Stocks: Divergence and Non-Confirmation

The S&P 500 Composite (SPX, 1,343.80) rose 17.96 points or 1.35% on Thursday, July 21, 2011. SPX closed above the highs of the previous 8 trading days.

As of the close on July 21, 2011, the Dow Theory suggested a divergence and non-confirmation as the Dow-Jones Industrial Average closed above its closing prices of the previous 2 months but the Dow-Jones Transportation Average failed to confirm a similar breakout above its recent trading range.

As I have been saying, “For the medium term, a complex Dow Theory Secondary Reaction probably is still unfolding during the historically weak, ‘Sell in May, and go away’ season.”

Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) fell below the lows of the previous 8 trading days on 7/21/11, suggesting a short-term price pullback. Technically, larger trends still appear bullish since TLT bottomed at 88.14 on 2/9/11.

U.S. dollar ETF (UUP) fell below the lows of the previous 6 weeks on 7/21/11, suggesting a minor downtrend.

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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
14.43% , MHS , MEDCO HEALTH
5.36% , ESRX , EXPRESS SCRIPTS
2.10% , DGT , Global Titans, DGT
3.30% , EWK , Belgium Index, EWK
1.30% , TMW , Wilshire 5000 ST TM, TMW
2.55% , ADRD , Developed 100 BLDRS, ADRD
4.66% , EWI , Italy Index, EWI
15.30% , RHI , ROBERT HALF
11.42% , MS , MORGAN STANLEY
6.32% , GR , GOODRICH CORP
1.17% , TTH , Telecom H, TTH
2.35% , CVS , CVS
3.33% , EZU , EMU Europe Index, EZU
3.03% , KCE , Capital Markets KWB ST, KCE
3.49% , EWQ , France Index, EWQ
3.24% , IXG , Financials Global LargeCap Value, IXG
1.76% , PPH , Pharmaceutical H, PPH
5.78% , VFC , VF
1.45% , RFV , Value MidCap S&P 400, RFV
0.93% , IWZ , Growth LargeCap Russell 3000, IWZ
2.06% , SVU , SUPERVALU
3.60% , EWN , Netherlands Index, EWN
2.09% , ACWX , Global ex US ACWI iS, ACWX
2.08% , IXC , Energy Global, IXC
4.47% , VLO , VALERO ENERGY
1.17% , NYC , LargeCap Blend NYSE Composite iS, NYC
3.01% , LLY , ELI LILLY
4.20% , TROW , T ROWE PRICE GP
0.65% , PXN , Nanotech Lux, PXN
4.84% , PM , Philip Morris, PM
3.57% , EWO , Austria Index, EWO
3.62% , LBTYA , Liberty Global Inc. (LBTYA)
3.51% , DIS , WALT DISNEY

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-5.96% , ABC , AMERISOURCEBERGN
-13.31% , GNW , GENWORTH FINANCIAL
-5.17% , WAG , WALGREEN
-8.35% , IR , INGER RAND
-0.70% , TLH , Bond 10-20 Year US Treas, TLH
-8.53% , ERIC.O , LM Ericsson Telephone Company
-9.14% , SWY , SAFEWAY
-3.39% , PEP , PEPSICO
-3.43% , CBE , COOPER INDS STK A
-4.51% , SHW , SHERWIN WILLIAMS
-3.78% , WHR , WHIRLPOOL
-0.84% , MYY , Short 100% MidCap 400, MYY
-3.49% , HBAN , HUNTINGTON
-2.11% , LSI , LSI LOGIC
-0.64% , PGJ , China LargeCap Growth G D H USX PS, PGJ
-0.51% , PMR , Retail, PMR
-2.37% , KR , KROGER
-1.26% , DOG , Short 100% Dow 30, DOG
-2.50% , NWL , NEWELL RUBBER
-1.82% , PXQ , Networking, PXQ
-1.28% , DHR , DANAHER
-2.34% , DELL , DELL
-2.47% , DXD , Short 200% Dow 30 PS, DXD
-2.76% , SDS , Short 200% S&P 500 PS, SDS
-1.00% , SNV , SYNOVUS
-1.01% , TUR , Turkey MSCI iS, TUR
-1.82% , MZZ , Short 200% MidCap 400 PS, MZZ
-2.09% , FMCN , Focus Media, FMCN
-1.52% , AMD , ADV MICRO DEV
-0.73% , PSQ , Short 100% QQQ, PSQ
-1.10% , MBI , MBIA
-1.01% , TDC , Teradata Corporation, TDC
-1.17% , DYN , DYNEGY
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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) fell further below 7-week lows on 7/12/11 after trading with a bearish bias since peaking on 10/14/10. The Ratio remains below the 200-day SMA, below the 50-day SMA, and the 50-day SMA remains below the 200-day SMA. Absolute price broke down below 14-week lows on 6/23/11.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) fell further below 4-month lows on 7/19/11. The Ratio has been trading with a bearish bias since peaking on 11/27/07, so this is a major long-term bearish trend. The Ratio remains below the 200-day SMA, below the 50-day SMA, and the 50-day SMA remains below the 200-day SMA. Absolute price broke down below 14-week lows on 6/23/11.

NASDAQ Composite/S&P 500 Relative Strength Ratio staged a prolonged correction from 1/18/11 to 6/20/11. The Ratio has picked up some bullish short-term momentum since 6/20/11 but has yet to break out to a new high. Long term, the trend remains bullish. Absolute price peaked on 5/2/11.

The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) rose above the highs of the previous 10 weeks on 7/14/11, suggesting a minor recovery. But OEX/SPX fell below 28-year lows on 5/26/11, confirming its preexisting bearish long-term major trend.

The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) suddenly reversed to the downside on 7/14/11–this just after IWM/SPY rose above the highs of the previous 3 months on 7/13/11. Although IWM/SPY appears uncertain about the short term, longer term the trend remains bullish.

The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) has been fluctuating neutral/sideways since peaking on 4/5/11. Long term, the trend remains bullish.

Agriculture, PowerShares DB Agriculture Fund ETF (DBA) fell below the lows of the previous 2 trading days on 7/21/11, possibly suggesting a minor short-term price pullback. Longer term, DBA has been stuck in a downside correction since peaking at 35.58 on 3/4/11. Support 32.35, 32.23, 31.65, 31.46. Resistance 33.42, 34.83, and 35.58.

Crude Oil, United States Oil ETF (USO) rose to challenge the highs of the previous 5 weeks on 7/21/11. Still, many day-to-day reversals in recent weeks may make Oil a risky market to trade at this time. Long term, as long as USO holds above its low at 35.14 on 6/27/11, the major trend still might turn back up. Support 36.93 and 35.14. Resistance 38.98, 40.74, and 46.60.

Gold, SPDR Gold Shares ETF (GLD) consolidated gains in recent days. GLD rose above previous all-time price highs on 7/18/11, reconfirming a major long-term uptrend. In a world of too much debt and weak currencies, investors around the globe seek the safety of gold as the only true-forever money. Support: 154.10, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: 156.58.

Gold Mining Stocks ETF (GDX) Relative (to the Gold bullion ETF) Strength Ratio (GDX/GLD) rose above the highs of the previous 7 weeks on 7/21/11, reconfirming a short-term uptrend. But GDX fell below 27-month lows on 6/17/11, which was a bearish indication for the long term. The Ratio is still down substantially since its peak on 4/8/11, and the main trend remains bearish.

Silver, iShares Silver Trust ETF (SLV) consolidated gains in recent days. SLV rose above the highs of the previous 10 weeks on 7/18/11, confirming a medium-term uptrend. Silver also appears to have emerged on the bullish side of a 2-month Triangle Consolidation. Support 34.02 and 31.97. Resistance: 44.71 and 48.35.

Silver/Gold ETFs Ratio (SLV/GLD) rose above the highs of the previous 9 weeks on 7/18/11, confirming a short-term minor uptrend. The Ratio entered a steep downtrend since the peak on 4/28/11 and fell below the lows of the previous 4 months in 6/27/11, reconfirming a more significant downtrend for the medium term.

Copper, iPath DJ-UBS Copper TR Sub-Idx ETN (JJC ) fell below the lows of the previous 2 trading days on 7/21/11, possibly suggesting a minor short-term price pullback. Longer term, JJC rose above the highs of the previous 3 months on 7/19/11, confirming a preexisting medium-term uptrend. JJC has been in a bullish trend since bottoming at 51.13 on 5/11/11. Strength in Copper suggests confidence in the economic outlook, while Weakness suggests doubts about the future. Support 56.92, 55.50, 52.93, 52.12, 51.13. Resistance: 60.04 and 61.69.

Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) fell below the lows of the previous 8 trading days on 7/21/11, suggesting a short-term price pullback. Technically, larger trends still appear bullish since TLT bottomed at 88.14 on 2/9/11. Support 93.14, 89.65, and 88.14. Resistance 97.90, 102.27, 106.10, 107.05, and 109.32.

Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) has consolidated losses since breaking down below 9-month lows on 6/16/11 and thereby confirming a major downtrend.

U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) have consolidated losses since falling below the lows of the previous 6 months on 6/20/11. This downtrend means that fixed-income investors prefer the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) over the inflation-protected TIPs.

U.S. dollar ETF (UUP) fell below the lows of the previous 6 weeks on 7/21/11, suggesting a minor downtrend. Still, UUP may be forming a Triangle Bottom pattern since making a low at 20.84 on 5/4/11. Support 21.01 and 20.84. Resistance 21.74, 21.86, and 22.21

Advisory Service Sentiment: There were 46.2% Bulls versus 21.5% Bears as of 7/20/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio rose to 2.15, which suggests moderate bullish complacency when compared to 20-year range of 0.41 to 3.74, a median of 1.56, and a mean of 1.64.

VIX Fear Index collapsed below the lows of the previous 8-weeks, plunging to 15.12 intraday on 7/1/11, in a surprisingly rapid swing to 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 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.

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. Previously, 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.

As of the close on July 1, 2011, the Dow Theory suggested a divergence and non-confirmation as the Dow-Jones Transportation Average closed above all previous closing price highs but the Dow-Jones Industrial Average failed to confirm.

As of the close on July 21, 2011, the Dow Theory suggested a divergence and non-confirmation as the Dow-Jones Industrial Average closed above its closing prices of the previous 2 months but the Dow-Jones Transportation Average failed to confirm a similar breakout above its recent trading range.

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
1356.48, high of 7/7/11

S&P 500 Cash Index Potential Support
1295.92, low of 7/18/11
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
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
4.66% Italy Index, EWI
4.25% Spain Index, EWP
3.60% Netherlands Index, EWN
3.57% Austria Index, EWO
3.49% France Index, EWQ
3.33% EMU Europe Index, EZU
3.30% Belgium Index, EWK
3.03% Capital Markets KWB ST, KCE
2.73% Europe 350 S&P Index, IEV
2.69% Russia MV, RSX
2.67% European VIPERs, VGK
2.67% Financial Services DJ, IYG
2.60% Value EAFE MSCI, EFV
2.40% Financial SPDR, XLF
2.21% Germany Index, EWG
2.16% Singapore Index, EWS
2.12% EAFE Index, EFA
2.09% Financials VIPERs, VFH
2.09% Global ex US ACWI iS, ACWX
2.08% Energy Global, IXC
2.00% Financial DJ US, IYF
1.98% United Kingdom Index, EWU
1.97% Energy SPDR, XLE
1.92% Brazil Index, EWZ
1.89% Growth EAFE MSCI, EFG
1.88% Global 100, IOO
1.87% Switzerland Index, EWL
1.84% Energy DJ, IYE
1.84% Indonesia MV, IDX
1.78% Sweden Index, EWD
1.78% Small Cap EAFE MSCI iS, SCZ
1.75% South Africa Index, EZA
1.74% Value S&P 500 B, IVE
1.73% Energy VIPERs, VDE
1.69% Value 1000 Russell, IWD
1.68% Taiwan Index, EWT
1.68% Biotech SPDR, XBI
1.65% Australia Index, EWA
1.63% Transportation Av DJ, IYT
1.61% Malaysia Index, EWM
1.60% Emerging Markets, EEM
1.56% Pacific ex-Japan, EPP
1.53% Latin Am 40, ILF
1.51% Dividend DJ Select, DVY
1.51% Health Care SPDR, XLV
1.50% Frontier Markets Guggenheim , FRN
1.50% Industrial SPDR, XLI
1.49% Utilities SPDR, XLU
1.49% Value VIPERs, VTV
1.45% Utilities VIPERs, VPU
1.45% Energy & Nat Res iS GS, IGE
1.45% LargeCap Blend S&P 100, OEF
1.41% Basic Materials DJ US, IYM
1.40% Emerging VIPERs, VWO
1.39% S&P 500 SPDRs LargeCap Blend, SPY
1.38% Dividend International, PID
1.37% Value SmallCap S&P 600 B, IJS
1.37% S&P 500 iS LargeCap Blend, IVV
1.36% Value SmallCap Russell 2000, IWN
1.36% Thailand MSCI iS, THD
1.34% LargeCap 1000 R, IWB
1.31% LargeCap Blend S&P=Weight R, RSP
1.29% Value MidCap Russell, IWS
1.28% WilderHill Clean Energy PS, PBW
1.28% Water Resources, PHO
1.27% Emerging 50 BLDRS, ADRE
1.27% LargeCap VIPERs, VV
1.26% LargeCap Blend Russell 3000, IWV
1.25% Value LargeCap Dynamic PS, PWV
1.25% DIAMONDS (DJIA), DIA
1.22% Blend Total Market VIPERs, VTI
1.21% Materials SPDR, XLB
1.19% Pacific VIPERs, VPL
1.17% Mexico Index, EWW
1.16% Consumer Discretionary SPDR, XLY
1.10% Value MidCap S&P 400 B, IJJ
1.09% Canada Index, EWC
1.08% Growth VIPERs, VUG
1.08% Value SmallCap VIPERS, VBR
1.06% MidCap Russell, IWR
1.03% Metals & Mining SPDR, XME
1.03% Growth S&P 500/BARRA, IVW
1.03% Dividend High Yield Equity PS, PEY
1.01% Hong Kong Index, EWH
1.00% Growth 1000 Russell, IWF
1.00% India PS, PIN
0.99% Telecom DJ US, IYZ
0.98% Microcap Russell, IWC
0.98% Dividend SPDR, SDY
0.98% Dividend Appreciation Vipers, VIG
0.97% SmallCap S&P 600, IJR
0.96% Growth MidCap Russell, IWP
0.93% MidCap S&P 400 SPDRs, MDY
0.93% MidCap S&P 400 iS, IJH
0.91% SmallCap Russell 2000, IWM
0.90% Realty Cohen & Steers, ICF
0.86% Chile MSCI iS, ECH
0.85% Small Cap VIPERs, VB
0.84% Japan Index, EWJ
0.83% Oil, Crude, U.S. Oil Fund, USO
0.82% Consumer Staples SPDR, XLP
0.80% REIT VIPERs, VNQ
0.79% Financial Preferred, PGF
0.75% Growth MidCap 400 B, IJK
0.75% Semiconductor iS IGW, SOXX
0.71% Bond Ex-US Treas, BWX
0.69% Growth SmallCap VIPERs, VBK
0.68% REIT Wilshire, RWR
0.68% Growth BARRA Small Cap 600, IJT
0.68% Homebuilders SPDR, XHB
0.67% Growth SmallCap R 2000, IWO
0.67% QQQ Nasdaq 100 Trust, QQQ
0.64% Real Estate US DJ, IYR
0.62% South Korea Index, EWY
0.59% India Earnings WTree, EPI
0.57% China 25 iS, FXI
0.55% Bond, High-Yield Junk, JNK
0.48% Bond, High-Yield Corporate, HYG
0.46% Technology SPDR, XLK
0.41% Preferred Stock iS, PFF
0.38% Info Tech VIPERs, VGT
0.34% Technology DJ US, IYW
0.30% Semiconductor SPDR, XSD
0.16% Networking, IGN
0.07% Bond Muni ATM-Free S&P iS, MUB
0.03% Oil Fund PowerShares, DBO
0.03% Bond EmrgMkt JPM iS, EMB
0.00% Bond Treasury Short-Term iS, SHV
-0.05% Bond, 1-3 Year Treasury, SHY
-0.15% Bond, Corp, LQD
-0.16% Bond, Aggregate, AGG
-0.21% Bond, TIPS, TIP
-0.37% Agriculture DB PS, DBA
-0.49% Commodity Tracking, DBC
-0.55% Bond, 10 Year Treasury, IEF
-0.64% China LargeCap Growth G D H USX PS, PGJ
-0.76% Silver Miners Global X, SIL
-0.76% Gold Shares S.T., GLD
-0.77% Bond, 20+ Years Treasury, TLT
-1.01% Turkey MSCI iS, TUR
-2.07% Silver Trust iS, SLV