Technology and Energy major stock sectors rose above previous highs.
U.S. dollar ETF (UUP) fell below the lows of the previous 3 months.
Crude Oil, United States Oil ETF (USO) rose above its highs of the previous 9 months.
The Dow-Jones Industrial and Transportation Averages diverged after 2/3/12, as Industrials struggled moderately higher while Transports trended down.
Last week, the Dow-Jones Industrials appeared to encounter resistance near the round number of 13,000. That round number resistance phenomenon is not necessarily logical, but it is typical behavior for the Industrials.
The Dow-Jones Transportation Average closed below its 50-day SMA and broke down below its October-February uptrend line.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) remains neutral but appears to have gained strength in February. Small and Mid Caps appear to be losing strength in recent weeks.
The S&P 500 Composite (SPX: 1,365.74) rose above the highs of the previous 9 months on 2/24/12.
NYSE volume fell again on Friday and continues to languish at extremely low levels, suggesting weak demand for stocks. The 50-day SMA of NYSE Volume is at its lowest level in 12 years.
Popular Price Momentum indicators, such as RSI(14) and MACD(12/26/9), failed to confirm higher price highs over the past 10 trading days, thereby warning of bearish divergence.
SPX remains within a potential Bearish Rising Wedge chart pattern, which has forming since December. In addition, that pattern is contained within a larger potential Bearish Rising Wedge chart pattern beginning at the October low. Break downs below the lower boundary lines would offer technical warning of a possible fast return to the lows.
My Sensitive Short-Term Price Momentum Oscillator based on SPX turned upward but shows a bearish divergence compared to the SPX price. In recent weeks, the slowness of the grind higher indicates that the stock market already had lost most of its bullish momentum.
Expect resistance near the 2011 highs, around the intraday peak on the SPX at 1370.58 set on 5/2/2011, allowing plus or minus a few percentage points for Gann’s “lost motion”.
Overbought, up big from the October low, and with very little room above before encountering resistance, Potential Reward relative to potential Risk appears unattractive for stocks.
Recent sentiment data, detailed below, indicates alarming degrees of optimism and bullish complacency. When the majority of investors has been bullish for some time, we can assume that they are already fully invested in the market. Once everyone who is going to buy has already bought, stocks are vulnerable to a downside shakeout. The pendulum of emotion tends to swing too far in one direction, but market mood always reverts to the mean.
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Equity Mutual Funds lost 6% in 2011, according to Lipper Research Services.
Hedge funds lost 5%, according to COO Connect.
Hedge funds suffered their second-worst year on record in 2011, according to an index maintained by Eurekahedge, an independent research firm that specializes in hedge fund data. Some of the world’s largest and best-known hedge funds suffered huge losses, down 20% to 50%.
But not all money managers were down in 2011; see:
Robert W. Colby Asset Management, Inc. (click here).
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9 major U.S. stock sectors ranked in order of long-term relative strength:
Available by subscription only (click here).
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Stock Market Indicators
The Dow Theory gave a bullish signal on 12/23/11, when both Dow-Jones Industrial and Transportation Averages closed above their closing price highs of the previous 5 months. These two Averages diverged after 2/3/12, however, as Industrials struggled higher while Transports failed to confirm….
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Sentiment for Contrary Thinking
ABC News reported on 2/21/12 that 10 out of 10 investment strategists at large firms were bullish. http://abcnews.go.com/watch/world-news-with-diane-sawyer/SH5585921/VD55173505/world-news-221-dow-jones-climbs-past-13000
The Commitment of Traders (COT) report shows that the Commercials (giant corporations with deep pockets) have been buying “risk off” defensive futures contracts, specifically, the U.S. dollar and the ten-year Treasury note. On the other side, trend-following Speculators have been buying “risk on” aggressively bullish contracts, setting a new all-time net-long record in the Nasdaq futures. The unusually large size of Speculators’ positions implies a weak-handed, top-heavy stock market.
AAII Sentiment: There were 44% Bulls and 28% Bears, according to the AAII weekly survey reported on 2/23/12. Net bullish opinion is as high as it was last July, near the market top.
Investors Intelligence Sentiment: There were 54.8% Bulls versus 25.8% Bears, according to the Investors Intelligence weekly survey of stock market newsletter advisors reported on 2/15/11. This was the highest level of bullish sentiment since the stock market top in May, 2011.
Investment Newsletters were 75% bullish, the highest since near the major top in year 2000, according to Hulbert Digest.
Market Vane’s Bullish Consensus among Advisors and Newsletters rose to 66% Bulls this month, in the same 64% to 69% range of Bulls from February to July 2011 at the highs.
Short Selling ETFs are trading the lowest volume since the market top in April, 2011, according to Frank D. Gretz of Wellington Shields & Co.
Corporate insiders have been selling their companies’ stock at the heaviest rate since the market peak last July, according to Mark Hulbert at MarketWatch. Insiders sold 577 shares for each 100 shares they bought, according to Argus Research Vickers Weekly Insider Report. That is a big change in insider behavior from 81 shares sold for each 100 shares bought in November. Since corporate insiders (officers, directors, and largest shareholders) know so much more about their companies than the public can possibly know, it is bearish when insiders sell at such a heavy pace.
NYSE short interest collapsed from a high peak of 16.1 billion shares sold short last September, which coincided with the stock market lows, to 12.5 billion shares sold short in February. This is the lowest level since last April, at the market top. Short interest represents a pool of potential demand for stocks, since short sellers eventually must buy back the shares they borrowed. Currently, that pool of demand is depleted.
VIX Fear Index broke down below the lows of the previous 6 months on 2/3/12, hitting 16.10 intraday. That was down from a peak of 48.00 on 8/8/11. Such a large drop in VIX indicated a shift away from fear and toward bullish complacency, which may be bearish. 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.
The S&P 500 Composite Potential Resistance
1576.09, high of 10/11/2007
1552.76, high of 10/31/2007
1523.57, high of 12/11/2007
1498.85, high of 12/26/2007
1440.24, high of 5/19/2008
1406.32, high of 5/29/2008
1381.50, Fibonacci 78.6% of 2007-2009 range
1376.55, Fibonacci 100.0% projection 10/11 range
1370.58, high of 5/2/11
1368.92, high of 2/24/2012
The S&P 500 Composite Potential Support
1352.28, low of 2/23/2012
1337.35, low of 2/10/2012
1300.49, low of 1/30/2012
1277.58, low of 1/13/2012
1265.26, low of 1/5/2012
1262.30, low of 12/27/2011
1257.85, 200-day SMA
1257.46, low of 12/30/11
1257.58, Fibonacci 61.8% of 2011 range
1255.22, high of 12/22/2011
1248.64, low of 12/29/2011
1244.80, low of 12/7/2011
1239.73, low of 12/1/2011
1238.81, Fibonacci 78.6% of 1,576.09 high
1234.81, low of 11/3/11
1231.04, high of 12/16/11
1226.64, low of 11/9/2011
1222.68, Fibonacci 50% of 2011 range
1224.57, high of 12/19/11
1215.20, low of 12/16/11
1209.47, low of 12/14/2011
1209.43, low of 11/17/2011
1204.49, Fibonacci 23.6% of 2009-11 range
1202.37, low of 12/19/11
1187.77, Fibonacci 38.2% of 2011 range
1158.66, low of 11/25/2011
1144.38, Fibonacci 23.6% of 2011 range
1101.73, Fibonacci 38.2% of 2009-11 range
1074.77, low of 10/4/2011
1039.70, low of 8/27/10
1039.31, Fibonacci 23.6% of June-Aug. 2010 range
1010.91, low of 7/1/2010
1018.69, Fibonacci 50% of 2009-11 range
1008.55, Fibonacci 38.2% of 2009-2010 range
991.97, low of 9/2/2009
978.51, low of 8/17/2009
956.23, high of 6/11/2009
943.29, Gann 50.0% of 2009-2010 range
935.64, Fibonacci 61.8% of 2009-11 range
878.04, Fibonacci 61.8% of 2009-2010 range
874.17, Gann 62.5% of 2009-2010 range
869.32, low of 7/8/2009
817.40, Fibonacci 78.6% of 2009-11 range
805.17, Gann 75.0% of 2009-2010 range
785.13, Fibonacci 78.6% of 2009-2010 range
666.79, intraday low of 3/6/2009
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Fixed-Income Investments
Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) remains neutral but appears to be gaining strength since 2/21/12. TLT remains below its 50-day SMA but above its 200-day SMA. The 50-day SMA has remained above the 200-day SMA every day since 6/24/11, suggesting a persistently bullish major trend for the longer term. Support 114.62, 109.82, 106.08, 103.20, 102.27, 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance 118.28, 120.91, 121.64, 121.76, 124.02 and 125.03.
Bond, iShares Barclays 7-10 Year U.S. Treasury ETF (IEF) remains neutral but appears to be gaining strength since 2/21/12. IEF remains below its 50-day SMA but above its 200-day SMA. The 50-day SMA has remained above the 200-day SMA every day since 6/21/11, suggesting a persistently bullish major trend for the longer term. Support 104.37, 104.00, 103.29, 102.32, 101.36, 101.11, 99.79, and 97.66. Resistance 105.68, 106.49 and 106.66.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) remains neutral but appears to be gaining strength since 2/15/12. JNK/LQD remains below its 200-day SMA but above its 50-day SMA. The 50-day SMA has remained bearishly below the 200-day SMA every day since 6/20/11.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) remains neutral long term but has been gaining strength since 12/30/11 as it became clear that the world’s monetary authorities are inflating fiat currencies. TIP/IEF has remained bullishly above both its 50-day and 200-day SMAs since 2/15/12. The 50-day SMA has remained bearishly below the 200-day SMA every day since 7/15/11.
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) fell below the lows of the previous 3 months on 2/24/12, obviously losing strength. UUP remains neutral below its 50-day SMA but above its 200-day SMA since 2/6/12. The 50-day SMA has remained above the 200-day SMA every day since 10/26/11. Support 21.58, 21.07, and 20.84. Resistance 22.30, 22.41, 22.46, 22.85, 23.52, 25.84, 27.19, 28.97.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) remains neutral but appears to be losing strength since 1/26/12. DBA has remained above its 50-day SMA but below its 200-day SMA since 2/14/12, and the 50-day SMA has remained below the 200-day SMA every day since 8/8/11.
Crude Oil, United States Oil ETF (USO) rose above its highs of the previous 9 months on 2/24/12, obviously gaining strength. USO rose above its 50-day SMA and rose above a 6-week downtrend line on 2/13/12, has remained above its 200-day SMA since 12/20/11, and the 50-day SMA has remained above the 200-day SMA every day since 1/3/12. Support 40.35, 39.96, 38.51, 36.67, 35.73, 34.54, 32.52, 29.10, 26.28, and 22.74. Resistance 42.19 and 45.60.
Gold, SPDR Gold Shares ETF (GLD) rose above the highs of the previous 3 months on 2/23/12 and remains in bullish position above its 50-day and 200-day SMAs. Longer term, the 50-day SMA has remained bullishly above the 200-day SMA every day since 2/11/09. Support: 166.17, 160.29, 159.68, 158.01, 156.19, 154.55, 148.27, 147.19, 143.97, 143.42, and 142.55. Resistance: 175.46, 177.40, and 185.85.
Gold Mining Stocks ETF/Gold Shares ETF Relative Strength Ratio (GDX/GLD) fell below the lows of the previous 3 years on 2/15/12, thereby reconfirming a bearish major trend for the long term. GDX/GLD remains bearishly below its 50-day and 200-day SMAs. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 2/22/11.
Silver, iShares Silver Trust ETF (SLV) remains neutral. SLV rose above its 200-day SMA and rose above its highs of the previous 5 months on 2/23/12. The 50-day SMA remains below the 200-day SMA, however. Support 31.82, 30.67, 28.63, 27.83, 25.65, and 24.44. Resistance: 40.23, 41.49, 42.30, 42.78, 44.71 and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) remains neutral. SLV/GLD rose above its highs of the previous 5 months on 2/24/12 but remains below its falling 200-day SMA. Longer term, the 50-day SMA has remained below the 200-day SMA every day since 8/30/11.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) remains neutral, bullishly above both 50-day and 200-day SMAs, but with the 50-day SMA bearishly below the 200-day SMA every day since 8/8/11.
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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
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
4.76% , SIRI , Sirius Satellite
4.15% , RSX , Russia MV, RSX
3.25% , HMA , HEALTH MGMT STK A
5.93% , BSX , BOSTON SCIENT
6.51% , IPG , INTERPUBLIC GRP
0.95% , ADRA , Asia 50 BLDRS, ADRA
2.25% , WPO , Washington Post
0.08% , PSJ , Software, PSJ
0.46% , DGT , Global Titans, DGT
3.56% , CECO , CAREER EDUCATION CORP
1.56% , FISV , FISERV
1.93% , EWO , Austria Index, EWO
3.11% , CPWR , COMPUWARE
1.61% , HOT , STARWOOD HOTELS
1.50% , AIG , AMER INTL GROUP
2.89% , TDC , Teradata Corporation, TDC
2.55% , GD , GENERAL DYNAMICS
1.79% , ETFC , E*TRADE FINANCIAL
2.21% , PKI , PERKINELMER
2.65% , CLF , CLIFFS NATURAL RESOURCES, CLF
1.35% , LEG , LEGGETT & PLATT
0.28% , PXQ , Networking, PXQ
2.35% , SCHW.K , CHARLES SCHWAB, SCHW.O
2.27% , RHT , Red Hat Inc.
0.67% , LLY , ELI LILLY
2.00% , TUP , TUPPERWARE
0.61% , DBC , Commodity Tracking, DBC
0.50% , JKE , Growth LargeCap iS M, JKE
0.81% , COL , ROCKWELL COLLINS
0.47% , PWB , Lg Cap Growth PSD, PWB
1.46% , EP , EL PASO
1.42% , SNI , Scripps Networks Interactive
1.86% , BAX , BAXTER INTL
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-4.95% , CROX , CROCS Inc., CROX
-5.47% , VLO , VALERO ENERGY
-3.71% , MRVL , MARVELL TECHNOLOGY
-1.05% , AVP , AVON
-1.98% , PBW , WilderHill Clean Energy PS, PBW
-2.39% , IDX , Indonesia MV, IDX
-3.36% , MBI , MBIA
-0.49% , PIC , Insurance, PIC
-0.65% , VIA.O , VIACOM INC. (New)
-1.24% , GIS , GENERAL MILLS
-1.48% , HAR , Harman International
-1.88% , FDX , FEDEX
-0.56% , PGR , PROGRESSIVE OHIO
-1.61% , FMCN , Focus Media, FMCN
-1.36% , AN , AUTONATION
-0.72% , DPS , Dr Pepper Snapple Group
-1.52% , FITB , FIFTH THIRD BANC
-0.31% , SOXX , Semiconductor iS IGW, SOXX
-1.03% , JNY , JONES APPAREL
-5.47% , ODP , OFFICE DEPOT
-1.32% , ISIL , INTERSIL CORP
-3.02% , MAS , MASCO
-1.66% , HBAN , HUNTINGTON
-1.52% , ADSK , AUTODESK
-0.55% , HSP , HOSPIRA
-2.53% , MS , MORGAN STANLEY
-0.69% , MCO , MOODYS CORP
-1.04% , SLM.O , SLM CORP
-0.18% , TUR , Turkey MSCI iS, TUR
-0.43% , LLL , L-3 COMMS HLDGS
-0.61% , IYT , Transportation Av DJ, IYT
-0.29% , EIS , Israel MSCI iS, EIS
-0.39% , RFV , Value MidCap S&P 400, RFV
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
4.15% Russia MV, RSX
1.93% Austria Index, EWO
1.55% Oil, Crude, U.S. Oil Fund, USO
1.53% Oil Fund PowerShares, DBO
1.41% Italy Index, EWI
1.39% South Africa Index, EZA
1.23% Sweden Index, EWD
1.23% South Korea Index, EWY
1.13% Germany Index, EWG
1.01% Emerging Markets, EEM
0.96% Thailand MSCI iS, THD
0.96% Small Cap EAFE MSCI iS, SCZ
0.95% EMU Europe Index, EZU
0.95% France Index, EWQ
0.93% Value EAFE MSCI, EFV
0.90% Brazil Index, EWZ
0.87% European VIPERs, VGK
0.85% Europe 350 S&P Index, IEV
0.82% Emerging VIPERs, VWO
0.80% United Kingdom Index, EWU
0.78% Global ex US ACWI iS, ACWX
0.77% Belgium Index, EWK
0.74% Emerging 50 BLDRS, ADRE
0.65% Bond, 20+ Years Treasury, TLT
0.63% Chile MSCI iS, ECH
0.61% Hong Kong Index, EWH
0.61% Commodity Tracking, DBC
0.60% EAFE Index, EFA
0.59% Technology SPDR, XLK
0.57% Switzerland Index, EWL
0.50% Health Care SPDR, XLV
0.48% Spain Index, EWP
0.47% Technology DJ US, IYW
0.45% Dividend International, PID
0.45% Growth EAFE MSCI, EFG
0.44% Info Tech VIPERs, VGT
0.44% Energy DJ, IYE
0.43% Utilities SPDR, XLU
0.41% Growth S&P 500/BARRA, IVW
0.40% Bond Ex-US Treas, BWX
0.40% Energy SPDR, XLE
0.36% Energy VIPERs, VDE
0.35% QQQ Nasdaq 100 Trust, QQQ
0.34% Growth 1000 Russell, IWF
0.34% Growth VIPERs, VUG
0.33% Consumer Staples SPDR, XLP
0.32% Utilities VIPERs, VPU
0.32% Global 100, IOO
0.31% Bond, High-Yield Corporate, HYG
0.30% Taiwan Index, EWT
0.28% Real Estate US DJ, IYR
0.27% Latin Am 40, ILF
0.24% Value LargeCap Dynamic PS, PWV
0.23% Dividend Appreciation Vipers, VIG
0.22% Bond EmrgMkt JPM iS, EMB
0.22% S&P 500 SPDRs LargeCap Blend, SPY
0.21% Netherlands Index, EWN
0.21% LargeCap Blend S&P 100, OEF
0.21% Growth MidCap Russell, IWP
0.21% Pacific VIPERs, VPL
0.21% Agriculture DB PS, DBA
0.21% Growth MidCap 400 B, IJK
0.20% Japan Index, EWJ
0.18% Pacific ex-Japan, EPP
0.17% LargeCap 1000 R, IWB
0.17% Financial Preferred, PGF
0.17% Australia Index, EWA
0.17% S&P 500 iS LargeCap Blend, IVV
0.17% Energy Global, IXC
0.17% Biotech SPDR, XBI
0.16% LargeCap VIPERs, VV
0.15% Realty Cohen & Steers, ICF
0.15% LargeCap Blend Russell 3000, IWV
0.15% MidCap Russell, IWR
0.14% Blend Total Market VIPERs, VTI
0.13% REIT VIPERs, VNQ
0.12% LargeCap Blend S&P=Weight R, RSP
0.12% REIT Wilshire, RWR
0.11% Capital Markets KWB ST, KCE
0.10% Bond, High-Yield Junk, JNK
0.09% Metals & Mining SPDR, XME
0.09% MidCap S&P 400 iS, IJH
0.09% Dividend DJ Select, DVY
0.09% China LargeCap Growth G D H USX PS, PGJ
0.08% Preferred Stock iS, PFF
0.08% Bond, Corp, LQD
0.08% Bond, 10 Year Treasury, IEF
0.07% Value VIPERs, VTV
0.07% Malaysia Index, EWM
0.05% Dividend SPDR, SDY
0.05% China 25 iS, FXI
0.05% Frontier Markets Guggenheim , FRN
0.05% Energy & Nat Res iS GS, IGE
0.03% DIAMONDS (DJIA), DIA
0.03% MidCap S&P 400 SPDRs, MDY
0.03% Bond, Aggregate, AGG
0.03% Bond, TIPS, TIP
0.02% Growth SmallCap VIPERs, VBK
0.00% Value MidCap Russell, IWS
0.00% Bond Treasury Short-Term iS, SHV
-0.02% Bond, 1-3 Year Treasury, SHY
-0.03% Industrial SPDR, XLI
-0.04% Growth SmallCap R 2000, IWO
-0.04% Value 1000 Russell, IWD
-0.05% Value S&P 500 B, IVE
-0.05% India PS, PIN
-0.05% Materials SPDR, XLB
-0.09% Silver Trust iS, SLV
-0.09% Semiconductor SPDR, XSD
-0.11% Dividend High Yield Equity PS, PEY
-0.11% Basic Materials DJ US, IYM
-0.12% Consumer Discretionary SPDR, XLY
-0.12% Microcap Russell, IWC
-0.14% Networking, IGN
-0.14% Small Cap VIPERs, VB
-0.16% Bear, Short S&P 500, SH
-0.18% Turkey MSCI iS, TUR
-0.18% Value MidCap S&P 400 B, IJJ
-0.19% SmallCap Russell 2000, IWM
-0.24% Financial DJ US, IYF
-0.24% Value SmallCap VIPERS, VBR
-0.27% Telecom DJ US, IYZ
-0.27% Growth BARRA Small Cap 600, IJT
-0.30% Financials VIPERs, VFH
-0.31% Semiconductor iS IGW, SOXX
-0.34% Financial SPDR, XLF
-0.34% Canada Index, EWC
-0.37% Value SmallCap Russell 2000, IWN
-0.38% India Earnings WTree, EPI
-0.39% Singapore Index, EWS
-0.40% Financial Services DJ, IYG
-0.41% SmallCap S&P 600, IJR
-0.46% Gold Shares S.T., GLD
-0.53% Value SmallCap S&P 600 B, IJS
-0.58% Mexico Index, EWW
-0.61% Transportation Av DJ, IYT
-0.94% Bond Muni ATM-Free S&P iS, MUB
-1.23% Water Resources, PHO
-1.45% Homebuilders SPDR, XHB
-1.98% WilderHill Clean Energy PS, PBW
-2.39% Indonesia MV, IDX
