Daily Stock Market Commentary – 9/08/2008

A Funny Thing Happened…

On Monday, stocks are expected to open significantly higher, following Sunday’s news of the U.S. government’s bailout of Fannie Mae and Freddie Mac. Such strong opens on news are often quickly reversed. Still, if the market regroups after normal and moderate profit taking is well absorbed, there could be additional upside attempts.

This dramatic news may create disorderly market conditions, producing losses for amateur traders and windfall profits for professional traders. Although initial impressions may seem mostly positive, this may be but one battle in a long war. It may not solve all the fundamental problems. Sometimes, government rescues solve one problem but create others.

Looking beyond the news of the day, the established intermediate-term trend for the general stock market is clearly Bearish, technically speaking. Long-term, the S&P 500 has been in a Primary Tide Bear Market since the intraday high of 1,576.09 on 10/11/2007.

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
31.06% , SNDK , SanDisk Corporation
25.09% , UST , UST
8.81% , KEY , KEYCORP
1.81% , EZA , South Africa Index, EZA
10.45% , HBAN , HUNTINGTON
0.27% , RPG , Growth S&P 500, RPG
1.26% , PHJ , Dividend Growth PS, PHJ
3.50% , PEY , Dividend High Yield Equity PS, PEY
6.24% , LSI , LSI LOGIC
3.59% , TDC , Teradata Corporation, TDC
2.66% , LLL , L-3 COMMS HLDGS
9.66% , FNM , FANNIE MAE
4.87% , RKH ,Bank Regional H, RKH
6.39% , FITB , FIFTH THIRD BANC
3.26% , ACV , Alberto-Culver Co.
0.93% , XLP , Consumer Staples SPDR, XLP
2.07% , RTN , RAYTHEON
2.41% , LPX , LOUISIANA PAC
1.33% , PCG , PG&E
2.69% , IYF ,Financial DJ US, IYF
5.00% , SOV , SOVEREIGN BANC
0.19% , RFG , Growth MidCap S&P 400, RFG
5.69% , WM , WASHINGTON MUT
1.32% , IYM , Basic Materials DJ US, IYM
0.90% , PBJ , Food & Beverage, PBJ
3.79% , IP , INTL PAPER
4.07% , CIT , CIT GROUP
3.11% , VFH , Financials VIPERs, VFH
3.57% , HSY , HERSHEY FOODS
9.28% , MI , MARSHAL & ILSLEY
3.67% , SNV , SYNOVUS
3.62% , XLF , Financial SPDR, XLF
5.33% , BAC , BANK OF AMERICA
1.05% , ADRA , Asia 50 BLDRS, ADRA
2.25% , BIG , BIG LOTS
0.52% , JKG , MidCap Blend Core iS M, JKG
1.80% , MTB , M&T BANK
4.81% , TIN , TEMPLE INLAND
2.24% , TROW , T ROWE PRICE GP
0.30% , ISI , LargeCap Blend S&P 1500 iS, ISI

Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-8.00% , EXC , EXELON CORP
-1.76% , VPU , Utilities VIPERs, VPU
-0.31% , TMW , Wilshire 5000 ST TM, TMW
-4.62% , RHT , Red Hat Inc.
-4.75% , SLV , Silver Trust iS, SLV
-0.58% , ADRD , Developed 100 BLDRS, ADRD
-3.86% , SWY , SAFEWAY
-6.74% , RFMD , RF Micro Devices Inc
-3.95% , MAS , MASCO
-3.09% , ASH , ASHLAND
-4.26% , GILD , Gilead Sciences Inc
-0.93% , PKB , Building & Construction, PKB
-3.03% , ADBE , ADOBE SYS
-0.67% , EZU , EMU Europe Index, EZU
-0.59% , PSJ , Software, PSJ
-2.17% , HOG , HARLEY DAVIDSON
-1.73% , CVS , CVS
-3.64% , BHH , Internet B2B H, BHH
-1.73% , IDU , Utilities DJ, IDU
-1.39% , KR , KROGER
-3.25% , EP , EL PASO
-2.38% , FPL , FPL GROUP INC
-1.13% , SWH , Software H, SWH
-2.67% , NSM , NATL SEMICONDUCT
-2.10% , XLU , Utilities SPDR, XLU
-0.21% , DSG , Growth Small Cap DJ, DSG
-2.03% , ETR , ENTERGY
-1.31% , TBH , Telebras HOLDRS, TBH*
-0.61% , PID , Dividend International, PID
-0.32% , FPX , IPOs, First Tr IPOX-100, FPX
-1.89% , HAL , HALLIBURTON
-2.06% , EIX , EDISON INTL
-0.15% , JKK , Growth SmallCap iS M, JKK
-2.05% , AGN , ALLERGAN
-1.88% , PAYX , PAYCHEX
-0.23% , IWC , Microcap Russell, IWC
-2.43% , WLP , WELLPOINT HEALTH
-1.53% , MCO , MOODYS CORP
-0.86% , AW , ALLIED WASTE IND
-1.68% , AEP , AM ELEC POWER

Sectors: among the 9 major U.S. sectors, 4 rose and 4 fell.
Major Sectors Ranked for the Day
% Price Change, Sector ETF, Symbol
3.62% Financial SPDR, XLF
0.93% Consumer Staples SPDR, XLP
0.20% Consumer Discretionary SPDR, XLY
0.11% Materials SPDR, XLB
0.00% Technology SPDR, XLK
-0.03% Industrial SPDR, XLI
-0.41% Energy SPDR, XLE
-0.53% Health Care SPDR, XLV
-2.10% Utilities SPDR, XLU

Primary Tide Trends for the 9 major sectors last for years. Here are my up-to-date Relative Strength Rankings, as measured with emphasis on these long-term Primary Tide Trends (listed in order of long-term relative strength):

Consumer Staples (XLP) Neutral, Market Weight. On 9/5/08, XLP /SPY Relative Strength Ratio rose to another new 5-year high, again confirming that the long-term trend is up.

Health Care (XLV) Neutral, Market Weight. On 8/19/08, the XLV/SPY Relative Strength Ratio moved up to a new 7-month high, confirming an intermediate-term upside correction.

Consumer Discretionary (XLY) Bearish, Underweight. On 7/15/08, XLY absolute price fell to its lowest level in 5 years. Since 1/5/05, the XLY/SPY Relative Strength Ratio has underperformed substantially.

Industrial (XLI) Bearish, Underweight. On 9/5/08, the XLI absolute price fell to a new 7-week low, indicating intermediate-term trend weakness.

Materials (XLB) Bearish, Underweight.On 9/5/08, the XLB absolute price fell to a new 7-month low, indicating significant trend weakness.

Energy (XLE) Bearish, Underweight. On 9/5/08, the XLE absolute price fell to a new 7-month low, indicating significant trend weakness.

Technology (XLK) Bearish, Underweight. On 9/5/08, the XLK absolute price fell to a new 6-month low, indicating significant trend weakness.

Utilities (XLU) Bearish, Underweight. On 9/5/08, the XLU absolute price fell to a new 23-month low, indicating significant trend weakness.

Financial (XLF) Bearish, Underweight. On 7/15/08, the XLF absolute price and the XLF/SPY Relative Strength Ratio both fell to their lowest level in 8 years, again confirming a Bearish Primary Tide Trend. Since 3/23/04, the XLF/SPY Relative Strength Ratio has underperformed substantially.

Foreign stock index EFA Relative Strength Ratio fell to a new 34-month low on 9/5/08 and has been in a falling trend since 5/23/08. EFA is the ETF representing the EAFE, the international developed country stock markets, ex the U.S. and Canada.

NASDAQ Composite remains Bearish. On 9/5/08, absolute price broke down to a new 7-week low, indicating intermediate-term trend weakness. Relative Strength Ratio has been in a declining trend since 8/14/08.

Growth Stock/Value Stock Relative Strength Ratio fell to another new 3-month low on 9/5/08. The short-term trend remains down. Longer term, this ratio (IWF/IWD) has been in an uptrend since 8/8/06, and it rose to a new 4-year high on 7/15/08.

The Small Cap/Large Cap Relative Strength Ratio has been consolidating since making a 2-year high on 8/14/08. The long-term trend has been Bullish most of the time since 4/8/99.

Crude Oil Futurescontract price hit a new 5-month low. The short-term and intermediate-term trends are Bearish, but the long-term trend still might be Bullish. U.S. OIL FUND ETF (AMEX: USO) is not a pure play on Crude Oil, although it generally moves in the same direction.

The Energy stock sector has underperformed Crude Oil since 12/10/07.

Gold futures contract price fell again. Gold’s short-term trend remains Bearish. Gold has been in an intermediate-term downtrend since the peak of 1033.90 on 3/17/08. Gold has been in a long-term uptrend since 8/25/1999.

Gold Mining stocks continue to underperform Gold futures on a major trend basis.

U.S. Treasury Bond futures contract price hit another new 6-month high. The short-term trend was confirmed as Bullish once again. Bonds have been in an intermediate-term uptrend since 6/13/08. Long term, Bonds have been in a neutral sideways trend since June 2003.

iShares iBoxx $ InvestGrade Corp Bond (LQD) ETF fell again. On 9/5/08, LQD/TLT Relative Strength Ratio broke down to another new multi-year low, again confirming that the short-term, intermediate-term, and long-term trends all are Bearish. Bond investors are seriously concerned about the economic outlook.

iShares Lehman TIPS Bond (TIP) ETF fell again. On 9/4/08, TIP/TLT Relative Strength Ratio broke down to a new multi-year low, again confirming again that the short-term, intermediate-term, and long-term trends all are Bearish. Bond investors are not concerned about the inflation outlook.

The U.S. dollar rose to another new 11-month closing price high. The short-term and intermediate-term trends remain Bullish, but the long-term trend still might be Bearish.

The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood. The business and financial news has flipped from fear to hope and back again this year, creating higher levels of volatility. Investors might be wise to focus on risk control.

Sentiment/Contrary Opinion: There were 37.8% Bulls versus 40.0% Bears as of 9/3/2008, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio fell to 0.95, down from 1.00 the previous week. The low of 0.57 on 7/16/08 was the lowest level of the ratio since 1994. The ratio’s 38-year range is 0.28 to 17.51, and the median is 1.47.

VIX Fear Index, now at 23.06, still indicates relatively low Fear since the peak at 28.48 on 7/14/08. Previously, VIX fell from a peak of 32.64 on 3/17/08 to a low of 16.30 on 5/15/08, indicating decreasing Fear. The all-time high was 45.74 on 10/8/98. The all-time low was 9.89 on 1/24/07. VIX is a market estimate of expected constant 30-day volatility, calculated by weighting S&P 500 Index CBOE option bid/ask quotes spanning a wide range of strike prices for the two nearest expiration dates.

VXN Fear Index, now at 26.66, still indicates relatively low Fear since the peak at 33.20 on 7/14/08. Previously, VXN fell from a peak of 35.63 on 1/22/08 to a low of 20.00 on 5/16/08, indicating decreasing Fear. The all-time high was 114.23 on 10/8/98. The all-time low was 12.61 on 7/29/05. VXN measures NASDAQ Volatility using a method comparable to that used for VIX.

CBOE Put/Call Ratio is 0.79, which indicates Bearish sentiment. Its 4-year mean and median are 0.62, and its 4-year range is 0.35 to 1.28.

ISEE Call/Put Ratio is 1.01, which indicates Bearish sentiment. The ratio’s 4-year mean is 1.50, 4-year median is 1.47, and 4-year range is 0.51 to 3.16.

Fundamentals: The 2003-2007 Bull Market was fed by abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and the net balance of positive earnings surprises. The unfolding fallout from the subprime credit market crisis has derailed that engine. Economic statistics and corporate earnings have weakened and seem likely to stay weak over the next several months.

The Dow Theory confirmed a Primary Tide Bear Market on 11/21/07 when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their respective closing price lows of August, 2007.

The breadth of the market has been in a relatively Bearish trend long term since June 2007. The number of New Lows has exceeded the number of New Highs most days for more than a year, since July 2007, and that is one sign of a Bear Market. On 7/15/08, the Cumulative Daily Advance-Decline Lines for the NYSE and for the NASDAQ both fell to new 20-month lows, so major breadth trends remain Bearish.

To discover the next Resistance, traders probably will be watching how the market acts at the following levels for the Standard & Poor’s 500 cash index (1,242.31):

Potential Resistance
1,576.09, high of 10/11/2007
1,552.76, high of 10/31/2007
1,523.57, high of 12/11/2007
1,498.85, high of 12/26/2007
1,440.24, high of 5/19/2008
1,406.32, high of 5/29/2008
1,366.59, high of 6/17/2008
1,335.63, high of 6/25/2008
1,313.15 high of 8/11/2008

To discover the next Support, traders probably will be watching how the market acts at the following levels for the S&P 500 cash index (1,242.31):

Potential Support
1,200.44, low of 7/15/2008
1,168.20, low of 10/13/2005
1,163.23, high of 3/5/2004
1,159.86, low of 5/17/2005
1,153.64, low of 5/16/2005
1,146.18, low of 5/13/2005
1,139.14, low of 4/29/2005
1,136.37, low of 4/20/2005

Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol

4.87% Bank Regional H, RKH
3.71% Financial Services DJ, IYG
3.62% Financial SPDR, XLF
3.50% Dividend High Yield Equity PS, PEY
3.20% Internet Infrastructure H, IIH
3.11% Financials VIPERs, VFH
2.82% South Korea Index, EWY
2.69% Financial DJ US, IYF
2.62% Taiwan Index, EWT
2.54% China 25 iS, FXI
1.81% South Africa Index, EZA
1.73% Dividend DJ Select, DVY
1.69% Dividend Leaders, FDL
1.67% Semiconductor SPDR, XSD
1.52% Capital Markets KWB ST, KCE
1.43% Emerging Markets, EEM
1.39% Materials VIPERs, VAW
1.38% Homebuilders SPDR, XHB
1.34% Metals & Mining SPDR, XME
1.34% Semiconductor H, SMH
1.32% Semiconductor iS GS, IGW
1.32% Basic Materials DJ US, IYM
1.26% Dividend Growth PS, PHJ
1.21% Dividend SPDR, SDY
1.15% Singapore Index, EWS
1.05% Asia 50 BLDRS, ADRA
1.04% Value MidCap iS M, JKI
1.04% Consumer Non-Cyclical, IYK
1.01% MidCap Russell, IWR
1.00% Value S&P 500 B, IVE
0.97% Value MidCap Russell, IWS
0.93% Consumer Staples SPDR, XLP
0.92% LargeCap Blend S&P=Weight R, RSP
0.91% Financials Global LargeCap Value, IXG
0.90% Food & Beverage, PBJ
0.89% Consumer Staples VIPERs, VDC
0.84% Global Titans, DGT
0.81% Value VIPERs, VTV
0.81% China LargeCap Growth G D H USX PS, PGJ
0.80% Hong Kong Index, EWH
0.80% MidCap VIPERs, VO
0.80% Value 1000 Russell, IWD
0.79% Malaysia Index, EWM
0.78% Semiconductors, PSI
0.78% Canada Index, EWC
0.75% Gold Shares S.T., GLD
0.74% Dividend Achievers PS, PFM
0.74% Value LargeCap NYSE 100 iS, NY
0.73% Netherlands Index, EWN
0.72% Value SmallCap Dynamic PS, PWY
0.68% Value LargeCap Fundamental RAFI 1000, PRF
0.67% Growth Large Cap, ELG
0.66% Short 200% QQQ PS, QID
0.64% LargeCap Blend Total Market DJ, IYY
0.63% Real Estate US DJ, IYR
0.62% Retail H, RTH
0.61% Leisure & Entertainment, PEJ
0.61% Growth Mid Cap Dynamic PS, PWJ
0.60% Ultra S&P500 Double, SSO
0.59% Blend Total Market VIPERs, VTI
0.56% Value LargeCap iS M, JKF
0.56% Internet H, HHH
0.53% LargeCap 1000 R, IWB
0.53% Insurance, PIC
0.52% MidCap Blend Core iS M, JKG
0.48% S&P 500 iS LargeCap Blend, IVV
0.47% Growth MidCap Russell, IWP
0.45% LargeCap Blend Core iS M, JKD
0.44% WilderHill Clean Energy PS, PBW
0.44% Growth MidCap 400 B, IJK
0.41% LargeCap Blend Russell 3000, IWV
0.41% Pacific VIPERs, VPL
0.40% LargeCap Blend S&P 100, OEF
0.40% Short 100% QQQ, PSQ
0.38% Dividend Appreciation Vipers, VIG
0.37% Aerospace & Defense, PPA
0.35% Consumer D. VIPERs, VCR
0.34% Ultra Dow30 Double, DDM
0.32% MidCap S&P 400 iS, IJH
0.32% Value MidCap S&P 400 B, IJJ
0.31% S&P 500 SPDRs LargeCap Blend, SPY
0.31% LargeCap Rydex Rus Top 50, XLG
0.30% LargeCap Blend S&P 1500 iS, ISI
0.30% Micro Cap Zachs, PZI
0.30% Value LargeCap Russell 3000, IWW
0.29% Pacific ex-Japan, EPP
0.29% Value SmallCap iS M, JKL
0.28% Value LargeCap Dynamic PS, PWV
0.27% LargeCap Blend NYSE Composite iS, NYC
0.27% Growth S&P 500, RPG
0.27% Retail, PMR
0.24% MidCap Growth iS M, JKH
0.23% Extended Mkt VIPERs, VXF
0.20% Industrials VIPERs, VIS
0.20% Consumer Discretionary SPDR, XLY
0.19% Growth LargeCap NASDAQ Fidelity, ONEQ
0.19% Growth MidCap S&P 400, RFG
0.17% LargeCap Blend Socially Responsible iS, KLD
0.15% Natural Resource iS GS, IGE
0.14% LargeCap VIPERs, VV
0.14% Realty Cohen & Steers, ICF
0.13% DIAMONDS (DJIA), DIA
0.12% REIT Wilshire, RWR
0.11% Materials SPDR, XLB
0.10% Consumer Cyclical DJ, IYC
0.07% Growth LargeCap Russell 3000, IWZ
0.05% Small Cap VIPERs, VB
0.04% Growth VIPERs, VUG
0.03% Value Large Cap DJ, ELV
0.03% Value SmallCap Russell 2000, IWN
0.03% Bond, TIPS, TIP
0.02% Growth 1000 Russell, IWF
0.02% REIT VIPERs, VNQ
0.02% Ultra MidCap400 Double, MVV
0.02% Industrial LargeCap Blend DJ US, IYJ
0.00% Technology SPDR, XLK
0.00% Networking, IGN
0.00% MidCap S&P 400 SPDRs, MDY
0.00% Japan Index, EWJ
-0.02% Oil Services H, OIH
-0.03% Industrial SPDR, XLI
-0.03% Value SmallCap S&P 600 B, IJS
-0.03% Global 100, IOO
-0.04% Bond, 1-3 Year Treasury, SHY
-0.04% Energy Exploration & Prod, PXE
-0.05% Value 40 Large Low P/E FT DB, FDV
-0.05% Bond, 20+ Years Treasury, TLT
-0.05% LargeCap Blend Dynamic PS, PWC
-0.07% Networking, PXQ
-0.08% SmallCap S&P 600, IJR
-0.08% Value SmallCap VIPERS, VBR
-0.08% Value S&P 500, RPV
-0.10% Mexico Index, EWW
-0.10% Technology GS, IGM
-0.10% Bond, Corp, LQD
-0.11% Austria Index, EWO
-0.12% Growth S&P 500/BARRA, IVW
-0.13% Lg Cap Growth PSD, PWB
-0.13% Value MidCap Dynamic PS, PWP
-0.13% OTC Dynamic PS, PWO
-0.13% Switzerland Index, EWL
-0.14% SmallCap Core iS M, JKJ
-0.15% Growth SmallCap iS M, JKK
-0.16% Info Tech VIPERs, VGT
-0.17% Growth SmallCap VIPERs, VBK
-0.19% Technology Global, IXN
-0.19% Value SmallCap S&P 600, RZV
-0.20% Value Line Timeliness MidCap Gr, PIV
-0.21% Growth Small Cap DJ, DSG
-0.22% Bond, 10 Year Treasury, IEF
-0.23% Value Small Cap DJ, DSV
-0.23% Technology MS sT, MTK
-0.23% Microcap Russell, IWC
-0.24% Growth SmallCap R 2000, IWO
-0.25% Healthcare Global, IXJ
-0.25% SmallCap Russell 2000, IWM
-0.26% Japan LargeCap Blend TOPIX 150, ITF
-0.26% Short 100% Dow 30, DOG
-0.26% Emerging VIPERs, VWO
-0.27% Energy DJ, IYE
-0.29% Nanotech Lux, PXN
-0.30% Bond, Aggregate, AGG
-0.30% Energy VIPERs, VDE
-0.30% Belgium Index, EWK
-0.31% Biotech SPDR, XBI
-0.31% Wilshire 5000 ST TM, TMW
-0.31% Telecom H, TTH
-0.31% Short 100% S&P 500, SH
-0.32% IPOs, First Tr IPOX-100, FPX
-0.32% Biotech & Genome, PBE
-0.33% Internet Architecture H, IAH
-0.34% Value MidCap S&P 400, RFV
-0.34% Ultra QQQ Double, QLD
-0.34% Emerging 50 BLDRS, ADRE
-0.35% Short 200% MidCap 400 PS, MZZ
-0.35% Technology DJ US, IYW
-0.36% Pharmaceuticals, PJP
-0.37% EAFE Index, EFA
-0.37% Australia Index, EWA
-0.37% Growth BARRA Small Cap 600, IJT
-0.38% Value LargeCap Euro STOXX 50 DJ, FEU
-0.38% Software, IGV
-0.41% Energy SPDR, XLE
-0.41% Growth LargeCap iS M, JKE
-0.42% Short 100% MidCap 400, MYY
-0.43% Short 200% S&P 500 PS, SDS
-0.44% Sweden Index, EWD
-0.47% Telecom DJ US, IYZ
-0.48% Growth EAFE MSCI, EFG
-0.48% Growth LargeCap NASDAQ 100, QQQQ
-0.52% Value EAFE MSCI, EFV
-0.52% Healthcare DJ, IYH
-0.53% Short 200% Dow 30 PS, DXD
-0.53% Health Care SPDR, XLV
-0.54% Transportation Av DJ, IYT
-0.54% Telecom Services VIPERs, VOX
-0.55% Pharmaceutical H, PPH
-0.56% United Kingdom Index, EWU
-0.56% Latin Am 40, ILF
-0.56% Europe 350 S&P Index, IEV
-0.57% Spain Index, EWP
-0.58% Developed 100 BLDRS, ADRD
-0.58% Growth SmallCap Dynamic PS, PWT
-0.59% Water Resources, PHO
-0.59% Health Care VIPERs, VHT
-0.59% Software, PSJ
-0.61% Dividend International, PID
-0.65% Biotech H, BBH
-0.65% France Index, EWQ
-0.66% European VIPERs, VGK
-0.67% EMU Europe Index, EZU
-0.71% Brazil Index, EWZ
-0.72% Italy Index, EWI
-0.75% Energy Global, IXC
-0.77% Telecommunications & Wireless, PTE
-0.82% Telecommunications Global, IXP
-0.87% Europe 100 BLDRS, ADRU
-0.88% Euro STOXX 50, FEZ
-0.89% SmallCap PS Zacks, PZJ
-0.93% Building & Construction, PKB
-0.94% Biotechnology, IBB
-1.00% Commodity Tracking, DBC
-1.00% Oil & Gas, PXJ
-1.10% Oil, Crude, U.S. Oil Fund, USO
-1.13% Software H, SWH
-1.17% Utilities, PUI
-1.40% Broadband H, BDH
-1.73% Utilities DJ, IDU
-1.76% Utilities VIPERs, VPU
-1.92% Germany Index, EWG
-2.10% Utilities SPDR, XLU
-2.44% Utilities H, UTH
-3.36% Hardware & Electronics, PHW
-3.64% Internet B2B H, BHH
-4.75% Silver Trust iS, SLV