As of the close on June 6, 2011, the Dow Theory confirmed a Secondary Reaction (a significant downside correction) for the general stock market, as the Dow Industrials and Transports both closed below 10-week lows. As of June 1, 2011, the Dow Theory gave a warning of a significant downside correction for the general stock market, as the Dow Industrials and Transports both closed below 5-week lows.
S&P 500 Composite (SPX, 1,286.17) fell 13.99 points or 1.08% on Monday to its lowest closing price in 10 weeks, again reconfirming its preexisting significant downside correction.
Volume on the NYSE rose 11% to confirm the price breakdown.
Financial SPDR stock sector ETF (XLF) absolute price broke down further below 6-month lows and remains bearish.
Technology SPDR stock sector ETF (XLK) absolute price broke down further below 6-week lows and remains bearish.
Industrial SPDR stock sector ETF (XLI) absolute price broke down further below 11-week lows.
Consumer Discretionary SPDR stock sector ETF (XLY) absolute price broke down further below 6-week lows.
Materials SPDR stock sector ETF (XLB) absolute price broke down below 11-week lows.
Consumer Staples SPDR stock sector ETF (XLP) absolute price broke down below 5-week lows.
Health Care SPDR stock sector ETF (XLV) absolute price broke down below 5-week lows.
Utilities SPDR stock sector ETF (XLU) absolute price broke down below 5-week lows.
Junk/Investment-Grade Corporate Bonds Relative Strength Ratio (JNK/LQD) broke down below 6-month lows on 6/6/11. Absolute price of JNK broke down below 11-week lows on 6/6/11, after topping out at 41.32 on 11/4/10. Both confirm a bearish trend for JNK.
The U.S. dollar fell below the lows of the previous 4-weeks early on 6/6/11 but reversed to close higher, possibly signaling a minor trend change.
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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
2.76% , HOG , HARLEY DAVIDSON
2.02% , DELL , DELL
2.70% , SEE , SEALED AIR
0.55% , ZEUS , Olympic Steel, ZEUS
1.01% , PH , PARKER HANNIFIN
1.43% , PWER , POWER ONE
1.65% , SBUX , STARBUCKS
1.44% , LMT , LOCKHEED MARTIN
0.56% , GR , GOODRICH CORP
0.72% , PCAR , PACCAR
1.46% , MYY , Short 100% MidCap 400, MYY
0.54% , CTSH , Cognizant Technology Solutions
0.32% , GWW , WW GRAINGER
0.35% , MCHP , Microchip Technology Incorporated
1.01% , SH , Short 100% S&P 500, SH
0.24% , MCK , MCKESSON CORP
0.17% , IAU , Gold COMEX iS, IAU
0.35% , HON , HONEYWELL INTL
0.25% , PETM , PETsMART Inc
0.43% , LSI , LSI LOGIC
0.13% , FISV , FISERV
0.56% , UTX , UNITED TECH
0.62% , RHT , Red Hat Inc.
0.02% , AGG , Bond, Aggregate, AGG
0.20% , MCD , MCDONALDS
0.01% , SHY , Bond, 1-3 Year Treasury, SHY
0.07% , K , KELLOGG
0.03% , CEG , CONSTELL ENERGY
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-1.95% , PMR , Retail, PMR
-1.85% , PWT , Growth SmallCap Dynamic PS, PWT
-1.48% , JKL , Value SmallCap iS M, JKL
-1.84% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-1.58% , JKI , Value MidCap iS M, JKI
-1.67% , PWO , OTC Dynamic PS, PWO
-2.30% , IIH , Internet Infrastructure H, IIH
-1.56% , PWP , Value MidCap Dynamic PS, PWP
-3.14% , TIN , TEMPLE INLAND
-13.78% , EPU , Peru MSCI iS, EPU
-7.27% , LO , Lorillard, Inc. LO
-6.46% , ODP , OFFICE DEPOT
-4.47% , C , CITIGROUP
-3.45% , BHH , Internet B2B H, BHH
-1.84% , PWY , Value SmallCap Dynamic PS, PWY
-0.31% , TLH , Bond 10-20 Year US Treas, TLH
-4.87% , RF , REGIONS FINAN
-1.68% , IGN , Networking, IGN
-6.93% , OMX , OFFICEMAX INC., OMX
-1.77% , RZV , Value SmallCap S&P 600, RZV
-1.87% , IXG , Financials Global LargeCap Value, IXG
-1.90% , RFG , Growth MidCap S&P 400, RFG
-1.54% , JKJ , SmallCap Core iS M, JKJ
-0.25% , PPA , Aerospace & Defense, PPA
-1.16% , IWZ , Growth LargeCap Russell 3000, IWZ
-1.73% , KCE , Capital Markets KWB ST, KCE
-4.67% , VLO , VALERO ENERGY
-1.61% , FPX , IPOs, First Tr IPOX-100, FPX
-2.17% , EK , EASTMAN KODAK
-2.89% , HAR , Harman International
-3.80% , FLR , FLUOR
-2.69% , SYK , STRYKER
-5.30% , LPX , LOUISIANA PAC
9 major U.S. stock sectors ranked in order of long-term relative strength:
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Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) has been trading with a bearish bias since peaking on 10/14/10. The Ratio remains below the 200-day SMA, and the 50-day SMA remains below the 200-day SMA.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) has been consolidating since making a low on 5/26/10. The Ratio remains below the 200-day SMA, and the 50-day SMA remains below the 200-day SMA.
NASDAQ Composite/S&P 500 Relative Strength Ratio appears to have entered a downside correction since peaking on 1/18/11 and remains neutral. Absolute price appears to have entered a downside correction since peaking on 5/2/11.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell further below 28-year lows on 5/26/11, again reconfirming its preexisting bearish major trend.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) broke down below 2-month lows on 5/24/11 and has been in a downside correction since 4/5/11.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) has been correcting and consolidating major gains since 4/5/11 and remains neutral. The Ratio rose above all-time highs on 4/5/11.
Crude Oil nearest futures contract price has turned choppy/sideways since the low of 94.63 on 5/6/11, consolidating losses in a downtrend. The latest data from the Commodity Futures Trading Commission shows hedge-fund and other money managers increased net long positions in Oil–which could prove to be bearish when this hot money rushes for the exits. On 5/3/11, when Crude Oil was 111.56, I wrote, “Crude Oil nearest futures contract price fell below the lows of the previous 7 trading days on 5/3/11, suggesting a short-term price pullback.” Support 94.63, 87.09, 83.85, 83.55, 80.28, 80.06, 79.84, 79.25, 78.86, 73.52, 72.63, 70.76, 70.35, 69.51, 68.59, 67.15, 65.05, and 64.24. Resistance 103.39, 104.60, 105.16, 114.83, 115.27, 120.42, 130.0, and 147.27.
Gold nearest futures contract price has recovered most of its loss since its peak at 1577.4 on 5/2/11. Upside momentum has slowed, and so the rally may be weakening. Reward/Risk does not appear attractive. It seems possible that Gold has topped out. Support: 1520.04, 1462.5, 1445.0, 1411.5, 1380.7, 1419.5, 1351.4, 1309.1, 1307.7, 1297.0, 1274.8, 1270.5, 1232.4, 1210.9, 1191.5, and 1155.6. Resistance: 1577.4.
Gold Mining Stocks ETF (GDX) Relative Strength Ratio (relative to the Gold bullion ETF, GDX/GLD) broke down below 29-month lows on 6/6/11. The Ratio has been falling steeply since 4/8/11 and remains bearish.
Silver nearest futures contract price gapped higher in the morning of 6/6/11 but faded as the day wore on. Silver appears to be continuing the choppy, Triangle Consolidation trend of recent weeks. Silver fell from 49.82 on 4/25/11 to 32.3 on 5/12/11, breaking down below 10-week lows. Since 5/12/11, Silver may have experienced nothing more than a temporary countertrend bounce and normal partial retracement of losses in a larger downside correction. On 5/2/11, when Silver was 46.084, I wrote, “Silver nearest futures contract price broke sharply below the lows of the previous 2 weeks. The short-term price trend has turned down. If this downtrend continues, it could have implications for inflation expectations.” Support 36.265, 32.3, 31.695, 31.61, 30.265, 29.635, 26.30, 24.98, and 22.84. Resistance: 38.845, 39.38, 39.47, 49.82, 49.845 and 50.35.
Silver/Gold Ratio entered a steep downtrend since the peak on 4/28/11. Although the Ratio has recovered modestly since 5/16/11, it may remain bearish.
Copper nearest futures contract price appears to be consolidating losses in recent weeks. Copper broke down below previous 5-month lows on 5/12/11, confirming an intermediate-term correction, if not a bear market. Weakness in Copper suggests doubts about the economic outlook. Support 3.9505, 3.8535, 3.846, 3.6065, 3.3930, 3.1775, 2.9285, 2.8555, 2.8445, and 2.72. Resistance: 4.2125, 4.402, 4.533, 4.554, 4.6495, 4.6535, and 4.6575.
U.S. Treasury Bond nearest futures contract price fell below 2-day lows on 6/6/11, suggesting consolidation or a minor pullback. The Bond rose above the highs of the previous 6 months on 6/1/11, again reconfirming a significant uptrend. In its favor, nearly everyone has been talking bearish on Bonds this year, so the Bond is rising up off an extreme oversold condition. Support 124.16, 124.01, 123.18, 120.20, 119.15, 117.28, 117.04, 116.26, 115.15, 114.06, 113.04, and 112.15. Resistance 126.10, 128.00 129.14, 129.27, 132.26, 133.00, 135.12, 135.19, 136.31, 137.31, and 142.31.
Junk/Investment-Grade Corporate Bonds Relative Strength Ratio (JNK/LQD) broke down below 6-month lows on 6/6/11. Absolute price of JNK broke down below 11-week lows on 6/6/11, after topping out at 41.32 on 11/4/10. Both confirm a bearish trend for JNK.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year Relative Strength Ratio (TIP/IEF) fell below the lows of the previous 6 months on 6/1/11, again reconfirming a medium-term downtrend. TIP/IEF entered a downtrend after peaking on 4/8/11. This downtrend means that fixed-income investors prefer the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) over the inflation-protected TIPs. Inflation expectations are dying.
The U.S. dollar nearest futures contract price fell below the lows of the previous 4-weeks early on 6/6/11 but reversed to close higher, possibly signaling a minor trend change. Support 73.665, 72.86, and 70.80. Resistance 74.955, 76.54, 76.87, 77.675, 78.98, 79.34, 81.635, 81.935, 82.02, 83.64, 84.73, 85.36, 86.71, 88.80, 89.22, 89.71, and 92.53.
Advisory Service Sentiment: There were 57.3% Bulls versus 15.7% Bears as of 4/6/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio soared to 3.65, up from 2.23 the previous week. The Ratio rose its highest level in the 8 years since the 20-year high of 3.74 set on 6/18/03. Following that 2003 peak, the stock market turned sideways/choppy for 2 months and sentiment reverted toward the mean. The Ratio’s 20-year range is 0.41 to 3.74, the median is 1.56, and the mean is 1.63. According to Humphrey B. Neill, The Art of Contrary Thinking, when everybody thinks alike, everyone is likely to be wrong.
VIX Fear Index fell below its 3-year range on 4/20/11, hitting 14.30 intraday, and again confirming a preexisting trend toward bullish complacency. This follows a brief spike up to an intraday peak of 31.28 on 3/16/11. Fear was short-lived. 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 Dow Theory signaled a Primary Tide Bull Market on 7/23/09, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above their closing price highs of the previous 6 months. Looking ahead, joint closes below the 5/17/11 closing price lows could have serious bearish implications for the multi-month Secondary Trend. Here are the critical closing price levels to watch out for: 12,479.60 for the Dow-Jones Industrials and 5,335.37 for the Dow-Jones Transports.
As of the close on June 6, 2011, the Dow Theory confirmed a Secondary Reaction (a significant downside correction) for the general stock market, as the Dow Industrials and Transports both closed below 10-week lows. As of June 1, 2011, the Dow Theory gave a warning of a significant downside correction for the general stock market, as the Dow Industrials and Transports both closed below 5-week lows.
On 5/2/11, when the S&P 500 Composite (SPX) was 1,358.59, I warned, “The majority of major stock price indexes opened higher on gaps but reversed to close with losses on the day. This may signal exhaustion of the short-term uptrend. Sentiment indicators have been suggesting that the stock market may be over loved and overbought. And in view of the sharp reversals in the metal commodities, the so-called “inflation trade”, when speculators buy stocks and sell fixed-income instruments based on expectations of rising price levels for goods and services, may be on thin ice.”
Based on the daily SPX, momentum indicators gave bearish divergence warnings in April; that is, they never made it back to their February peaks when the price indexes rose to higher highs. These bearish divergence warnings are still in effect.
S&P 500 Composite (SPX, 1,286.17) fell 13.99 points or 1.08% on Monday to its lowest closing price in 10 weeks, again reconfirming its preexisting significant downside correction.
S&P 500 Cash Index 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
1370.50, high of 5/2/11
1359.44, high of 5/10/11
1346.82, high of 5/19/11
S&P 500 Cash Index Potential Support
1249.05, low of 3/16/11
1246.73, high of 12/13/10
1238.81, Fibonacci 78.6% of 1,576.09 high
1235.05, high of 12/7/10
1232.85, low of 12/16/10
1228.74, Fibonacci 61.8% of 2007-2009 range
1227.08, high of 11/5/10
1173.00, low of 11/16/10
1171.70, low of 10/27/10
1166.74, low of 10/20/10
1159.71, low of 10/19/10
1,151.41, low of 10/7/10
1,131.87, low of 10/4/10
1122.79, low of 9/23/2010
1114.63, low of 9/15/2010
1110.88, low of 9/10/2010
1091.15, low of 9/7/2010
1039.70, low of 8/27/10
1039.31, Fibonacci 23.6% of June-Aug. 2010 range
1010.91, low of 7/1/2010
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
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
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
One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
1.05% Silver Trust iS, SLV
0.17% Gold Shares S.T., GLD
0.10% Bond EmrgMkt JPM iS, EMB
0.05% Bond, TIPS, TIP
0.02% Bond, Aggregate, AGG
0.01% Bond, 1-3 Year Treasury, SHY
-0.02% Bond Treasury Short-Term iS, SHV
-0.06% Bond, 10 Year Treasury, IEF
-0.11% Bond Ex-US Treas, BWX
-0.17% Bond, Corp, LQD
-0.18% Bond Muni ATM-Free S&P iS, MUB
-0.22% Bond, High-Yield Junk, JNK
-0.24% Bond, High-Yield Corporate, HYG
-0.25% Preferred Stock iS, PFF
-0.38% Indonesia MV, IDX
-0.42% Australia Index, EWA
-0.43% India Earnings WTree, EPI
-0.43% Financial Preferred, PGF
-0.46% Utilities SPDR, XLU
-0.49% DIAMONDS (DJIA), DIA
-0.51% Taiwan Index, EWT
-0.51% Consumer Staples SPDR, XLP
-0.53% Malaysia Index, EWM
-0.56% Utilities VIPERs, VPU
-0.57% India PS, PIN
-0.60% Health Care SPDR, XLV
-0.60% Dividend Appreciation Vipers, VIG
-0.64% Dividend High Yield Equity PS, PEY
-0.66% Dividend SPDR, SDY
-0.66% Turkey MSCI iS, TUR
-0.69% Pacific ex-Japan, EPP
-0.72% Industrial SPDR, XLI
-0.72% Semiconductor iS IGW, SOXX
-0.74% Technology DJ US, IYW
-0.74% Technology SPDR, XLK
-0.76% Bond, 20+ Years Treasury, TLT
-0.81% Hong Kong Index, EWH
-0.82% QQQ Nasdaq 100 Trust, QQQ
-0.82% United Kingdom Index, EWU
-0.84% Info Tech VIPERs, VGT
-0.84% Russia MV, RSX
-0.86% Growth S&P 500/BARRA, IVW
-0.90% Semiconductor SPDR, XSD
-0.92% Dividend International, PID
-0.95% Growth 1000 Russell, IWF
-0.96% Dividend DJ Select, DVY
-0.96% LargeCap Blend S&P 100, OEF
-0.97% Growth EAFE MSCI, EFG
-0.98% China 25 iS, FXI
-0.98% Japan Index, EWJ
-1.00% Materials SPDR, XLB
-1.00% Pacific VIPERs, VPL
-1.02% Value LargeCap Dynamic PS, PWV
-1.05% Consumer Discretionary SPDR, XLY
-1.05% S&P 500 SPDRs LargeCap Blend, SPY
-1.05% S&P 500 iS LargeCap Blend, IVV
-1.06% Small Cap EAFE MSCI iS, SCZ
-1.07% Global 100, IOO
-1.09% LargeCap 1000 R, IWB
-1.10% Growth VIPERs, VUG
-1.13% Telecom DJ US, IYZ
-1.13% Value VIPERs, VTV
-1.14% Commodity Tracking, DBC
-1.15% Value SmallCap S&P 600 B, IJS
-1.15% LargeCap VIPERs, VV
-1.16% Blend Total Market VIPERs, VTI
-1.16% South Korea Index, EWY
-1.19% LargeCap Blend Russell 3000, IWV
-1.24% Value S&P 500 B, IVE
-1.27% Transportation Av DJ, IYT
-1.27% Switzerland Index, EWL
-1.28% Value 1000 Russell, IWD
-1.28% LargeCap Blend S&P=Weight R, RSP
-1.29% Growth MidCap Russell, IWP
-1.30% EAFE Index, EFA
-1.30% Value MidCap S&P 400 B, IJJ
-1.32% Water Resources, PHO
-1.33% Value SmallCap VIPERS, VBR
-1.34% Emerging VIPERs, VWO
-1.34% Global ex US ACWI iS, ACWX
-1.35% Value SmallCap Russell 2000, IWN
-1.35% Singapore Index, EWS
-1.36% MidCap S&P 400 iS, IJH
-1.37% MidCap Russell, IWR
-1.39% MidCap S&P 400 SPDRs, MDY
-1.42% SmallCap S&P 600, IJR
-1.42% Belgium Index, EWK
-1.43% Real Estate US DJ, IYR
-1.45% Germany Index, EWG
-1.47% REIT VIPERs, VNQ
-1.47% Netherlands Index, EWN
-1.49% Value EAFE MSCI, EFV
-1.49% Basic Materials DJ US, IYM
-1.49% Realty Cohen & Steers, ICF
-1.51% Thailand MSCI iS, THD
-1.52% REIT Wilshire, RWR
-1.53% Microcap Russell, IWC
-1.54% Growth MidCap 400 B, IJK
-1.54% Value MidCap Russell, IWS
-1.56% France Index, EWQ
-1.56% Growth BARRA Small Cap 600, IJT
-1.57% Europe 350 S&P Index, IEV
-1.58% European VIPERs, VGK
-1.60% Chile MSCI iS, ECH
-1.60% Small Cap VIPERs, VB
-1.61% Emerging Markets, EEM
-1.62% Emerging 50 BLDRS, ADRE
-1.64% SmallCap Russell 2000, IWM
-1.66% Canada Index, EWC
-1.66% Oil, Crude, U.S. Oil Fund, USO
-1.68% Networking, IGN
-1.73% Capital Markets KWB ST, KCE
-1.73% Financials VIPERs, VFH
-1.76% Frontier Markets Guggenheim , FRN
-1.76% Oil Fund PowerShares, DBO
-1.79% Financial DJ US, IYF
-1.81% Growth SmallCap R 2000, IWO
-1.86% WilderHill Clean Energy PS, PBW
-1.90% Growth SmallCap VIPERs, VBK
-1.90% EMU Europe Index, EZU
-1.91% Financial SPDR, XLF
-1.93% Energy Global, IXC
-1.96% Homebuilders SPDR, XHB
-1.97% Austria Index, EWO
-2.03% Mexico Index, EWW
-2.06% Agriculture DB PS, DBA
-2.08% Metals & Mining SPDR, XME
-2.11% Biotech SPDR, XBI
-2.13% Financial Services DJ, IYG
-2.14% Energy DJ, IYE
-2.17% China LargeCap Growth G D H USX PS, PGJ
-2.22% Energy & Nat Res iS GS, IGE
-2.23% Energy VIPERs, VDE
-2.24% South Africa Index, EZA
-2.26% Energy SPDR, XLE
-2.27% Sweden Index, EWD
-2.42% Brazil Index, EWZ
-2.54% Latin Am 40, ILF
-2.72% Spain Index, EWP
-2.74% Italy Index, EWI
-3.15% Silver Miners Global X, SIL
