By Robert W. Colby, Senior Analyst TraderPlanet.com
The Energy sector price made a new 7-week high and remains the leading sector.
Inflation expectations have been rising in September.
Financial sector bounced sharply, although that main trend is Bearish.
The stock market has been firming up since the downside shakeout low on 8/16/07. The stock market appears to be shrugging off scary news about the unfolding fallout from the subprime- and credit-market crisis. Short-term momentum now points upward, and the major trend of the stock market remains Bullish.
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
0.81% , PEJ , Leisure & Entertainment, PEJ
0.70% , RPG , Growth S&P 500, RPG
0.41% , RFV , Value MidCap S&P 400, RFV
10.05% , GM , GENERAL MOTORS
0.86% , VTV , Value VIPERs, VTV
0.24% , RZV , Value SmallCap S&P 600, RZV
13.90% , CFC , COUNTRYWIDE FNCL
6.05% , MCD , MCDONALDS
0.27% , BDH , Broadband H, BDH
3.43% , QCOM , QUALCOMM
0.56% , IEV , Europe 350 S&P Index, IEV
5.60% , F , FORD MOTOR
1.52% , IYG , Financial Services DJ, IYG
0.80% , RFG , Growth MidCap S&P 400, RFG
5.25% , MS , MORGAN STANLEY
0.82% , OEF , LargeCap Blend S&P 100, OEF
2.24% , EWM , Malaysia Index, EWM
3.67% , UNP , UNION PACIFIC
3.52% , MWV , MEADWESTVACO
6.06% , KSS , KOHLS
0.56% , DSV , Value Small Cap DJ, DSV
2.99% , MER , MERRILL LYNCH
2.04% , YUM , YUM BRANDS
0.50% , PWO , OTC Dynamic PS, PWO
1.47% , ILF , Latin Am 40, ILF
2.33% , WB , WACHOVIA
5.14% , JNY , JONES APPAREL
2.35% , MI , MARSHAL & ILSLEY
1.38% , XLY , Consumer Discretionary SPDR, XLY
0.83% , XLG , LargeCap Rydex Rus Top 50, XLG
1.11% , ELV , Value Large Cap DJ, ELV
3.22% , COH , COACH
1.84% , IYR , Real Estate US DJ, IYR
2.96% , ABK , AMBAC FINL GRP
1.20% , VCR , Consumer D. VIPERs, VCR
5.43% , MTG , MGIC INVESTMENT
1.50% , CAG , CONAGRA FOODS
3.25% , GS , GOLDMAN SACHS
2.31% , PHM , PULTE HOMES
1.21% , EWO , Austria Index, EWO
0.66% , EWI , Italy Index, EWI
5.03% , FCX , FREEPRT MCMORAN STK B
0.61% , EWQ , France Index, EWQ
2.53% , GNTX , Gentex Corporation
1.60% , TTH , Telecom H, TTH
2.51% , COST , COSTCO WHOLESAL
2.85% , CC , CIRCUIT CITY STR
2.89% , RSH , RADIOSHACK
1.07% , BIIB , BIOGEN IDEC
2.54% , JPM , J P MORGAN CHASE
Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-5.21% , CEPH , Cephalon Inc
-2.30% , CECO , CAREER EDUCATION CORP
-4.28% , ASD , AMER STANDARD
-3.83% , GLW , CORNING
-2.66% , UIS , UNISYS
-1.00% , ANDW , ANDREW
-0.77% , DOG , Short 100% Dow 30, DOG
-1.47% , TLAB , TELLABS
-0.75% , DBC , Commodity Tracking, DBC
-1.21% , IFF , INTL FLAV & FRAG
-0.34% , PTE , Telecommunications & Wireless, PTE
-0.82% , SH , Short 100% S&P 500, SH
-0.15% , MYY , Short 100% MidCap 400, MYY
-1.54% , TUP , TUPPERWARE
-1.07% , ADBE , ADOBE SYS
-1.03% , IIH , Internet Infrastructure H, IIH
-1.69% , PAYX , PAYCHEX
-1.31% , FRE , FREDDIE MAC
-0.28% , BOL , BAUSCH & LOMB
-0.36% , IGW , Semiconductor iS GS, IGW
-0.49% , PSQ , Short 100% QQQ, PSQ
-0.75% , DXD , Short 200% Dow 30 PS, DXD
-0.28% , VPL , Pacific VIPERs, VPL
-1.03% , MHS , MEDCO HEALTH
-1.90% , STJ , ST JUDE MEDICAL
-1.48% , CSC , COMPUTER SCIENCE
-1.94% , NOV , NATIONAL OILWELL VARC0
-0.43% , LVLT , LEVEL 3 COMMUNICATIONS
-1.73% , CBE , COOPER INDS STK A
-0.37% , PNW , PINNACLE WEST
-1.18% , FNM , FANNIE MAE
-0.54% , IAU , Gold COMEX iS, IAU
-1.19% , VIA.B , VIACOM STK B
-0.99% , PPL , PPL
-0.45% , STI , SUNTRUST BANKS
-0.48% , MHP , MCGRAW HILL
-0.81% , CL , COLGATE
-0.54% , GTW , GATEWAY
-0.79% , SNPS , Synopsys Inc
-1.19% , OMC , OMNICOM
-0.72% , ADI , ANALOG DEVICES
-3.40% , SNDK , SanDisk Corporation
-0.49% , ZION , ZIONS
-0.59% , IEF , Bond, 10 Year Treasury, IEF
-0.27% , CTXS , CITRIX SYSTEMS
-0.53% , TIP , Bond, TIPS, TIP
-0.26% , IXN , Technology Global, IXN
-1.48% , VC , VISTEON
-1.15% , RFMD , RF Micro Devices Inc
-0.25% , CTAS , CINTAS
Sectors: among the 9 major U.S. sectors, 8 rose and 1 finished unchanged.
Major Sectors Ranked for the Day
% Price Change, Sector
1.38% Consumer Discretionary
0.29% Consumer Staples
0.23% Health Care
Looking beyond the daily fluctuation to the major trends (listed in order of relative strength):
Energy (XLE) Bullish. Relative strength made a new high on 9/12/07. XLE has been strong compared to the S&P since 3/12/03. Overweight.
Technology (XLK) Bullish. Relative strength made a new 2-year high on 9/6/07. XLK has been relatively strong compared to the S&P since its low on 7/24/06. Overweight.
Industrial (XLI) Bullish. Stabilizing since the price low on 8/16/07. Longer term, XLI has been relatively strong compared to the S&P since 8/9/06. Overweight.
Utilities (XLU) Market weight. Relative strength improving since 6/22/07.
Materials (XLB) Market weight. Relative strength is down slightly since 9/6/07 but improving more significantly since 8/17/07.
Consumer Staples (XLP) Bearish. This defensive sector’s relative strength has underperformed since 8/15/07. Underweight.
Health Care (XLV) Bearish. Relative strength turned down on 4/19/07 and made a new 5-year low on 7/19/07, thereby confirming a major downtrend. Underweight.
Consumer Discretionary (XLY) Bearish. Price hit a new 10-month low on 8/16/07. Relative strength made another new 5-year low on 9/12/07. Underweight.
Financial (XLF) Bearish. Price hit a new 3-week low on 9/7/07 and a 13-month low on 8/16/07. Relative strength has been falling since 2/20/07 and made a new 6-year low on 8/3/07. Underweight.
Foreign stocks outperformed since 8/17/04. Before that, the short-term, July-August market shakeout hit global markets harder than the U.S. market. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) has substantially outperformed long term, since the Bull market started in 2002, and the secular trend probably is still Bullish.
NASDAQ relative strength sharply outperformed since 8/17/04. In addition, except for brief periods ranging between 1 to 6 days, NASDAQ has outperformed since 5/17/07. Longer term, NASDAQ has outperformed for more than a year, since 8/8/06.
Growth outperformed Value since 8/20/07. Also, Growth outperformed Value since 5/16/07. It looks like a strong trend.
Small Caps have sharply underperformed Large Caps since 8/21/07. Small Caps also underperformed since 4/19/06. These trends deserve respect.
Crude Oil made another new all-time high. The U.S. OIL FUND ETF (AMEX: USO) price made a one-year high. Note that the USO fund is not a pure play on Crude Oil. The longer-term trends for both remain Bullish.
The Energy sector price made a new 7-week high and outperformed the USO. Longer 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 Trust ETF (NYSE: GLD) eased modestly lower over past 2 days but remains in a short-term uptrend. Longer term, GLD has underperformed the S&P since the GLD top on 5/12/06 at 72.26, which is a level that probably will be significant to traders.
Silver underperformed Gold since 9/4/07. Longer term, iShares Silver Trust (AMEX: SLV) broke down to a new 6-month low on 6/26/07 and underperformed GLD since 12/7/06. So, the main trend is relatively Bearish.
The Gold Miners ETF (GDX) have been in a short-term recovery mode since 8/16/07. But GDX still has underperformed GLD since 7/19/07. The Gold Miners also underperformed the Gold Metal since 1/31/06. In fact, Gold Mining stocks have substantially underperformed both Gold and the S&P 500 for more than 20 years.
Inflation expectations have been rising short-term, since 8/31/07. But the larger trend has been falling since 6/22/07. So, the ratio of the price of bond TIPS to 10-year U.S. Treasury Notes indicates mixed inflation expectations in different time frames.
U.S. Treasury Bond prices are consolidating after a making new 9-month high on 9/10/97. That new high confirmed a significant uptrend. Long-term, Bonds have recovered more than half of their losses since the price peak at 97.66 on 6/16/03 for iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT). Bonds remain reactive to news about the credit crisis: the worse the crisis, the higher the Bond prices.
U.S. dollar’s “Dead Cat Bounce” is not meaningful. It fell to a new 15-year low on 9/13/07. All trends are clearly Bearish. Traders will be watching 78.43, the low of 9/2/92.
Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:
2.58% Broker Dealers
2.15% South Korea
1.74% Hong Kong
1.38% Consumer Discretionary
1.31% Dow Transports
1.16% Gold Mining
1.06% AMEX Composite
1.00% Dow Industrial
0.97% Dow Composite
0.96% S&P 100
0.84% S&P 500
0.83% NYSE Composite
0.79% Russell 1000
0.75% Russell 3000
0.72% Wilshire 5000
0.68% United Kingdom
0.56% Commodity Related
0.49% Nasdaq 100
0.44% Health Care
0.43% Dow Utilities
0.39% Canadian Dollar
0.37% Value Line
0.35% Nasdaq Composite
0.31% Russell 2000
0.29% Consumer Staples
0.27% S&P Mid Caps
0.23% Health Care
0.20% US Dollar Index
0.19% S&P Small Caps
0.11% Health Care Products
0.10% Oil Services
0.03% British Pound
-0.03% Computer Tech
-0.19% Euro Index
-0.28% Swiss Franc
-0.31% Australian Dollar
-0.36% Natural Gas
-0.63% 30Y T-Bond
-0.95% Disk Drives
-0.95% Japanese Yen
To sum up the current position of the U.S. stock market:
The unfolding fallout from the subprime- and credit-market crisis moved investor sentiment toward the Bearish side in August. News of both damages and rescues is still leaking out little by little, but the stock market seems to be taking all the news in stride.
Considering the long term, beyond the recent short-term downside shakeout, the U.S. stock market has shown impressive Bullish resilience from the major low on 10/10/02 to the new all-time highs on 7/19/07. 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.
Investors may perceive anything that threatens to end abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and the net balance of positive earnings surprises as threats to the Bullish scenario.
Stocks generally are fully valued to over priced by long-term historical standards. Although that alone does not mean that stocks cannot resume their uptrends, 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.