CRB Commodity Price Index fell below its lows of the previous 14 weeks on 4/5/12 and remains bearish.
U.S. dollar ETF (UUP) rose above its highs of the previous 14 trading days on 4/5/12 and remains bullish.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) has been relatively weak for a year, since 4/5/11. IWM/SPY fell below its lows of the previous 3 months on 4/5/12, suggesting renewed downside momentum for the medium term.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) fell below its lows of the previous 2.5 months on 4/5/12, suggesting renewed downside momentum for the medium term.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) reconfirmed a bearish major trend when it fell below its lows of the previous 8 years.
The S&P 500 Composite (SPX: 1,398.08) appears very likely to fall below the lows of the previous 4 weeks next week, based on Friday’s action in stock index futures after the disappointment in the employment report on Friday, when the stock market was closed for the holiday.
A variety of technical indicators have been demonstrating waning bullish momentum for stocks. A downside correction or shakeout has seemed overdue, according to past norms.
The NYSE Cumulative Daily Advance-Decline Line shows bearish divergences: it peaked on 3/13/12 and made lower highs on 3/26/12 and 4/2/12. Then on 4/5/12, it closed below its lows of the previous 4 weeks, while SPX held above its lows.
The S&P 500 chart has been forming a Potential Bearish Rising Wedge. A probable breakdown below the rising lower boundary line (currently near the latest closing price at SPX 1,398.08) would be a clear bearish chart signal.
RSI(14) based on SPX fell below the lows of the previous 4 weeks. RSI remains well below recent highs. RSI showed previous bearish divergences at the March highs: the 73.15 high on 3/19/12 was less than the 75.38 high set on 2/9/12.
MACD based on SPX fell below its lows of the previous 3 weeks and remains bearish. MACD remains below its signal line, and fell further below its high set on 2/9/12, which appears to have been the momentum peak for the rally.
On-Balance Volume for the SPX shows a bearish divergence: it peaked on 3/19/12, made a lower high on 3/26/12, and fell below its 3 previous lows for the first time this year on 4/5/12.
NYSE New Highs Minus New Lows turned bearish (with net New Lows) on 4/4/12, after making a series of lower highs over the past 2 months.
The Dow Theory may have given an earlier warning by diverging after 2/3/12, as the Transports turned corrective and failed to confirm higher highs by the Industrials.
It has been an exceptional year so far, with no downside pullbacks of as much as 3% in more than 3 months, since 12/19/12, based on SPX close prices. It is extremely unlikely that stocks can continue to go up like this much longer, however, without a significant downside correction. Odds are stocks will experience the usual ups and downs this year. After large price run ups, stocks become more vulnerable to sudden reversals. Therefore, Potential Reward relative to potential Risk appears unattractive for stocks.
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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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Sentiment for Contrary Thinking
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 investors 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.
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 showed 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 51.64% Bulls and 20.19% Bears, according to the AAII weekly survey reported on 2/9/12. This was the highest level of bullish sentiment in more than a year, since 52.34% Bulls on 1/13/11.
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 recently 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 65% Bulls–the same extreme level of optimism recorded at the February 2011 top in the stock market.
Short Selling ETFs were 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 in April 2011, according to Mark Hulbert at MarketWatch. Insiders sold 656 shares for each 100 shares they bought, according to Argus Research Vickers Weekly Insider Report. That was 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, which was 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. That pool of demand has been depleted.
VIX Fear Index broke down below the lows of the previous 4 years on 3/16/12, hitting 13.66 intraday, its lowest level since 6/20/07. VIX is down from a peak of 48.00 on 8/8/11: such a large drop indicated a shift away from fear and toward bullish complacency. 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
1422.38, high of 4/2/2012
The S&P 500 Composite Potential Support
1391.56, low of 3/29/2012
1386.87, low of 3/23/2012
1381.50, Fibonacci 78.6% of 2007-2009 range
1378.04, high of 2/29/2012
1376.55, Fibonacci 100.0% projection 10/11 range
1370.58, high of 5/2/11
1370.05, 50-day SMA
1340.03, low of 3/6/2012
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
1269.66, 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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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
8.49% , BBBY , BED BATH BEYOND
0.84% , ADRA , Asia 50 BLDRS, ADRA
2.36% , TJX , TJX
2.52% , PPG , PPG INDUSTRIES
0.24% , IGM , Technology GS, IGM
2.35% , A , AGILENT TECH
0.41% , MYY , Short 100% MidCap 400, MYY
0.90% , PMR , Retail, PMR
0.76% , SHW , SHERWIN WILLIAMS
1.32% , BEN , FRANKLIN RSC
2.33% , RL , Polo Ralph Lauren
2.47% , ROST , Ross Stores Inc
5.15% , FMCN , Focus Media, FMCN
1.12% , VFC , VF
1.54% , HD , HOME DEPOT
2.95% , AVP , AVON
2.56% , WFM.O , Whole Foods Market Inc
0.64% , PWB , Lg Cap Growth PSD, PWB
0.61% , TLH , Bond 10-20 Year US Treas, TLH
1.06% , BLK , BlackRock Inc.
1.52% , RAI , Reynolds American
2.14% , SBUX , STARBUCKS
0.76% , DE , DEERE & CO
0.43% , ITF , Japan LargeCap Blend TOPIX 150, ITF
2.46% , BIDU , Baidu, Inc., BIDU
1.04% , VRSN , VeriSign Inc
0.66% , INTU , INTUIT
0.64% , MTB , M&T BANK
0.70% , VCR , Consumer D. VIPERs, VCR
0.37% , AZO , AUTOZONE
0.53% , SWK , Stanley Black & Decker
0.70% , NEE , NextEra Energy Resources LLC
0.65% , EXPD , Expeditors International WA
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-21.10% , PMTC.O , PARAMETRIC
-0.22% , NYC , LargeCap Blend NYSE Composite iS, NYC
-4.84% , KMX , CarMax
-2.57% , DOV , DOVER
-1.09% , RFV , Value MidCap S&P 400, RFV
-0.32% , PFM , Dividend Achievers PS, PFM
-0.65% , EWU , United Kingdom Index, EWU
-1.66% , PEG , PUBL SVC ENTER
-2.72% , EWO , Austria Index, EWO
-0.48% , IOO , Global 100, IOO
-1.51% , PGN , PROGRESS ENERGY
-1.68% , CBE , COOPER INDS STK A
-3.19% , KSS , KOHLS
-2.86% , STLD , Steel Dynamics, STLD
-1.42% , EWK , Belgium Index, EWK
-1.48% , IGN , Networking, IGN
-1.53% , AEP , AM ELEC POWER
-0.91% , THD , Thailand MSCI iS, THD
-2.01% , DUK , DUKE ENERGY
-0.91% , ADRD , Developed 100 BLDRS, ADRD
-2.36% , LSI , LSI LOGIC
-0.82% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-1.23% , SLM.O , SLM CORP
-1.21% , EOG , EOG RESOURCES
-0.36% , PUI , Utilities, PUI
-1.22% , EWD , Sweden Index, EWD
-0.41% , IWW , Value LargeCap Russell 3000, IWW
-0.55% , IWN , Value SmallCap Russell 2000, IWN
-1.50% , LLL , L-3 COMMS HLDGS
-0.80% , VPU , Utilities VIPERs, VPU
-0.72% , IJJ , Value MidCap S&P 400 B, IJJ
-0.42% , DGT , Global Titans, DGT
-1.44% , CAH , CARDINAL HEALTH
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
1.30% Silver Trust iS, SLV
1.17% Indonesia MV, IDX
1.08% Oil, Crude, U.S. Oil Fund, USO
1.08% China LargeCap Growth G D H USX PS, PGJ
1.05% Taiwan Index, EWT
1.02% China 25 iS, FXI
0.92% Hong Kong Index, EWH
0.91% Oil Fund PowerShares, DBO
0.89% South Africa Index, EZA
0.72% Biotech SPDR, XBI
0.72% Bond, 20+ Years Treasury, TLT
0.72% South Korea Index, EWY
0.70% Gold Shares S.T., GLD
0.69% Consumer Discretionary SPDR, XLY
0.62% QQQ Nasdaq 100 Trust, QQQ
0.61% Australia Index, EWA
0.58% Pacific ex-Japan, EPP
0.58% Emerging VIPERs, VWO
0.54% Emerging Markets, EEM
0.53% India PS, PIN
0.51% Russia MV, RSX
0.45% Bond, 10 Year Treasury, IEF
0.39% Pacific VIPERs, VPL
0.39% Emerging 50 BLDRS, ADRE
0.38% Commodity Tracking, DBC
0.36% Agriculture DB PS, DBA
0.30% Info Tech VIPERs, VGT
0.28% Technology DJ US, IYW
0.26% Bond, TIPS, TIP
0.25% Chile MSCI iS, ECH
0.23% Technology SPDR, XLK
0.23% Bond, Aggregate, AGG
0.23% Growth 1000 Russell, IWF
0.23% Growth VIPERs, VUG
0.20% Growth S&P 500/BARRA, IVW
0.17% Bond, Corp, LQD
0.16% Semiconductor iS IGW, SOXX
0.16% India Earnings WTree, EPI
0.15% Preferred Stock iS, PFF
0.14% Growth MidCap Russell, IWP
0.14% Transportation Av DJ, IYT
0.14% Malaysia Index, EWM
0.11% Financial Preferred, PGF
0.06% Bear, Short S&P 500, SH
0.04% Bond, 1-3 Year Treasury, SHY
0.03% LargeCap 1000 R, IWB
0.02% S&P 500 iS LargeCap Blend, IVV
0.00% Japan Index, EWJ
0.00% Homebuilders SPDR, XHB
0.00% Consumer Staples SPDR, XLP
0.00% Bond Treasury Short-Term iS, SHV
-0.01% Health Care SPDR, XLV
-0.02% Brazil Index, EWZ
-0.05% S&P 500 SPDRs LargeCap Blend, SPY
-0.06% LargeCap Blend S&P 100, OEF
-0.07% Blend Total Market VIPERs, VTI
-0.08% Microcap Russell, IWC
-0.08% Financial Services DJ, IYG
-0.08% LargeCap Blend Russell 3000, IWV
-0.09% LargeCap VIPERs, VV
-0.09% DIAMONDS (DJIA), DIA
-0.12% Growth MidCap 400 B, IJK
-0.13% Dividend Appreciation Vipers, VIG
-0.14% Telecom DJ US, IYZ
-0.17% Latin Am 40, ILF
-0.18% MidCap Russell, IWR
-0.18% Growth BARRA Small Cap 600, IJT
-0.19% Value LargeCap Dynamic PS, PWV
-0.24% Bond EmrgMkt JPM iS, EMB
-0.24% Financial DJ US, IYF
-0.24% Growth SmallCap VIPERs, VBK
-0.24% Bond, High-Yield Corporate, HYG
-0.27% Growth SmallCap R 2000, IWO
-0.28% Singapore Index, EWS
-0.29% Dividend DJ Select, DVY
-0.29% Small Cap EAFE MSCI iS, SCZ
-0.29% Financial SPDR, XLF
-0.29% LargeCap Blend S&P=Weight R, RSP
-0.30% Capital Markets KWB ST, KCE
-0.30% Global ex US ACWI iS, ACWX
-0.30% Value 1000 Russell, IWD
-0.31% Value S&P 500 B, IVE
-0.32% Turkey MSCI iS, TUR
-0.34% Dividend SPDR, SDY
-0.34% REIT Wilshire, RWR
-0.36% Bond Muni ATM-Free S&P iS, MUB
-0.37% Realty Cohen & Steers, ICF
-0.37% Frontier Markets Guggenheim , FRN
-0.37% Value SmallCap S&P 600 B, IJS
-0.38% REIT VIPERs, VNQ
-0.39% Dividend International, PID
-0.40% Small Cap VIPERs, VB
-0.40% Financials VIPERs, VFH
-0.40% Growth EAFE MSCI, EFG
-0.40% Industrial SPDR, XLI
-0.41% MidCap S&P 400 SPDRs, MDY
-0.41% Energy Global, IXC
-0.41% Value VIPERs, VTV
-0.42% MidCap S&P 400 iS, IJH
-0.42% Semiconductor SPDR, XSD
-0.42% Dividend High Yield Equity PS, PEY
-0.44% Real Estate US DJ, IYR
-0.44% SmallCap Russell 2000, IWM
-0.45% SmallCap S&P 600, IJR
-0.46% Bond Ex-US Treas, BWX
-0.48% Global 100, IOO
-0.49% Bond, High-Yield Junk, JNK
-0.50% Value MidCap Russell, IWS
-0.51% Energy DJ, IYE
-0.53% Mexico Index, EWW
-0.53% Value SmallCap VIPERS, VBR
-0.55% Value EAFE MSCI, EFV
-0.55% Value SmallCap Russell 2000, IWN
-0.56% Energy SPDR, XLE
-0.57% Materials SPDR, XLB
-0.57% Canada Index, EWC
-0.58% Water Resources, PHO
-0.60% EAFE Index, EFA
-0.62% Energy VIPERs, VDE
-0.62% Basic Materials DJ US, IYM
-0.62% Netherlands Index, EWN
-0.65% United Kingdom Index, EWU
-0.72% Value MidCap S&P 400 B, IJJ
-0.74% Utilities SPDR, XLU
-0.75% Energy & Nat Res iS GS, IGE
-0.80% Utilities VIPERs, VPU
-0.91% Thailand MSCI iS, THD
-0.91% Europe 350 S&P Index, IEV
-0.95% WilderHill Clean Energy PS, PBW
-0.98% Switzerland Index, EWL
-0.98% European VIPERs, VGK
-1.06% EMU Europe Index, EZU
-1.14% Metals & Mining SPDR, XME
-1.22% Sweden Index, EWD
-1.23% Spain Index, EWP
-1.25% Germany Index, EWG
-1.28% France Index, EWQ
-1.42% Belgium Index, EWK
-1.48% Networking, IGN
-1.54% Italy Index, EWI
-2.72% Austria Index, EWO
