AAII Sentiment shows that individual investors are extremely bullish. As of 8/23/12, there were 41.96% Bulls and 25.87% Bears. This is the most extreme optimism since 3/29/12, a few days before the SPX high close for the year and the beginning of a significant downside correction.

Stock price indexes have tested 4-year highs but have failed the test.

The S&P 500 (SPX: 1,402.08) fell 11.41 points or 0.81% on Thursday. It was the largest daily loss in 4 weeks, since 7/24/12. SPX closed below its lowest closing prices of the previous 10 trading days.

Momentum oscillators have turned downward, after many of them demonstrated bearish divergences. Daily MACD (12,26,9) crossed below its signal line on Thursday.

The number of stocks making new highs recently has been but a fraction of July’s peak numbers.

NYSE volume fell 3% and was 23% below its 200-day SMA. Volume has been running near the lowest levels of the year since 8/8/12, possibly reflecting diminishing enthusiasm for stocks, as well as summer vacations. On-Balance Volume for the SPX remains in a downtrend with bearish divergence. NYSE Cumulative Volume of Advancing Stocks minus Volume of Declining Stocks remains weak relative to price. Volume has not been confirming the price up move.

It takes volume to push prices up. After the shorts have been forced to cover and the longs have had their fill of buying, in the absence of a fresh source of demand, stocks fall of their own weight.

With the stock price indexes far above their 4-year lows and still very close to the top end of their 4-year price range, downside risk may exceed upside potential for the stock market. Choosing safety over risk appears to be the most reasonable approach for conservative traders and investors.

For extensive coverage of major global markets with illustrative charts, take a free trial for my weekly report —
click here.
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Hedge funds and equity mutual funds both lost money last year, 2011, and some are down again this year as well.

Meanwhile, one money manager made gains for 5 consecutive quarters; see:
Robert W. Colby Asset Management, Inc. (click here).

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The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) MDY/SPY whipsawed up above its 50-day SMA again on 8/23/12, thereby turning systematically neutral again. MDY/SPY remains below its 200-day SMA, and its 50-day SMA has been below its 200-day SMA since 6/6/12.
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Sentiment for Contrary Thinking

Investor sentiment data indicates alarming degrees of optimism and bullish complacency this August as the stock price indexes test their 2012 market highs. Current elevated levels of optimism are bearish because when the majority is this bullish, 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, as it did during the -11% April-June downside stock market price correction.

AAII Sentiment shows that individual investors are extremely bullish. As of 8/23/12, there were 41.96% Bulls and 25.87% Bears. This is the most extreme optimism since 3/29/12, a few days before the SPX high close for the year and the beginning of a significant downside correction.

Investors Intelligence Sentiment shows that stock market newsletter advisors are more bullish. As of 8/22/12, there were 47.3% Bulls and 24.7% Bears. This 47.3% Bulls is the largest percentage of Bulls since 4/11/12, a few days after the SPX high close for the year and the beginning of a significant downside correction.

Hulbert Stock Newsletter Sentiment Index showed that the average recommended equity exposure among a subset of the shortest-term stock market timers jumped to 53.1% in August, up from previous peaks at 47.0% in July and 42.1% in May. “Watch out for a correction — or worse. The odds of a stock market correction are now quite elevated,” according to Mark Hulbert.

Corporate Insiders Are Bearish. Insiders sold 5.5 shares for each share bought in July–up from 1.6-to-1 in May and up from a long-term average of 2.25-to-1. The data was reported by Vickers Weekly Insider Report, published by Argus Research, and Mark Hulbert.

NYSE Short Interest fell by more than 0.5 billion shares, the largest drop since January. This source of short-covering, potential demand for stocks has diminished.

The ICI reported $62.6 billion has been withdrawn from domestic equity mutual funds so far in 2012. This is another confirmation that supply is greater than demand for stocks.

VIX Fear Index fell to 13.30 intraday on 8/17/12, its lowest level in more than 5 years, since 6/20/07. VIX fell from an intraday peak of 27.73 on 6/4/12. This large drop suggests a shift from worried concern 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 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
1426.68, high of 8/21/2012
1422.38, high of 4/2/2012
1418.71, high of 8/17/2012
1415.32, high of 5/1/2012

The S&P 500 Composite Potential Support
1391.04, low of 8/6/2012
1389.07, Fibonacci 78.6% of April-June 2012 range
1388.71, low of 5/3/2012
1381.50, Fibonacci 78.6% of 2007-2009 range
1380.39, high of 7/19/2012
1374.81, high of 7/3/2012
1370.58, high of 5/2/2011
1368.70, 50-day SMA
1363.49, high of 6/19/2012
1362.93, Fibonacci 61.8% of April-June 2012 range
1357.38, low of 4/10/2012
1355.70, low of 7/2/2012
1344.56, Fibonacci 50% of April-June 2012 range
1340.34, Fibonacci 23.6% of 2011-12 range
1340.03, low of 3/6/2012
1335.52, high of 6/11/2012
1334.93, high of 5/31/2012
1333.37, 200-day SMA
1329.24, low of 7/24/2012
1329.05, high of 6/7/2012
1328.49, high of 5/22/2012
1326.19, Fibonacci 38.2% of April-June 2012 range
1325.41, low of 7/12/2012
1306.62, low of 6/12/2012
1303.47, Fibonacci 23.6% of April-June 2012 range
1291.98, low of 5/18/2012
1289.59, Fibonacci 38.2% of 2011-12 range
1266.74, low of 6/4/2012
1265.26, low of 1/5/2012
1262.30, low of 12/27/2011
1257.58, Fibonacci 61.8% of 2011 range
1248.58, Fibonacci 50.0% of 2011-12 range
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 11/3/2011
1231.04, high of 12/16/2011
1228.74, Fibonacci 61.8% of 2007-2009 range
1226.64, low of 11/9/2011
1224.57, high of 12/19/2011
1215.20, low of 12/16/2011
1207.56, Fibonacci 61.8% of 2011-12 range
1202.37, low of 12/19/2011
1158.66, low of 11/25/2011
1121.44, Fibonacci 50% of 2007-2009 range
1074.77, low of 10/4/2011
1149.16, Fibonacci 78.6% R of 2011-12 range
1014.14, Fibonacci 38.2% of 2007-2009 range
1010.91, low of 7/1/2010
991.97, low of 9/2/2009
978.51, low of 8/17/2009
956.23, high of 6/11/2009
881.38, Fibonacci 23.6% of 2007-2009 range
869.32, low of 7/8/2009
666.79, intraday low of 3/6/2009
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Tangible Assets, Commodities

U.S. dollar ETF (UUP) fell below its 50-day SMA on 8/3/12, turning systematically neutral. UUP fell below its 200-day SMA on 8/23/12, and its 50-day SMA has stayed above its 200-day SMA every day since 10/26/11. Support 22.14, 21.89, 21.74, 21.58, 21.07, and 20.84. Resistance 23.14, 23.52, 25.84, 27.19, 28.97.

CRB Commodity Price Index remains systematically neutral: above its 50-day SMA, above its 200-day SMA, and its 50-day SMA has remained below its 200-day SMA every day since 8/18/11.

Agriculture, PowerShares DB Agriculture Fund ETF (DBA) whipsawed back down into a triangle consolidation pattern on 8/23/12 following a failed breakout on 8/21/12. DBA remains systematically bullish: above its 50-day SMA, above its 200-day SMA, and its 50-day SMA rose above its 200-day SMA on 8/13/12. High food prices could bring trouble for the general economy because more consumer spending for food means less consumer spending available for other goods and services.

Crude Oil, United States Oil ETF (USO) turned systematically neutral on 7/16/12, when price rose above its 50-day SMA. USO remains below its 200-day SMA, and its 50-day remains far below its 200-day SMA. Support 34.34, 32.45, 31.40, 29.02, 26.28, and 22.74. Resistance 36.97, 40.29, 41.38, 42.30, and 45.60.

Gold, SPDR Gold Shares ETF (GLD) rose above its 200-day SMA on 8/22/12 but remains systematically neutral. GLD remains above its 50-day SMA, but its 50-day SMA has stayed below its 200-day SMA every day since 4/17/12. Support: 154.83, 148.27, 147.19, 143.97, 143.42, and 142.55. Resistance: 163.20, 164.89, 166.57, 174.00, 175.46, 177.40, and 185.85.

Gold Mining Stocks ETF/Gold Shares ETF Relative Strength Ratio (GDX/GLD) rose above its 50-day SMA on 8/16/12, thereby turning systematically neutral again. GDX/GLD remains below its 200-day SMA, and its 50-day SMA has remained bearishly below its 200-day SMA every day since 2/22/11.

Silver, iShares Silver Trust ETF (SLV) price rose above its 50-day SMA on 8/3/12, thereby turning systematically neutral again for the short term. SLV remains below its 200-day SMA, and its 50-day SMA has remained below the 200-day SMA every day since 10/27/11. Support 26.87, 26.13, 25.34, 25.00, 24.44, 22.52, 20.73, and 19.44. Resistance: 30.52, 31.64, 32.34, 33.44, 36.44, 40.23, 41.49, 42.30, 42.78, 44.71, and 48.35.

Silver/Gold ETFs Ratio (SLV/GLD) turned systematically neutral when it rose above its 50-day SMA again on 8/17/12. SLV/GLD remains below its 200-day SMA, and the 50-day SMA has remained below the 200-day SMA every day since 8/30/11.

Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) price whipsawed back above its 50-day SMA on 8/21/12, thereby turning systematically neutral again for the short term. Longer term, JJC fell to its lowest level in 8 months on 8/2/12, thereby confirming its major bearish trend. JJC price remains below its 200-day SMA, and its 50-day SMA has remained below its 200-day SMA every day since 5/31/12. In addition, JJC remains far below its 2011 high at 61.69 and has underperformed the stock market since 12/31/10. Given that “Dr. Copper” is one of the better indicators of investor confidence (or lack thereof) in the global industrial economy, this relative weakness may be suggesting rising doubts about prospects going forward.
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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 later revealed to be deal stocks 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
5.07% , SNPS , Synopsys Inc
4.32% , FII , FED INVESTORS STK B
2.35% , SLV , Silver Trust iS, SLV
1.43% , ESRX , EXPRESS SCRIPTS
1.07% , BMY , BRISTOL MYERS
1.47% , DISH , EchoStar Communications
1.64% , BBY , BEST BUY
0.87% , IAU , Gold COMEX iS, IAU
0.42% , AM , AMER GREETINGS STK A
0.81% , PSQ , Short 100% QQQ, PSQ
0.67% , SIL , Silver Miners Global X, SIL
0.62% , ADSK , AUTODESK
0.63% , ROK , ROCKWELL AUTOMAT
0.15% , GVI , Bond Interm U.S. Gov, GVI
0.84% , GLD , Gold Shares S.T., GLD
0.47% , TIP , Bond, TIPS, TIP
0.51% , HOLX , Hologic, Inc., HOLX
0.59% , PBI , PITNEY BOWES
0.39% , CTL , CENTURYTEL
0.25% , CTSH , Cognizant Technology Solutions
0.41% , JCP , JC PENNEY
0.37% , PAYX , PAYCHEX
0.36% , LVLT.K , LEVEL 3 COMMUNICATIONS
0.32% , EFX , EQUIFAX
0.17% , EPU , Peru MSCI iS, EPU
0.29% , SNI , Scripps Networks Interactive
0.18% , K , KELLOGG
0.29% , MCK , MCKESSON CORP
0.38% , HBAN , HUNTINGTON
0.16% , PWER , POWER ONE
0.14% , HMA , HEALTH MGMT STK A
0.14% , CPB , CAMPBELL SOUP
0.10% , MUB , Bond Muni ATM-Free S&P iS, MUB

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-20.80% , BIG , BIG LOTS
-4.90% , PDCO , Patterson Dental Company
-0.93% , ACWX , Global ex US ACWI iS, ACWX
-0.42% , JKK , Growth SmallCap iS M, JKK
-6.28% , BIDU , Baidu, Inc., BIDU
-8.15% , HPQ , HEWLETT PACKARD
-4.51% , CROX , CROCS Inc., CROX
-1.17% , JKL , Value SmallCap iS M, JKL
-0.87% , IGM , Technology GS, IGM
-4.13% , SWY , SAFEWAY
-1.00% , VPU , Utilities VIPERs, VPU
-6.94% , X , US STEEL CORP
-0.94% , PXE , Energy Exploration & Prod, PXE
-3.35% , BA , BOEING
-0.41% , ADRU , Europe 100 BLDRS, ADRU
-2.65% , DRI , DARDEN REST
-0.38% , IGN , Networking, IGN
-5.59% , STLD , Steel Dynamics, STLD
-1.88% , XEL , XCEL ENERGY
-2.30% , BBT , BB&T
-2.34% , SIRI , Sirius Satellite
-2.09% , GRMN , GARMIN LTD
-0.53% , PWO , OTC Dynamic PS, PWO
-0.47% , TMW , Wilshire 5000 ST TM, TMW
-3.26% , ZEUS , Olympic Steel, ZEUS
-0.82% , IJS , Value SmallCap S&P 600 B, IJS
-2.40% , PM , Philip Morris, PM
-5.05% , CLF , CLIFFS NATURAL RESOURCES, CLF
-1.46% , DPS , Dr Pepper Snapple Group
-2.06% , NFLX , Netflix, NFLX
-1.68% , HSIC , Henry Schein Inc
-0.71% , JKG , MidCap Blend Core iS M, JKG
-0.83% , FMCN , Focus Media, FMCN
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
2.35% Silver Trust iS, SLV
0.84% Gold Shares S.T., GLD
0.79% Bear, Short S&P 500, SH
0.47% Bond, TIPS U.S. Treasury iS, TIP
0.42% Bond, 20+ Years Treasury, TLT
0.27% Bond Ex-US Treas, BWX
0.24% Bond, Emerg Mkt JPM iS, EMB
0.18% Bond, 10 Year Treasury, IEF
0.10% Bond, Muni S&P ATM-Free iS, MUB
0.08% Financial Preferred, PGF
0.08% Bond, Long-Term Corp iBoxx iS, LQD
0.07% Bond, Intermediate US Aggregate iS, AGG
0.03% Preferred Stock iS, PFF
0.02% Bond Treasury Short-Term iS, SHV
0.01% Bond, 1-3 Year Treasury, SHY
0.00% Japan Index, EWJ
-0.02% Bond, High Yield Corp iBoxx iS, HYG
-0.10% Bond, High-Yield Junk, JNK
-0.12% Hong Kong Index, EWH
-0.12% Switzerland Index, EWL
-0.13% Health Care SPDR, XLV
-0.15% Chile MSCI iS, ECH
-0.16% Realty Cohen & Steers, ICF
-0.19% Biotech SPDR, XBI
-0.21% Frontier Markets Guggenheim , FRN
-0.23% WilderHill Clean Energy PS, PBW
-0.23% China 25 iS, FXI
-0.26% Real Estate US DJ iS, IYR
-0.27% Malaysia Index, EWM
-0.30% REIT VIPERs, VNQ
-0.30% SmallCap Growth S&P 600 iS, IJT
-0.31% REIT Wilshire, RWR
-0.38% Networking, IGN
-0.39% Pacific VIPERs, VPL
-0.39% Thailand MSCI iS, THD
-0.41% United Kingdom Index, EWU
-0.43% SmallCap Growth Russell 2000 iS, IWO
-0.47% Homebuilders SPDR, XHB
-0.48% Dividend International, PID
-0.48% Growth EAFE MSCI, EFG
-0.49% Commodity Tracking, DBC
-0.50% MidCap Growth S&P 400 iS, IJK
-0.51% Growth SmallCap VIPERs, VBK
-0.53% SmallCap Blend EAFE MSCI iS, SCZ
-0.56% Growth MidCap Russell, IWP
-0.57% Semiconductor iS IGW, SOXX
-0.57% Foreign LargeCap EAFE MSCI iS, EFA
-0.59% Europe 350 S&P Index, IEV
-0.60% SmallCap Blend S&P 600 iS, IJR
-0.60% China LargeCap Growth G D H USX PS, PGJ
-0.61% Singapore Index, EWS
-0.62% Microcap Russell, IWC
-0.63% Dividend Appreciation Vipers, VIG
-0.66% MidCap S&P 400 SPDRs, MDY
-0.67% Telecom DJ US, IYZ
-0.67% Mexico Index, EWW
-0.68% MidCap Blend S&P 400 iS, IJH
-0.68% MidCap Russell, IWR
-0.68% Small Cap VIPERs, VB
-0.68% Dividend U.S. DJ iS, DVY
-0.68% Consumer Discretionary SPDR, XLY
-0.69% LargeCap Growth S&P 500 iS, IVW
-0.70% Value SmallCap VIPERS, VBR
-0.70% Global 100, IOO
-0.70% SmallCap Blend Russell 2000 iS, IWM
-0.71% LargeCap Value Russell 1000 iS, IWD
-0.71% South Korea Index, EWY
-0.73% LargeCap VIPERs, VV
-0.73% LargeCap Blend Russell 3000 iS, IWV
-0.73% Dividend SPDR, SDY
-0.73% Agriculture DB PS, DBA
-0.74% Growth VIPERs, VUG
-0.75% Blend Total Market VIPERs, VTI
-0.75% Value LargeCap Dynamic PS, PWV
-0.77% Indonesia MV, IDX
-0.77% LargeCap Blend Russell 1000 iS, IWB
-0.77% European VIPERs, VGK
-0.77% LargeCap Growth Russell 1000 iS, IWF
-0.78% Value EAFE MSCI, EFV
-0.78% Global LargeCap Blend MSCI iS, ACWI
-0.78% Taiwan Index, EWT
-0.79% Consumer Staples SPDR, XLP
-0.79% Sweden Index, EWD
-0.80% Value VIPERs, VTV
-0.80% LargeCap Blend S&P 500 iS, IVV
-0.81% LargeCap Blend S&P 100, OEF
-0.81% Industrial SPDR, XLI
-0.81% S&P 500 SPDRs LargeCap Blend, SPY
-0.82% Technology SPDR, XLK
-0.82% QQQ Nasdaq 100 Trust, QQQ
-0.82% SmallCap Value S&P 600 iS, IJS
-0.82% Netherlands Index, EWN
-0.83% Financial DJ US, IYF
-0.83% DIAMONDS (DJIA), DIA
-0.84% LargeCap Value S&P 500 iS, IVE
-0.84% Dividend High Yield Equity PS, PEY
-0.85% MidCap Value S&P 400 iS, IJJ
-0.85% Value MidCap Russell, IWS
-0.86% Semiconductor SPDR, XSD
-0.87% Canada Index, EWC
-0.87% Financials VIPERs, VFH
-0.87% SmallCap Value Russell 2000 iS, IWN
-0.87% Info Tech VIPERs, VGT
-0.88% Austria Index, EWO
-0.88% Emerging VIPERs, VWO
-0.89% Water Resources, PHO
-0.89% India Earnings WTree, EPI
-0.90% Emerging 50 BLDRS, ADRE
-0.91% Pacific ex-Japan, EPP
-0.91% LargeCap Blend S&P=Weight R, RSP
-0.92% Emerging Markets MSCI iS, EEM
-0.92% India PS, PIN
-0.92% Capital Markets KWB ST, KCE
-0.93% Global ex U.S. LargeCap Blend, ACWX
-0.94% Dividend ex-U.S. DJ iS, IDV
-0.97% Technology DJ US, IYW
-0.98% Latin Am 40, ILF
-0.99% Financial SPDR, XLF
-1.00% Utilities VIPERs, VPU
-1.03% Utilities SPDR, XLU
-1.04% Energy DJ, IYE
-1.06% Oil Fund PowerShares, DBO
-1.06% Energy & Nat Res iS GS, IGE
-1.07% Germany Index, EWG
-1.10% Transportation Av DJ, IYT
-1.11% Energy SPDR, XLE
-1.14% Financial Services DJ, IYG
-1.14% Turkey MSCI iS, TUR
-1.14% France Index, EWQ
-1.15% Energy VIPERs, VDE
-1.15% Energy Global, IXC
-1.17% Belgium Index, EWK
-1.23% EMU Europe Index, EZU
-1.25% Australia Index, EWA
-1.27% Oil, Crude, U.S. Oil Fund, USO
-1.27% South Africa Index, EZA
-1.51% Spain Index, EWP
-1.60% Russia MV, RSX
-1.60% Basic Materials DJ US, IYM
-1.60% Brazil Index, EWZ
-1.67% Materials SPDR, XLB