The S&P 500 Composite (SPX, 1,195.54) rose 0.65 points or 0.05 % on Tuesday, October 11, 2011. SPX recovered from a lower open but stalled out after peaking at 10:45 a.m. The market remained choppy/sideways for the rest of the day. Still, SPX managed to close above the highs of the previous 9 trading days.
NYSE volume fell 2% below Monday’s slow pace and fell 10% below the trailing 200-day simple moving average (SMA). This rally attempt lacks volume confirmation.
Price momentum, which was accelerating late on Monday, decelerated substantially. The 6-day bounce has left the market in a vulnerable, overbought position. That does not necessarily rule out another day or two of upside attempts, similar to those we have already seen over the past 2 months. This is the 7th bounce of 3% or more since early August, and it probably will end the same way the others did, that is, failing near the upper end of the 2-month trading range.
The formerly weakest stocks bounced the most in recent days, while the stocks that previously had held up best have lagged. This is typical of a short-covering rally.
Markets are likely to remain volatile, with large daily swings in both directions. Fundamentally, timing of the Daily Fluctuations may depend on the next overnight news headline about the debt crisis in Europe, since that crisis appears to be a key driver of Daily Fluctuations. Over the past 2 months, there have been 10 bounces lasting 1 to 5 trading days. Such minor bounces tend to be fickle and fleeting and difficult to trade.
Daily upside reversals against the dominant bear trend lure short-term traders into trying to trade a bounce. Such minor price corrections are normal and expected, of course, but playing brief 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, as we have seen repeatedly over the past 2 months. And in a Dow Theory Primary Tide Bear Market, the big surprises come to the downside.
The Dow Theory signaled a Primary Tide Bear Market on 8/2/11, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their closing price lows of June, 2011. The Bear Market was confirmed on 10/3/11 by lower closing price lows for both Averages. A Dow Theory Primary Tide Bear Market is a powerful beast that must not be underestimated.
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Stock Market Indicators
NASDAQ Composite/S&P 500 Relative Strength Ratio has consolidated gains over the past 2 weeks. The Ratio rose above previous 10-year highs on 9/23/11, reconfirming a major long-term uptrend. That relative trend probably will resume–in time. NASDAQ absolute price trend has been whipsawing and is now neutral.
iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF/SPY) fell below 31-month lows on 10/4/11, reconfirming a major long-term downtrend. This basket of the stocks of Brazil, Russia, India and China is in a relatively bearish major trend.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) consolidated losses since breaking down below 29-month lows on 9/22/11, and thereby reconfirming its preexisting bearish major trend. Absolute price broke down below 2-year lows on 10/4/11 and remains bearishly below falling 50- and 200-day SMAs.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) consolidated losses since breaking down below 7-year lows on 9/19/11, and thereby reconfirming its preexisting bearish major trend. Absolute price broke down below 2-year lows on 10/4/11 and remains bearishly below falling 50- and 200-day SMAs.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) OEX/SPX consolidated after rising above 50-day and 200-day SMAs on 9/21/11, which was a RELATIVELY bullish sign of the OEX outperforming the SPX. Large Caps tend to outperform Mid Caps and Small Caps in bearish markets as investors seek the perceived relative safety of large size. Absolute price of OEX has been whipsawing and is now neutral.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) consolidated after falling below 20-month lows on 10/3/11, and thereby reconfirming a major downtrend. Absolute price has been weak since 5/2/11, broke down below 13-month lows on 10/4/11, and remains bearishly below falling 50- and 200-day SMAs.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) consolidated after falling below the lows of the previous 18-months on 10/3/11, and thereby reconfirming a bearish long-term major trend.
Advisory Service Sentiment: There were 34.4% Bulls versus 45.2% Bears as of 10/5/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio was 0.76, which is the lowest level since the big bear market of 2007- 2009. The Bull/Bear Ratio is now more 1 standard deviation below the 20-year average. It was more than 2 standard deviations above the 20-year average at the end of April, 2011. The 20-year median is 1.56 and the mean is 1.64. Sentiment is not so easy to interpret. Contrary to what many contrarians seem to believe, when advisors turn this cautious, stocks sometimes have much further to fall. Examples include similar levels of bearish sentiment in April 1973 and in July 2008, after which stock prices fell much further.
VIX Fear Index remains stuck in its 8-week, relatively high level trading range, from a low of 30.16 to a high of 48.00. 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: 1,195.54) 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
1258.07, low of 6/16/11
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
1234.56, low of 8/3/11
1232.85, low of 12/16/10
1230.71, high of 8/31/11
1228.74, Fibonacci 61.8% of 2007-2009 range
1220.39, high of 9/20/11
1199.24, high of 10/11/2011
S&P 500 Cash Index (SPX: 1,195.54) Potential Support
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
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
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Fixed-Income Investments
Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) price pulled back but held above the 115.76 low on 9/28/11. So, the bullish pattern of higher highs and higher lows is still intact. TLT rose above all-time highs on 10/4/11, reconfirming a long-term, major uptrend. Support 115.76, 114.05, 111.25, 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) fell below 5-week lows on 10/8/11, suggesting a correction or downside shakeout. Support 102.50 and 102.38. Resistance 106.66.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) consolidated losses since breaking down below the lows of the previous 29-months on 10/3/11, thereby reconfirming a bearish long-term major trend.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) fell below 13-month lows on 9/30/11, reconfirming a bearish long-term major trend. This bearish 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) price fell below the lows of the past 2 weeks on 10/10/11, after rising above the highs of the previous 8 months on 10/4/11, which reconfirmed a major price uptrend. After the collapse of gold and the Swiss Franc, the U.S. dollar may be the last refuge for risk-averse investors. Support 21.75, 21.56, 21.42, and 20.84. Resistance 22.63.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price fell below the lows of the previous 10 months on 10/3/11, reconfirming a major long-term downtrend.
Crude Oil, United States Oil ETF (USO) price corrected and consolidated after breaking down below 17-month lows on 10/4/11, which reconfirmed a major long-term downtrend. Support 28.10, 26.28, and 22.74. Resistance 33.30, 35.08, 35.14, 39.25, 40.74, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) price consolidated short-term gains after rising above the highs of the past 2 weeks on 10/10/11. The medium-term trend appears doubtful. Support: 154.19, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: 163.32, 165.72, 170.32, 177.40, and 185.85.
Gold Mining Stocks ETF/ Gold Shares ETF Relative Strength Ratio (GDX/GLD) remains bearishly below its falling 50-day and 200-day SMAs. 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 consolidated losses since breaking down below the lows of the previous 7 months on 9/26/11, and confirming a bearish major trend for the long term. SLV fell back below its 50-day SMA on 9/19/11 and fell below its 200-day SMA on 9/22/11. Support 27.41, 26.03, and 24.44. Resistance: 32.62, 34.51, 40.23, 41.49, 42.30, 42.78, 44.71 and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) broke down below the lows of the previous 11 months on 9/30/11, reconfirming a bearish major trend for the long term. 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) price consolidated losses since breaking down below the lows of the previous 14 months on 10/5/11, and thereby reconfirming a bearish major trend for the long term. 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
10.42% , JNY , JONES APPAREL
0.21% , PBJ , Food & Beverage, PBJ
1.51% , FDV , Value 40 Large Low P/E FT DB, FDV
3.82% , DDS , DILLARD STK A
5.10% , C , CITIGROUP
3.64% , VMC , VULCAN MATERIALS
1.35% , EWI , Italy Index, EWI
2.09% , HSIC , Henry Schein Inc
3.82% , JNS , JANUS CAPITAL
1.55% , GIS , GENERAL MILLS
3.32% , DE , DEERE & CO
1.79% , LSI , LSI LOGIC
2.01% , CMA , COMERICA
3.23% , VLO , VALERO ENERGY
1.51% , HHH , Internet H, HHH
0.47% , ADRA , Asia 50 BLDRS, ADRA
0.36% , IIH , Internet Infrastructure H, IIH
2.67% , TMO , THERMO ELECTRON
2.08% , AA , ALCOA
0.30% , RTH , Retail H, RTH
3.12% , GNW , GENWORTH FINANCIAL
2.40% , DISCA , Discovery Communications
0.34% , IWP , Growth MidCap Russell, IWP
0.84% , IGV , Software, IGV
5.50% , CTXS , CITRIX SYSTEMS
1.77% , LEG , LEGGETT & PLATT
2.72% , HANS , Hansen Natural, HANS
2.08% , RSH , RADIOSHACK
1.81% , INTU , INTUIT
0.66% , PXN , Nanotech Lux, PXN
5.08% , RIMM , RESEARCH IN MOTION LTD
1.30% , SNI , Scripps Networks Interactive
0.32% , EWP , Spain Index, EWP
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-1.24% , KWT , Solar Energy MV, KWT
-0.80% , TTH , Telecom H, TTH
-2.78% , JWN , NORDSTROM
-2.20% , CNP , CENTERPNT ENERGY
-1.45% , OMX , OFFICEMAX INC., OMX
-0.55% , FDL , Dividend Leaders, FDL
-3.21% , KSS , KOHLS
-2.97% , NI , NISOURCE
-2.39% , PGR , PROGRESSIVE OHIO
-2.93% , BEN , FRANKLIN RSC
-1.69% , PGN , PROGRESS ENERGY
-1.87% , WM , WASTE MANAGEMENT
-0.83% , EWJ , Japan Index, EWJ
-2.30% , MRVL , MARVELL TECHNOLOGY
-0.87% , VPU , Utilities VIPERs, VPU
-2.19% , RFMD , RF Micro Devices Inc
-1.00% , UTH , Utilities H, UTH
-1.17% , NE , NOBLE
-0.47% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-1.85% , LLY , ELI LILLY
-0.24% , SDY , Dividend SPDR, SDY
-0.71% , PBW , WilderHill Clean Energy PS, PBW
-1.49% , PEP , PEPSICO
-0.45% , VPL , Pacific VIPERs, VPL
-1.21% , JNK , Bond, High-Yield Junk, JNK
-0.17% , EWK , Belgium Index, EWK
-2.33% , USB , US BANCORP
-1.75% , LTD , LIMITED BRANDS
-2.01% , GPS , GAP
-0.54% , RKH , Bank Regional H, RKH
-1.18% , DIS , WALT DISNEY
-0.91% , XLU , Utilities SPDR, XLU
-1.46% , MRO , MARATHON OIL
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
2.17% China 25 iS, FXI
1.41% Thailand MSCI iS, THD
1.36% Agriculture DB PS, DBA
1.35% Italy Index, EWI
1.28% Metals & Mining SPDR, XME
1.03% Chile MSCI iS, ECH
1.02% Microcap Russell, IWC
1.02% Brazil Index, EWZ
0.81% Value SmallCap Russell 2000, IWN
0.74% Commodity Tracking, DBC
0.73% Networking, IGN
0.73% Transportation Av DJ, IYT
0.71% Growth SmallCap VIPERs, VBK
0.69% China LargeCap Growth G D H USX PS, PGJ
0.69% SmallCap Russell 2000, IWM
0.68% Technology DJ US, IYW
0.68% QQQ Nasdaq 100 Trust, QQQ
0.61% Growth SmallCap R 2000, IWO
0.60% Indonesia MV, IDX
0.59% Info Tech VIPERs, VGT
0.52% Growth BARRA Small Cap 600, IJT
0.51% SmallCap S&P 600, IJR
0.49% Value SmallCap S&P 600 B, IJS
0.46% Latin Am 40, ILF
0.45% Hong Kong Index, EWH
0.44% Technology SPDR, XLK
0.44% Financial Services DJ, IYG
0.43% Small Cap VIPERs, VB
0.43% Consumer Discretionary SPDR, XLY
0.41% Bond Ex-US Treas, BWX
0.39% Preferred Stock iS, PFF
0.39% Silver Trust iS, SLV
0.37% Water Resources, PHO
0.34% Growth MidCap Russell, IWP
0.34% Basic Materials DJ US, IYM
0.33% Bond, 10 Year Treasury, IEF
0.32% Growth 1000 Russell, IWF
0.32% Taiwan Index, EWT
0.32% Spain Index, EWP
0.29% Industrial SPDR, XLI
0.29% Growth VIPERs, VUG
0.28% Emerging VIPERs, VWO
0.27% Bond, Corp, LQD
0.25% Germany Index, EWG
0.24% Bond, Aggregate, AGG
0.24% Value SmallCap VIPERS, VBR
0.24% Bond, TIPS, TIP
0.22% Energy Global, IXC
0.21% Frontier Markets Guggenheim , FRN
0.20% Energy SPDR, XLE
0.19% Energy VIPERs, VDE
0.18% Growth MidCap 400 B, IJK
0.15% Growth S&P 500/BARRA, IVW
0.15% LargeCap Blend S&P 100, OEF
0.14% France Index, EWQ
0.14% MidCap S&P 400 SPDRs, MDY
0.14% Homebuilders SPDR, XHB
0.14% LargeCap Blend S&P=Weight R, RSP
0.13% Silver Miners Global X, SIL
0.12% Materials SPDR, XLB
0.12% Dividend High Yield Equity PS, PEY
0.10% S&P 500 SPDRs LargeCap Blend, SPY
0.10% MidCap Russell, IWR
0.08% S&P 500 iS LargeCap Blend, IVV
0.08% Blend Total Market VIPERs, VTI
0.08% Emerging 50 BLDRS, ADRE
0.07% MidCap S&P 400 iS, IJH
0.06% Netherlands Index, EWN
0.05% Emerging Markets, EEM
0.05% Bond, 1-3 Year Treasury, SHY
0.03% LargeCap 1000 R, IWB
0.03% Europe 350 S&P Index, IEV
0.03% Small Cap EAFE MSCI iS, SCZ
0.01% LargeCap Blend Russell 3000, IWV
0.00% Financial DJ US, IYF
-0.02% LargeCap VIPERs, VV
-0.03% Bond Treasury Short-Term iS, SHV
-0.03% Energy & Nat Res iS GS, IGE
-0.04% Value S&P 500 B, IVE
-0.06% Dividend Appreciation Vipers, VIG
-0.06% Financial Preferred, PGF
-0.06% Biotech SPDR, XBI
-0.07% Energy DJ, IYE
-0.08% Financial SPDR, XLF
-0.10% Mexico Index, EWW
-0.10% Value MidCap Russell, IWS
-0.10% Semiconductor iS IGW, SOXX
-0.11% Global 100, IOO
-0.11% Global ex US ACWI iS, ACWX
-0.11% Value LargeCap Dynamic PS, PWV
-0.12% Dividend DJ Select, DVY
-0.13% Value 1000 Russell, IWD
-0.14% Value MidCap S&P 400 B, IJJ
-0.15% Financials VIPERs, VFH
-0.15% Health Care SPDR, XLV
-0.16% Sweden Index, EWD
-0.17% Belgium Index, EWK
-0.18% DIAMONDS (DJIA), DIA
-0.18% EAFE Index, EFA
-0.18% Turkey MSCI iS, TUR
-0.20% Consumer Staples SPDR, XLP
-0.22% Australia Index, EWA
-0.23% European VIPERs, VGK
-0.23% Malaysia Index, EWM
-0.24% Dividend SPDR, SDY
-0.24% Value VIPERs, VTV
-0.25% Value EAFE MSCI, EFV
-0.28% Dividend International, PID
-0.28% Bond EmrgMkt JPM iS, EMB
-0.30% EMU Europe Index, EZU
-0.32% Growth EAFE MSCI, EFG
-0.33% Bond, 20+ Years Treasury, TLT
-0.34% Telecom DJ US, IYZ
-0.34% Pacific ex-Japan, EPP
-0.35% Switzerland Index, EWL
-0.36% Oil Fund PowerShares, DBO
-0.37% Semiconductor SPDR, XSD
-0.43% Singapore Index, EWS
-0.45% Pacific VIPERs, VPL
-0.47% Capital Markets KWB ST, KCE
-0.58% Bond Muni ATM-Free S&P iS, MUB
-0.59% South Korea Index, EWY
-0.69% Oil, Crude, U.S. Oil Fund, USO
-0.71% WilderHill Clean Energy PS, PBW
-0.71% Canada Index, EWC
-0.71% Gold Shares S.T., GLD
-0.74% India Earnings WTree, EPI
-0.75% United Kingdom Index, EWU
-0.83% Japan Index, EWJ
-0.87% Utilities VIPERs, VPU
-0.91% Utilities SPDR, XLU
-1.10% Bond, High-Yield Corporate, HYG
-1.21% Russia MV, RSX
-1.21% Bond, High-Yield Junk, JNK
-1.34% South Africa Index, EZA
-1.85% Real Estate US DJ, IYR
-1.97% Austria Index, EWO
-1.98% India PS, PIN
-1.99% REIT VIPERs, VNQ
-2.09% Realty Cohen & Steers, ICF
-2.10% REIT Wilshire, RWR
