
0.36% Dow Transports
0.34% Technology
0.33% Financial
0.32% Canada
0.30% Network
0.30% Spain
0.29% Paper
0.22% S&P Small Caps
0.20% Airlines
0.19% S&P Mid Caps
0.17% Russell 2000
0.17% Dow Composite
0.15% Dow Industrial
0.14% Singapore
0.14% Australian Dollar
0.12% Biotechs
0.11% Hong Kong
0.10% Consumer Discretionary
0.10% Utilities
0.09% Value Line
0.07% South Korea
0.03% S&P 100
0.01% US Dollar Index
0.01% Euro Index
0.00% Russell 3000
0.00% Wilshire 5000
-0.01% S&P 500
-0.02% Russell 1000
-0.03% Netherlands
-0.06% Hospitals
-0.07% Canadian Dollar
-0.08% Dow Utilities
-0.13% Swiss Franc
-0.17% NYSE Composite
-0.18% AMEX Composite
-0.22% Italy
-0.23% France
-0.23% United Kingdom
-0.26% Commodity Related
-0.29% Gold Mining
-0.31% Health Care
-0.33% Australia
-0.38% 30Y T-Bond
-0.44% Health Care Products
-0.46% Health Care
-0.46% Japanese Yen
-0.47% Consumer Staples
-0.50% Retailers
-0.54% Japan
-0.59% Insurance
-0.64% REITs
-0.64% Belgium
-0.64% Germany
-0.66% Drugs
-0.66% Malaysia
-0.66% Switzerland
-0.80% Sweden
-0.86% Austria
-0.97% Mexico
-1.03% Oil Services
-1.04% Oil
-1.30% Energy
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.
