By Robert W. Colby, Senior Analyst TraderPlanet.com
Strong: Technology, Growth, and NASDAQ.
Weak: Financials, Bonds, and Utilities.
The first 2 weeks of July have had a Bullish bias historically.
The Advance-Decline balance was slightly Bearish on the NYSE and even less Bearish on the NASDAQ.
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
25.91% , HLT , HILTON HOTELS
6.65% , DGX , QUEST DIAG
0.91% , PXQ , Networking, PXQ
0.70% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
0.96% , XSD , Semiconductor SPDR, XSD
7.00% , MAR , MARRIOTT INTL STK A
7.84% , HOT , STARWOOD HOTELS
5.72% , XMSR , XM Satellite R
4.43% , ERTS , ELECTRONIC ARTS
5.75% , TBH , Telebras H, TBH
4.40% , SSCC , Smurfit-Stone Container Corporation
2.89% , TIF , TIFFANY
4.03% , SIRI , Sirius Satellite
4.69% , UIS , UNISYS
1.66% , PEJ , Leisure & Entertainment, PEJ
4.45% , WYNN , Wynn Resorts L
2.59% , IP , INTL PAPER
2.99% , ESRX , EXPRESS SCRIPTS
1.18% , XME , Metals & Mining SPDR, XME
1.75% , LH , LAB CRP OF AMER
0.61% , IGV , Software, IGV
2.66% , TIN , TEMPLE INLAND
1.31% , LLL , L-3 COMMS HLDGS
1.83% , KLAC , KLA TENCOR
0.18% , IYH , Healthcare DJ, IYH
2.03% , HON , HONEYWELL INTL
1.55% , WMB , WILLIAMS
1.61% , EWW , Mexico Index, EWW
1.43% , IAH , Internet Architecture H, IAH
1.43% , BMS , BEMIS
1.20% , RAI , RJR TOBACCO HLDS
0.51% , IYC , Consumer Cyclical DJ, IYC
1.90% , RWR , REIT Wilshire, RWR
0.53% , PWO , OTC Dynamic PS, PWO
1.70% , ICF , Realty Cohen & Steers, ICF
0.40% , IJT , Growth BARRA Small Cap 600, IJT
1.14% , USO , Oil, Crude, U.S. Oil Fund, USO
0.70% , LBTYA , Liberty Global Inc. (LBTYA)
1.18% , PPG , PPG INDUSTRIES
1.99% , XLNX , XILINX
1.72% , LUV , SOUTHWEST AIRLS
1.29% , LMT , LOCKHEED MARTIN
1.36% , GOOG , Google
1.60% , TJX , TJX
1.62% , BBY , BEST BUY
1.61% , HD , HOME DEPOT
1.53% , MXIM , MAXIM INTEGRATED
1.93% , BEAS , BEA Systems Inc
1.14% , CSC , COMPUTER SCIENCE
2.47% , ALTR , ALTERA
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-1.26% , BHH , Internet B2B H, BHH
-0.49% , EWQ , France Index, EWQ
-2.44% , PTEN , Patterson-UTI Energy Inc
-2.34% , CVG , CONVERGYS
-3.54% , PWER , POWER ONE
-3.21% , GM , GENERAL MOTORS
-2.35% , CHRW.O , CH Robinson Worldwide Inc, CHRWD
-2.01% , NBR , NABORS
-1.60% , ECL , ECOLAB
-2.13% , ABK , AMBAC FINL GRP
-1.06% , EWI , Italy Index, EWI
-2.08% , HRB , H&R BLOCK
-1.65% , NWL , NEWELL RUBBER
-1.25% , IVGN , Invitrogen Corporation
-1.31% , GAS , NICOR
-1.06% , VMC , VULCAN MATERIALS
-1.03% , HAL , HALLIBURTON
-2.74% , CECO , CAREER EDUCATION CORP
-0.58% , ATVI , Activision Inc.
-1.12% , TLT , Bond, 20+ Years Treasury, TLT
-1.41% , LXK , LEXMARK INTL STK A
-1.13% , JCI , JOHNSON CONTROLS
-1.51% , KR , KROGER
-1.05% , SLR , SOLECTRON
-1.30% , MET , METLIFE
-1.38% , CTSH , Cognizant Technology Solutions
-0.59% , EFV , Value EAFE MSCI, EFV
-1.22% , PCG , PG&E
-0.17% , HHH , Internet H, HHH
-0.85% , GLW , CORNING
-1.12% , SNPS , Synopsys Inc
-1.40% , CFC , COUNTRYWIDE FNCL
-1.38% , FRE , FREDDIE MAC
-0.46% , IAU , Gold COMEX iS, IAU
-1.08% , GENZ , GENZYME GEN
-1.02% , HOG , HARLEY DAVIDSON
-0.86% , CSX , CSX
-0.35% , IYZ , Telecom DJ US, IYZ
-1.12% , TWX , TIME WARNER INC
-1.25% , FLEX , Flextronics International Ltd
-0.52% , EZU , EMU Europe Index, EZU
-1.30% , BC , BRUNSWICK
-1.11% , PRU , PRUDENTIAL FINL
-1.28% , NI , NISOURCE
-0.82% , FISV , FISERV
-0.75% , LAMR , Lamar Advertising Company
-1.18% , AMD , ADV MICRO DEV
-0.73% , BDK , BLACK & DECKER
-1.74% , ACE , ACE
-1.33% , OMX , OFFICEMAX INC., OMX
Sectors: among the 9 major U.S. sectors, 3 rose and 6 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.53% Consumer Discretionary
0.38% Technology
0.22% Materials
-0.03% Health Care
-0.07% Consumer Staples
-0.10% Industrial
-0.20% Utilities
-0.24% Energy
-0.84% Financial
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 7/5/07 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 fell moderately after making a new absolute price high on 7/3/07. EFA outperformed strongly since 6/13/07. The EFA’s 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 made a new multi-year price high. 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 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. 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 a new 2007 high. The short-term trend is obviously Bullish. The longer-term trend is less obvious. The U.S. OIL FUND ETF (AMEX: USO) is still well below its peak at 73.29 on 7/13/06.
Energy stocks underperformed both the USO and 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. So, the Relative Strength major trend is Bullish for the stocks.
Gold fell again, confirmed by more active trading. In contrast, trading volume fell on last week’s 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 fell again, 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) has been relatively strong. XAU outperformed GLD since 6/26/07. XAU underperformed GLD since 5/31/1996.
Inflation expectations rose but are still 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 fell sharply. 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 recovered modestly but remains 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 turned down again. 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.
1.67% Paper
1.56% REITs
1.56% South Korea
1.21% Australia
1.14% Mexico
1.13% Disk Drives
1.04% Gold Mining
0.87% Airlines
0.86% AMEX Composite
0.86% Computer Tech
0.85% Hardware
0.81% Nasdaq 100
0.76% Semiconductors
0.73% Brazil
0.73% Canada
0.71% Retailers
0.63% Hong Kong
0.57% Commodity Related
0.53% Consumer Discretionary
0.53% Hospitals
0.52% Internet
0.47% Canadian Dollar
0.44% Nasdaq Composite
0.38% Technology
0.36% Sweden
0.33% DOT
0.32% Chemicals
0.29% Germany
0.28% S&P Small Caps
0.26% Network
0.25% Spain
0.24% Biotechs
0.23% Russell 2000
0.22% Materials
0.21% Value Line
0.13% Australian Dollar
0.12% Wilshire 5000
0.10% Austria
0.09% Russell 3000
0.09% Health Care
0.09% US Dollar Index
0.08% Russell 1000
0.05% Oil Services
0.04% S&P Mid Caps
0.04% Drugs
0.03% S&P 500
-0.02% S&P 100
-0.02% Oil
-0.03% Health Care
-0.06% NYSE Composite
-0.06% Switzerland
-0.07% Consumer Staples
-0.08% Dow Industrial
-0.10% Industrial
-0.10% Health Care Products
-0.13% Natural Gas
-0.15% Euro Index
-0.16% Swiss Franc
-0.19% Dow Composite
-0.20% Utilities
-0.23% Netherlands
-0.24% Energy
-0.26% British Pound
-0.27% Dow Transports
-0.27% Japan
-0.30% Dow Utilities
-0.33% Insurance
-0.40% Japanese Yen
-0.44% Broker Dealers
-0.49% France
-0.58% Malaysia
-0.60% Banks
-0.62% United Kingdom
-0.64% Belgium
-0.84% Financial
-0.87% 30Y T-Bond
-1.01% Singapore
-1.06% Italy
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.
