By Robert W. Colby, Senior Analyst TraderPlanet.com
Technology sector turned Bullish:
absolute price made a new 5-year high.
Foreign stocks made another new absolute price high.
Gold turned down.
Consumer stocks continue to underperform.
M&A pace picking up.
The first 2 weeks of July have had a Bullish bias historically.
The Advance-Decline balance was Bullish on the NYSE but was less Bullish on the NASDAQ, again. On 6/26/07, the Cumulative Daily Advance-Decline Line for the NASDAQ fell to its lowest level since the March 2007 low. NASDAQ breadth remains in a weak trend relative to the NYSE breadth.
After the close, Blackstone Group (NYSE:BX) announced an agreement to buy Hilton Hotels Corp. (NYSE:HLT) for about $26 billion cash, or $47.50 per share.
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
0.64% , DSG , Growth Small Cap DJ, DSG
6.44% , HLT , HILTON HOTELS
2.67% , WEN , WENDYS INTL
3.40% , TNB , THOMAS & BETTS
1.32% , KCE , Capital Markets KWB ST, KCE
1.41% , EKH , Europe 2001 H, EKH
0.28% , VFH , Financials VIPERs, VFH
2.12% , CHKP , Check Point Software Technologies Ltd
0.36% , JKG , MidCap Blend Core iS M, JKG
0.29% , VIS , Industrials VIPERs, VIS
0.58% , PEJ , Leisure & Entertainment, PEJ
0.34% , SWH , Software H, SWH
4.87% , AAPL , APPLE COMPUTER
0.48% , DGT , Global Titans, DGT
2.52% , RYAAY , Ryanair Holdings plc
0.80% , PBW , WilderHill Clean Energy PS, PBW
0.59% , VXF , Extended Mkt VIPERs, VXF
0.40% , JKI , Value MidCap iS M, JKI
0.68% , PIC , Insurance, PIC
2.98% , HOT , STARWOOD HOTELS
0.48% , ADRU , Europe 100 BLDRS, ADRU
0.83% , EWK , Belgium Index, EWK
0.47% , JKH , MidCap Growth iS M, JKH
0.89% , ELV , Value Large Cap DJ, ELV
0.36% , PJP , Pharmaceuticals, PJP
0.76% , IYE , Energy DJ, IYE
0.65% , VTV , Value VIPERs, VTV
0.24% , PMR , Retail, PMR
0.47% , FEZ , Euro STOXX 50, FEZ
0.71% , VGK , European VIPERs, VGK
0.66% , EFV , Value EAFE MSCI, EFV
0.34% , FDL , Dividend Leaders, FDL
0.71% , XLG , LargeCap Rydex Rus Top 50, XLG
0.53% , IJH , MidCap S&P 400 iS, IJH
0.27% , IYM , Basic Materials DJ US, IYM
0.44% , VV , LargeCap VIPERs, VV
0.29% , EWP , Spain Index, EWP
0.47% , ADRD , Developed 100 BLDRS, ADRD
0.05% , PPA , Aerospace & Defense, PPA
0.29% , IWZ , Growth LargeCap Russell 3000, IWZ
0.15% , XLY , Consumer Discretionary SPDR, XLY
1.29% , SNV , SYNOVUS
0.85% , IYG , Financial Services DJ, IYG
0.16% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
0.44% , JKF , Value LargeCap iS M, JKF
0.38% , IYY , LargeCap Blend Total Market DJ, IYY
0.66% , CL , COLGATE
0.11% , PBJ , Food & Beverage, PBJ
0.18% , VHT , Health Care VIPERs, VHT
0.22% , IJS , Value SmallCap S&P 600 B, IJS
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-2.28% , F , FORD MOTOR
-0.27% , PTE , Telecommunications & Wireless, PTE
-0.46% , MYY , Short 100% MidCap 400, MYY
-0.99% , MEL , MELLON FINANCIAL
-3.06% , CAT , CATERPILLAR
-0.49% , SH , Short 100% S&P 500, SH
-0.43% , PKB , Building & Construction, PKB
-0.27% , RTH , Retail H, RTH
-1.08% , GWW , WW GRAINGER
-0.09% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-0.51% , XL , XL CAPITAL STK A
-0.35% , ANDW , ANDREW
-1.68% , BUD , ANHEUSER BUSCH
-1.65% , SIRI , Sirius Satellite
-0.76% , MZZ , Short 200% MidCap 400 PS, MZZ
-0.05% , TTH , Telecom H, TTH
-2.13% , URBN , Urban Outfitters Inc.
-1.25% , BOL , BAUSCH & LOMB
-0.02% , IXJ , Healthcare Global, IXJ
Sectors: among the 9 major U.S. sectors, 6 rose.
Major Sectors Ranked for the Day
% Price Change, Sector
0.77% Energy
0.71% Financial
0.71% Industrial
0.70% Technology
0.17% Health Care
0.02% Materials
0.00% Consumer Discretionary
0.00% Utilities
-0.04% Consumer Staples
Energy (XLE) Bullish. XLE has been relatively strong compared to the S&P since 3/12/03. Overweight.
Materials (XLB) 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) Bullish. XLI has been relatively strong compared to the S&P since 8/9/06. Overweight.
Technology (XLK) Bullish. XLK made a new 5-year high on 7/3/07 and has been relatively Bullish compared to the S&P since its low on 7/24/06.
Financial (XLF) Bearish. XLF has been relatively weak compared to the S&P since 3/23/04. Underweight.
Consumer Staples (XLP) Bearish. 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 has been relatively weak compared to the S&P since 10/9/02. Underweight.
Consumer Discretionary (XLY) Bearish. XLY has been relatively weak compared to the S&P since 1/5/05. Underweight.
Foreign stocks made another new absolute price high. EFA outperformed strongly since 6/13/07. The EFA’s short-term trend is strongly 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 high, but 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 since 5/16/07. Longer term, the major trend of Growth/Value has been mostly Bearish for seven years.
Small Caps outperformed relative to Large Caps from 5/17/07 to 6/27/07 but recently have started to lag. Longer term, the trend has been more Bearish than Bullish since the Small-Cap relative strength peak on 4/19/06.
Crude Oil rose to another new 12-week high, but volume has been falling. The short-term trend is still Bullish. 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 both the USO and SPY again. Long term, since 3/12/03, the stocks in the Energy Select Sector SPDR ETF (XLE) have significantly outperformed crude oil as a commodity. So, the Relative Strength major trend is Bullish for the stocks.
Gold turned down from resistance. Trading volume fell on the recent 4-day recovery, suggesting a weak and unsustainable rally attempt. GLD has been weak since 4/20/07. It broke down to a new 3-month low on 6/26/07. GLD appears to be in 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 turned down, and the longer term trend relative to GLD 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) stalled out short of resistance. XAU outperformed GLD since 6/26/07 but underperformed GLD since 5/31/1996, so the big trend is Bearish.
Inflation expectations are down since 6/22/07. The ratio of the price of bond TIPS to 10-year U.S. Treasury Notes broke below a six-week uptrend line on 6/26/07, and that indicated a downward shift in inflation expectations for the short-term.
Bond prices turned down. 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 stabilized for the day but remains Bearish. 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 recovered modestly since 6/15/07, but the rally looks countertrend. 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.
2.01% Sweden
1.49% Hardware
1.35% South Korea
1.32% Germany
1.26% Dow Transports
1.24% Network
1.23% Broker Dealers
1.01% Mexico
0.99% Computer Tech
0.98% Hospitals
0.86% Brazil
0.83% Belgium
0.79% Italy
0.77% Energy
0.75% Disk Drives
0.74% United Kingdom
0.71% Financial
0.71% Industrial
0.71% Oil
0.70% Technology
0.64% France
0.64% Hong Kong
0.62% Netherlands
0.57% Nasdaq 100
0.55% Banks
0.52% Commodity Related
0.52% Oil Services
0.52% Paper
0.51% Dow Composite
0.49% S&P 100
0.49% Natural Gas
0.48% Nasdaq Composite
0.43% Taiwan
0.37% Russell 2000
0.36% S&P 500
0.36% S&P Mid Caps
0.36% Russell 3000
0.35% NYSE Composite
0.35% Russell 1000
0.34% Wilshire 5000
0.31% Dow Industrial
0.30% Canada
0.29% Spain
0.27% Value Line
0.24% S&P Small Caps
0.21% Health Care Products
0.21% Internet
0.21% DOT
0.20% Austria
0.17% Health Care
0.14% Drugs
0.14% Singapore
0.10% AMEX Composite
0.08% US Dollar Index
0.08% British Pound
0.06% Health Care
0.03% Insurance
0.02% Materials
0.02% Semiconductors
0.00% Consumer Discretionary
0.00% Utilities
-0.01% Japanese Yen
-0.04% Consumer Staples
-0.04% Switzerland
-0.04% Euro Index
-0.05% Chemicals
-0.13% Dow Utilities
-0.20% Japan
-0.21% Gold Mining
-0.22% Biotechs
-0.25% REITs
-0.31% Swiss Franc
-0.33% Malaysia
-0.34% Retailers
-0.41% Australia
-0.46% Canadian Dollar
-0.49% 30Y T-Bond
-0.52% 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.
