The S&P 500 Composite (SPX: 1,261.15) rose 23.25 or 1.88% on Thursday, November 3, 2011.
On Wednesday and Thursday, SPX recovered a normal fraction of its losses on Monday and Tuesday. SPX still is down for the week, however. Combined trading volume on the rally days, Wednesday and Thursday, was less than combined volume on the falling price days, Monday and Tuesday. Relatively light volume on up days and heaver volume on down days suggests a minor counter trend reaction.
The stock price recovery from 10/4/11 to 10/27/11 was larger than previous rallies–but it appears to have been a counter-trend correction rather than a change in the major trend.
Just as the spike down to new lows on 10/4/11 proved to be a false breakdown, also known as a “bear trap”, so the brief price run-up last week above the 200-day SMA appears to be a false breakout. This week, the steep downside reversal back into the recent 12-week trading range and below the 200-day SMA suggests a high probability that last week’s upsurge was a “bull trap”.
Note that very high price volatility is typical of bear markets, while bull markets are much less volatile. Markets seem likely to remain volatile, with a continuing heightened sensitivity to news.
Longer-term indicators still are far from confirming any change in the major Primary Tide trend. For example, 50-day SMAs are well below 200-day SMAs for most stocks and indexes.
Ripples and Secondary Reactions opposite to the Dow Theory Primary Tide Trend lure short-term traders into trying to trade a bounce. Price corrections against the larger trends are normal and expected, of course, but playing counter-trend bounces is risky. The mood can switch from “risk on” to “risk off” overnight, leaving the too-clever trader suddenly holding the bag.
The Dow Theory signaled a Primary Tide Bear Market on 8/2/11, when both Dow-Jones Averages, Industrial and Transportation, closed below their closing price lows of the previous 11 months. This Bear Market was confirmed on 10/3/11 by lower closing price lows for both Averages. Both Averages would have to close above their closing price highs for the year to indicate a “Turn in the Tide”.
A Dow Theory Primary Tide Bear Market is a powerful beast that must not be underestimated. The median Dow Theory Primary Tide Bear Market in history lasts 16 months and takes stock prices down 34%. In a Dow Theory Primary Tide Bear Market, the big surprises usually come to the downside. Typically, there is no safe place to hide in a Dow Theory Primary Tide Bear Market. Even those stocks that have held up relatively well through most of the Bear Market eventually succumb to the relentless tide of selling.
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Stock Market Indicators
NASDAQ Composite/S&P 500 Relative Strength Ratio has been correcting and consolidating gains since peaking on 9/23/11.
iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF/SPY) whipsawed back above its 50-day SMA on 11/2/11, thereby turning neutral again.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) whipsawed back above its 50-day SMA on 11/2/11, thereby turning neutral again.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) EFA/SPY fell below the lows of the past 6 weeks on 11/1/11. EFA/SPY fell below its 50-day SMA on 10/31/11, thereby turning bearish again.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell below the lows of the past 7 weeks on 11/3/11, confirming a medium-term correction to the downside. Large Caps tend to underperform Mid Caps and Small Caps in bullish general market trends as investors prefer riskier and more volatile stocks. Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative safety of large size.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) remains neutral with the 50-day SMA below the 200-day SMA. Absolute price also remains neutral.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) remains neutral with the 50-day SMA below the 200-day SMA. Absolute price also remains neutral.
Advisory Service Sentiment: There were 43.2% Bulls versus 36.8% Bears as of 11/2/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio rose to 1.17 , up from a 2-year low of 0.74 on 10/12/11. The Bull/Bear Ratio has been below its 20-year median of 1.56 and mean of 1.64 for 11 consecutive weeks, since 8/24/11.
VIX Fear Index fell to 24.44 on 10/28/11, down from a high of 48.00 on 8/8/11, suggesting that fear had decreased substantially. 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 (SPX: 1,261.15) 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
1370.58, high of 5/2/11
1359.44, high of 5/10/11
1356.48, high of 7/7/11
1347.00, high of 7/21/11
1307.28, Fibonacci 78.6% of 2011 range
1292.66, high of 10/27/11
1273.35, 200-day SMA
S&P 500 Composite (SPX: 1,261.15) Potential Support
1258.07, low of 6/16/11
1257.58, Fibonacci 61.8% of 2011 range
1256.55, high of 10/24/11
1249.05, low of 3/16/11
1246.73, high of 12/13/10
1242.48, high of 11/2/2011
1238.81, Fibonacci 78.6% of 1,576.09 high
1222.68, Fibonacci 50% of 2011 range
1221.06, low of 10/26/2011
1215.42, low of 11/1/2011
1204.49, Fibonacci 23.6% of 2009-11 range
1190.58, low of 10/13/2011
1187.77, Fibonacci 38.2% of 2011 range
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) consolidated gains on 11/3/11, showing an indecisive Doji Candlestick. Price gapped higher on 11/1/11, opening above the highs of the past 3 weeks. The breakout above Resistance at 116.82 confirmed the bullish trend. The chart suggests a bullish Breakaway Gap, in my interpretation. Support 109.82, 106.08, 103.20, 102.27, 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance 125.03.
Bond, iShares Barclays 7-10 Year U.S. Treasury ETF (IEF) consolidated gains on 11/3/11, showing an indecisive Doji Candlestick. Price gapped higher on 11/1/11, opening above the highs of the past 3 weeks. The chart suggests a bullish Breakaway Gap, in my interpretation. Longer term, IEF rose above all-time highs on 9/22/11, reconfirming a major uptrend. Support 101.36, 101.11, 99.79, and 97.66. Resistance 106.66.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) bounced normally over the past 3 days after falling below 3-week lows and its 50-day SMA on 11/1/11, thereby turning bearish again. Longer term, JNK/LQD broke down below the lows of the previous 29-months on 10/3/11, which reconfirmed a bearish major trend.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF), since making a low on 9/30/11, recovered a normal fraction of previous large losses–but now appears to be losing upside momentum. Longer term, TIP/IEF broke down below the lows of the previous 13-months on 9/30/11, which reconfirmed a bearish major trend. In addition, the 50-day SMA is still far below the 200-day SMA.. This bearish long-term trend means that fixed-income investors have been choosing the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) over the inflation-protected TIPs. So, fixed-income investors may be more worried about deflation than inflation.
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) consolidated gains on 11/3/11. Price gapped higher on 11/1/11, opening above the highs of the past 7 trading days. The chart shows a bullish Breakaway Gap. The rising 50-day SMA is bullishly above the 200-day SMA. Support 21.07, 20.84. Resistance 21.91 and 22.63.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) fell below the lows of the previous 14 trading days on 11/1/11, confirming a short-term downtrend. This after falling below the lows of the previous 10 months on 10/3/11, which reconfirmed a major long-term downtrend.
Crude Oil, United States Oil ETF (USO) rose to test recent highs on 11/4/11. The 20-day SMA remains far below the 200-day SMA, implying a neutral medium-term trend. Longer term, USO broke down below 2-year lows on 10/4/11 to confirm a major bear market. Support 32.52, 29.10, 26.28, and 22.74. Resistance 36.52, 39.25, 40.74, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) whipsawed back above its 50-day SMA on 11/2/11, indicating a bullish trend again. Price remains above its 200-day SMA. Longer term, new highs on 9/6/11 confirmed a major bull market. Support: 163.61, 154.19, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: 170.32, 172.20, 177.40, and 185.85.
Gold Mining Stocks ETF/ Gold Shares ETF Relative Strength Ratio (GDX/GLD) whipsawed back above its 200-day SMA, but that loses significance in a whipsaw sideways trend. GDX/GLD fell below 29-month lows on 8/8/11, reconfirming a bearish major trend for the long term. Investors still prefer Gold bullion over Gold Miners.
Silver, iShares Silver Trust ETF (SLV) price fell below the lows of the previous 4 trading days on 11/1/11. Longer term, SLV price broke down below the lows of the previous 7 months on 9/26/11, which confirmed a bearish major trend for the long term. SLV fell below its 50-day SMA on 9/19/11, fell below its 200-day SMA on 9/22/11, and remains bearishly below both SMAs. Support 27.41, 26.03, and 24.44. Resistance: 34.44, 34.51, 40.23, 41.49, 42.30, 42.78, 44.71 and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) remains in bearish position, below falling 50-day and 200-day SMAs. Longer term, the SLV/GLD Ratio broke down below the lows of the previous 11 months on 9/30/11, reconfirming a bearish major trend. SLV/GLD has been mostly weak since peaking on 4/28/11. This means investors prefer Gold over Silver.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) fell below its 50-day SMA again on 10/31/11, returning to its persistent bearish trend. JJC broke down below the lows of the previous 14 months on 10/5/11, confirming a bearish major trend. Major trend weakness in Copper suggests serious concerns about the economic outlook.
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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
6.78% , BDH , Broadband H, BDH
23.97% , LAMR , Lamar Advertising Company
1.56% , TTH , Telecom H, TTH
4.06% , JKL , Value SmallCap iS M, JKL
3.30% , EWK , Belgium Index, EWK
17.94% , EL , Estee Lauder
2.50% , ADRD , Developed 100 BLDRS, ADRD
10.67% , NFLX , Netflix, NFLX
1.87% , IWW , Value LargeCap Russell 3000, IWW
1.77% , IXG , Financials Global LargeCap Value, IXG
1.68% , SWH , Software H, SWH
2.06% , TMW , Wilshire 5000 ST TM, TMW
5.47% , EWI , Italy Index, EWI
6.19% , SLE , SARA LEE
6.84% , LBTYA , Liberty Global Inc. (LBTYA)
3.15% , EWO , Austria Index, EWO
6.21% , LXK , LEXMARK INTL STK A
2.19% , JKE , Growth LargeCap iS M, JKE
7.00% , PWER , POWER ONE
2.60% , VGT , Info Tech VIPERs, VGT
6.79% , CSC , COMPUTER SCIENCE
3.04% , PXQ , Networking, PXQ
7.53% , QCOM , QUALCOMM
4.31% , CVS , CVS
2.15% , PWO , OTC Dynamic PS, PWO
3.53% , PHO , Water Resources, PHO
4.50% , SNA , SNAP ON
2.00% , CTAS , CINTAS
6.61% , BIG , BIG LOTS
6.09% , LSI , LSI LOGIC
5.93% , CTL , CENTURYTEL
2.00% , PIC , Insurance, PIC
3.67% , BHH , Internet B2B H, BHH
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-12.48% , RIG , TRANSOCEAN
-7.64% , K , KELLOGG
-3.52% , PCG , PG&E
-5.74% , HIG , HARTFORD FINL
-3.16% , VIA.B , VIACOM STK B
-6.67% , EK , EASTMAN KODAK
-1.35% , RL , Polo Ralph Lauren
-4.16% , QID , Short 200% QQQ PS, QID
-1.36% , VIA , VIACOM INC. (New)
-1.72% , CBS , CBS CORP.
-2.00% , WFM.O , Whole Foods Market Inc
-1.85% , AN , AUTONATION
-0.60% , LTD , LIMITED BRANDS
-1.77% , DOG , Short 100% Dow 30, DOG
-1.16% , PRU , PRUDENTIAL FINL
-3.68% , SDS , Short 200% S&P 500 PS, SDS
-0.43% , SNI , Scripps Networks Interactive
-0.83% , TLH , Bond 10-20 Year US Treas, TLH
-0.81% , WPI , WATSON PHARM
-0.82% , WAG , WALGREEN
-2.02% , PSQ , Short 100% QQQ, PSQ
-1.28% , AIV , APT INV MNGMT
-4.60% , MZZ , Short 200% MidCap 400 PS, MZZ
-0.23% , EWT , Taiwan Index, EWT
-1.58% , CLX , CLOROX
-0.13% , GR , GOODRICH CORP
-0.36% , SWY , SAFEWAY
-0.22% , AGG , Bond, Aggregate, AGG
-0.16% , GNW , GENWORTH FINANCIAL
-0.27% , TIF , TIFFANY
-0.12% , NWSA , News Corporation, NWSA
-0.24% , GILD , Gilead Sciences Inc
-3.48% , DXD , Short 200% Dow 30 PS, DXD
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
5.47% Italy Index, EWI
4.19% EMU Europe Index, EZU
4.19% Germany Index, EWG
4.14% France Index, EWQ
3.75% Turkey MSCI iS, TUR
3.70% Semiconductor SPDR, XSD
3.68% Netherlands Index, EWN
3.53% Water Resources, PHO
3.39% Spain Index, EWP
3.30% Belgium Index, EWK
3.28% European VIPERs, VGK
3.24% Sweden Index, EWD
3.22% Europe 350 S&P Index, IEV
3.21% Silver Miners Global X, SIL
3.15% Austria Index, EWO
2.99% Semiconductor iS IGW, SOXX
2.86% South Africa Index, EZA
2.75% Metals & Mining SPDR, XME
2.74% Energy Global, IXC
2.69% Energy & Nat Res iS GS, IGE
2.63% Energy SPDR, XLE
2.62% Value SmallCap S&P 600 B, IJS
2.61% Value EAFE MSCI, EFV
2.60% Info Tech VIPERs, VGT
2.57% Canada Index, EWC
2.55% Growth SmallCap VIPERs, VBK
2.55% United Kingdom Index, EWU
2.54% Technology DJ US, IYW
2.54% Networking, IGN
2.52% EAFE Index, EFA
2.52% Capital Markets KWB ST, KCE
2.51% Energy VIPERs, VDE
2.50% Value SmallCap VIPERS, VBR
2.49% SmallCap S&P 600, IJR
2.49% SmallCap Russell 2000, IWM
2.48% Financial Services DJ, IYG
2.46% Small Cap VIPERs, VB
2.45% Industrial SPDR, XLI
2.41% Growth SmallCap R 2000, IWO
2.38% Basic Materials DJ US, IYM
2.38% Technology SPDR, XLK
2.37% Value SmallCap Russell 2000, IWN
2.37% Growth EAFE MSCI, EFG
2.37% Growth MidCap 400 B, IJK
2.36% Value MidCap S&P 400 B, IJJ
2.35% Energy DJ, IYE
2.33% MidCap S&P 400 SPDRs, MDY
2.32% MidCap S&P 400 iS, IJH
2.28% Microcap Russell, IWC
2.26% Small Cap EAFE MSCI iS, SCZ
2.23% Switzerland Index, EWL
2.23% Growth BARRA Small Cap 600, IJT
2.22% Global ex US ACWI iS, ACWX
2.17% Growth MidCap Russell, IWP
2.10% Global 100, IOO
2.09% Transportation Av DJ, IYT
2.08% Dividend SPDR, SDY
2.07% Australia Index, EWA
2.07% QQQ Nasdaq 100 Trust, QQQ
2.04% Materials SPDR, XLB
1.99% LargeCap Blend S&P=Weight R, RSP
1.98% Oil Fund PowerShares, DBO
1.95% Blend Total Market VIPERs, VTI
1.95% MidCap Russell, IWR
1.93% Growth S&P 500/BARRA, IVW
1.93% Growth VIPERs, VUG
1.92% Growth 1000 Russell, IWF
1.91% Mexico Index, EWW
1.89% Value MidCap Russell, IWS
1.87% LargeCap VIPERs, VV
1.87% LargeCap Blend Russell 3000, IWV
1.87% LargeCap Blend S&P 100, OEF
1.83% Homebuilders SPDR, XHB
1.83% Dividend High Yield Equity PS, PEY
1.82% S&P 500 iS LargeCap Blend, IVV
1.82% S&P 500 SPDRs LargeCap Blend, SPY
1.82% Oil, Crude, U.S. Oil Fund, USO
1.80% Dividend DJ Select, DVY
1.80% Financials VIPERs, VFH
1.79% Financial DJ US, IYF
1.78% Value S&P 500 B, IVE
1.77% Value LargeCap Dynamic PS, PWV
1.76% Value VIPERs, VTV
1.75% Dividend Appreciation Vipers, VIG
1.75% LargeCap 1000 R, IWB
1.74% DIAMONDS (DJIA), DIA
1.74% Financial SPDR, XLF
1.72% Value 1000 Russell, IWD
1.71% WilderHill Clean Energy PS, PBW
1.69% Chile MSCI iS, ECH
1.68% China 25 iS, FXI
1.67% Telecom DJ US, IYZ
1.61% Utilities VIPERs, VPU
1.61% Thailand MSCI iS, THD
1.57% Gold Shares S.T., GLD
1.50% Russia MV, RSX
1.48% Biotech SPDR, XBI
1.44% Pacific ex-Japan, EPP
1.41% India Earnings WTree, EPI
1.40% Malaysia Index, EWM
1.38% REIT VIPERs, VNQ
1.35% REIT Wilshire, RWR
1.33% Dividend International, PID
1.32% Agriculture DB PS, DBA
1.30% Consumer Discretionary SPDR, XLY
1.26% Frontier Markets Guggenheim , FRN
1.23% Consumer Staples SPDR, XLP
1.22% Commodity Tracking, DBC
1.21% Utilities SPDR, XLU
1.21% India PS, PIN
1.17% Realty Cohen & Steers, ICF
1.13% Real Estate US DJ, IYR
1.11% Silver Trust iS, SLV
1.10% Emerging VIPERs, VWO
1.09% Health Care SPDR, XLV
1.03% Pacific VIPERs, VPL
1.02% Emerging Markets, EEM
1.02% Indonesia MV, IDX
0.99% Singapore Index, EWS
0.99% Bond, High-Yield Corporate, HYG
0.99% Bond, High-Yield Junk, JNK
0.95% China LargeCap Growth G D H USX PS, PGJ
0.80% Latin Am 40, ILF
0.75% Japan Index, EWJ
0.68% Emerging 50 BLDRS, ADRE
0.61% Bond EmrgMkt JPM iS, EMB
0.50% Bond Ex-US Treas, BWX
0.30% Financial Preferred, PGF
0.29% Brazil Index, EWZ
0.27% Preferred Stock iS, PFF
0.05% Bond, Corp, LQD
0.01% Bond, 1-3 Year Treasury, SHY
0.01% Bond Treasury Short-Term iS, SHV
-0.06% Hong Kong Index, EWH
-0.11% South Korea Index, EWY
-0.16% Bond Muni ATM-Free S&P iS, MUB
-0.22% Bond, Aggregate, AGG
-0.23% Taiwan Index, EWT
-0.47% Bond, 10 Year Treasury, IEF
-0.70% Bond, TIPS, TIP
-1.37% Bond, 20+ Years Treasury, TLT
