By Robert W. Colby, Senior Analyst TraderPlanet.com
Energy and Materials sectors made new highs relative to the S&P 500.
Crude Oil rose to another new 2007 high.
Bond prices fell sharply over the past 3 days.
Financial sector made a new 21-month low relative to the S&P 500.
For the general U.S. stock market, the first 2 weeks of July have had a Bullish bias historically.
Trading volume was relatively inactive, as traders typically take a couple of extra days off to enjoy a summer holiday week. Trading activity should pick up in the week ahead.
The Advance-Decline balance was moderately Bullish on the NYSE but less Bullish on the NASDAQ, where breadth has been lagging for a long time.
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
1.56% , PMR , Retail, PMR
0.90% , RFG , Growth MidCap S&P 400, RFG
14.75% , AMCC , APPLD MICRO CIRC
6.06% , TGT , TARGET
0.92% , DSG , Growth Small Cap DJ, DSG
5.56% , NEM , NEWMONT MINING
0.99% , PHW , Hardware & Electronics, PHW
5.08% , MU , MICRON TECH
3.16% , MNST , MONSTER WORLDWID
3.47% , EBAY , EBAY
0.47% , PWO , OTC Dynamic PS, PWO
6.02% , CTSH , Cognizant Technology Solutions
3.37% , SHLD , SEARS HOLDINGS
4.72% , RDC , ROWAN COMPANIES
0.40% , IWV , LargeCap Blend Russell 3000, IWV
2.93% , XHB , Homebuilders SPDR, XHB
0.57% , KSE , KEYSPAN
0.42% , CBSS , COMPASS BANCSHARES
0.79% , NCR , NCR
1.61% , RTH , Retail H, RTH
0.65% , VAW , Materials VIPERs, VAW
1.89% , PBW , WilderHill Clean Energy PS, PBW
0.35% , JKI , Value MidCap iS M, JKI
0.84% , VO , MidCap VIPERs, VO
2.11% , DJ , DOW JONES
2.09% , ISIL , INTERSIL CORP
1.67% , GNTX , Gentex Corporation
0.67% , PIV , Value Line Timeliness MidCap Gr, PIV
1.52% , MBI , MBIA
1.17% , XSD , Semiconductor SPDR, XSD
2.25% , STJ , ST JUDE MEDICAL
1.13% , PXJ , Oil & Gas, PXJ
0.83% , IGW , Semiconductor iS GS, IGW
1.64% , CBS , CBS CORP.
1.04% , EPP , Pacific ex-Japan, EPP
2.78% , CTX , CENTEX
0.82% , FEZ , Euro STOXX 50, FEZ
1.57% , DISH , EchoStar Communications Corporation
1.34% , LIZ , LIZ CLAIRBORNE
1.81% , RIG , TRANSOCEAN
2.20% , COST , COSTCO WHOLESAL
2.43% , SYK , STRYKER
3.21% , FCX , FREEPRT MCMORAN STK B
3.14% , MTG , MGIC INVESTMENT
0.64% , FDV , Value 40 Large Low P/E FT DB, FDV
0.84% , GLD , Gold Shares S.T., GLD
0.69% , CSX , CSX
0.72% , JKG , MidCap Blend Core iS M, JKG
0.44% , VBK , Growth SmallCap VIPERs, VBK
1.72% , SLV , Silver Trust iS, SLV
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-20.12% , PMTC.O , PARAMETRIC
-6.20% , GENZ , GENZYME GEN
-2.05% , MLNM , Millennium Pharmaceuticals Inc
-1.62% , PPL , PPL
-1.20% , MZZ , Short 200% MidCap 400 PS, MZZ
-1.15% , BBH , Biotech H, BBH
-0.99% , MEL , MELLON FINANCIAL
-1.56% , UIS , UNISYS
-0.59% , PBE , Biotech & Genome, PBE
-1.11% , GIS , GENERAL MILLS
-1.66% , NOVL , NOVELL
-0.99% , CIEN.O , CIENA
-0.99% , GR , GOODRICH CORP
-0.47% , VPL , Pacific VIPERs, VPL
-0.75% , MCK , MCKESSON CORP
-1.20% , XL , XL CAPITAL STK A
-0.45% , BAC , BANK OF AMERICA
-0.94% , SANM , SANMINA
-0.45% , IR , INGER RAND
-0.35% , WB , WACHOVIA
-0.51% , RTN , RAYTHEON
-0.39% , CC , CIRCUIT CITY STR
-0.24% , IEF , Bond, 10 Year Treasury, IEF
-0.05% , HET , HARRAHS ENTER
-0.93% , SO , SOUTHERN
-0.90% , BUD , ANHEUSER BUSCH
-0.09% , SCHW.O , CHARLES SCHWAB
-0.13% , SGP , SCHERING PLOUGH
-0.26% , PUI , Utilities, PUI
-0.72% , MRK , MERCK & CO
-1.13% , BMY , BRISTOL MYERS
-0.12% , BBT , BB&T
-0.31% , PJP , Pharmaceuticals, PJP
-0.58% , CZN , CITIZENS COMMS STK B
-0.30% , MDP , MEREDITH
-0.71% , TWX , TIME WARNER INC
-1.96% , PWER , POWER ONE
-0.17% , DD , DU PONT
-0.23% , SLE , SARA LEE
-0.13% , AZO , AUTOZONE
-0.46% , CMS , CMS ENERGY
-0.31% , IGV , Software, IGV
-1.35% , THC , TENET HEALTHCARE
-0.64% , AW , ALLIED WASTE IND
-1.09% , SDS , Short 200% S&P 500 PS, SDS
-0.04% , VHT , Health Care VIPERs, VHT
-0.42% , ABT , ABBOTT LABS
-0.55% , PCAR , PACCAR
-0.21% , JCI , JOHNSON CONTROLS
-0.33% , DOG , Short 100% Dow 30, DOG
Sectors: among the 9 major U.S. sectors, 8 rose and 1 fell.
Major Sectors Ranked for the Day
% Price Change, Sector
0.90% Consumer Discretionary
0.59% Consumer Staples
0.22% Health Care
Energy (XLE) Bullish. Relative strength made a new high on 7/6/07 and has been strong compared to the S&P since 3/12/03. Overweight.
Materials (XLB) Bullish. Relative strength made a new high on 7/6/07. XLB has been relatively strong compared to the S&P since 9/27/00. Overweight.
Industrial (XLI) Bullish. XLI made a new closing price high and has been relatively strong compared to the S&P since 8/9/06. Overweight.
Technology (XLK) Bullish. XLK made a new 6-year price high on 7/6/07 and has been relatively Bullish compared to the S&P since its low on 7/24/06.
Financial (XLF) Bearish. XLF made a new 21-month low relative to the S&P 500. 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 turned up as the U.S. dollar fell. EFA made a new absolute price high on 7/3/07 and 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 another new 6-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 rose modestly but 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 to another new 2007 high. The short-term trend is obviously Bullish, but 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 outperformed both the USO and SPY on Friday. 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 on Friday but remains questionable. GLD has been weak since 4/20/07. It broke down to a new 3-month low on 6/26/07. GLD still may be in a 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 rose, but 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) made new 2-month high. XAU has been relatively strong, outperforming 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: indications are mixed. The ratio of the price of bond TIPS to 10-year U.S. Treasury Notes rose since 6/28/07, but it is still down from a peak on 6/22/07.
Bond prices fell sharply over the past 3 days. 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 turned down and 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 fell again and remains Bearish. 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.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
3.34% Gold Mining
2.34% Hong Kong
2.15% South Korea
1.33% Oil Services
1.03% Broker Dealers
1.01% Commodity Related
0.90% Consumer Discretionary
0.74% United Kingdom
0.73% Disk Drives
0.64% Canadian Dollar
0.59% Consumer Staples
0.58% S&P Mid Caps
0.49% NYSE Composite
0.49% Dow Transports
0.42% Value Line
0.38% Russell 1000
0.38% Wilshire 5000
0.37% Nasdaq Composite
0.37% Nasdaq 100
0.37% Russell 3000
0.34% Dow Industrial
0.33% S&P 500
0.26% Russell 2000
0.25% Dow Composite
0.24% S&P 100
0.22% Health Care
0.21% Computer Tech
0.17% Euro Index
0.11% AMEX Composite
0.09% Australian Dollar
0.08% S&P Small Caps
0.05% Health Care
0.02% Natural Gas
-0.09% British Pound
-0.12% US Dollar Index
-0.15% Swiss Franc
-0.20% Health Care Products
-0.32% Dow Utilities
-0.44% 30Y T-Bond
-0.44% Japanese Yen
To sum up the current position of the U.S. stock market:
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.