U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) turned systematically bullish again when it whipsawed back above its 50-day SMA.
U.S. dollar ETF (UUP) turned systematically bearish again when it fell below its 50-day SMA and a 6-months long downtrend line.
The S&P 500 (SPX: 1,461.89) fell 4.58 points or 0.31% on Monday in somewhat slower trading. The bullish majority is left to reflect on the meaning of indecisive Spinning Top Candlesticks and the disappointment of lack of upside follow through after Friday’s unconfirmed closing high for SPX.
The Art of Contrary Thinking calls for questioning popular optimism. Investor sentiment data indicated alarming degrees of optimism and bullish complacency in recent weeks, matching extremes in September, 2012, when many stock price indexes hit peaks and reversed to the downside. Elevated levels of optimism are bearish because when the majority is extremely 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 the market mood always reverts to the mean.
Our clients’ separately managed accounts made gains in 6 of the past 7 consecutive quarters; see:
Robert W. Colby Asset Management, Inc. (click here).
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Market Indicators
The Dow Theory signaled a Primary Tide Bear Market on 5/17/12 when both Industrials and Transports closed below their closing price lows of the previous 4 months, including the critical lows of March and April, 2012. The Dow-Jones Industrial Average rose above its closing price highs of the previous 4-years on 10/5/12, but the Dow-Jones Transportation Average failed to confirm, remaining substantially below its 2012 high, thereby demonstrating non confirmation and bearish divergence. Both Averages broke down below their closing price lows of the previous 4 months again on 11/15/12 and 11/16/12. On 1/4/13, the Dow-Jones Transportation Average rose above its 2012 highs, but the Dow-Jones Industrial Average remained below its 2012 highs, thereby demonstrating non confirmation and bearish divergence.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sentiment for Contrary Thinking
Investor sentiment data indicates alarming degrees of optimism and bullish complacency, matching extremes in September, 2012, when many stock price indexes hit a peak and reversed to the downside. Elevated levels of optimism are bearish because when the majority is extremely 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 the market mood always reverts to the mean.
The CFTC’s Commitments of Traders report for stock indexes showed smart professionals selling heavily to dumb speculators. Large commercial hedging firms enjoy an enormous inside informational advantage over speculators, who are usually wrong at major market turning points, according to Steve Briese, bullishreview.com. The current maximum bearish reading indicates that a major top is brewing and next move should be down big, possibly to SPX 1074.77, the low of 10/4/2011.
Large speculators held a record net-long position in futures and options contracts on the NASDAQ 100, according to the CFTC’s Commitment of Traders report. Large Speculators, which are mainly hedge funds, are trend-followers, and their aggregate position usually becomes extreme near market reversals.
SentimentTrader.com noted that 67% of the “dumb money” was bullish, compared to 29% of the “smart money”. At such readings in the past, the stock market suffered a 3% to 8% downside correction spread out over a few weeks.
Put/Call Ratios signal a bearish turning point. The CBOE Equity Put/Call Ratio (which includes only options traded on individual stocks, while excluding options on indexes) fell to 53 on 1/3/13. This matched the 53 reading at the S&P 500 peak on 9/14/12, which was immediately followed by a 9% downside shakeout.
Market Vane’s Bullish Consensus survey showed extreme optimism. The percentage of stock market bulls surged to 70% in September, the highest since June 2007.
AAII Sentiment showed that individual investors were extremely bullish in December. As of December 20, 2012, there were 46.40% bulls, 28.80% neutral, and 24.80% bears. This was the most extreme optimism in more than 10 months.
Investors Intelligence Sentiment confirms that stock market newsletter advisors are now extremely bullish. Advisors are as bullish as they were at the top in September, 2012, when there were only 24.5% Bears. That top was followed by a 9% downside correction into November.
Corporate insiders are extremely bearish. Insiders sold 6.67 shares for each share bought in December 2012–up from 1.54-to-1 in November 2012, and up from a 20-year average of 3.41-to-1. This data is compiled by Vickers Weekly Insider Report, published by Argus Research. Reporting for MarketWatch.com, Mark Hulbert wrote, “The picture the data paint is unmistakably bearish.”
NYSE Margin Debt rose to $318 billion, the highest level since March 2011, a few weeks before the highest price for the S&P 500 for the year 2011. Stocks may be vulnerable to forced selling if stock prices fall significantly.
VIX Fear Index collapsed to 13.64 on 1/4/13 from 23.23 on 12/28/12. This indicates a rapid shift to bullish complacency from worried concern. 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
1474.51, high of 9/14/2012
The S&P 500 Composite Potential Support
1464.02, high of 10/18/2012
1448.00, high of 12/19/2012
1440.24, high of 5/19/2008
1439.15, high of 9/12/2012
1438.59, high of 12/12/2012
1434.27, high of 11/2/2012
1432.82, low of 12/20/2012
1430.53, low of 9/26/2012
1426.76, low of 12/12/2012
1425.53, low of 10/12/2012
1425.48, Fibonacci 23.6% of June-Sept ’12 range
1424.41, Fibonacci 61.8% of Sept-Nov ’12 range
1423.73, high of 12/3/2012
1422.58, low of 12/21/2012
1422.38, high of 4/2/2012
1422.06, low of 10/22/2012
1421.12, high of 10/25/2012
1420.34, high of 12/7/2012
1419.70, high of 11/29/2012
1418.71, high of 8/17/2012
1415.32, high of 5/1/2012
1412.79, 50-day SMA
1409.16, high of 11/23/2012
1403.28, low of 10/26/12
1401.58, low of 12/28/12
1398.11, low of 12/31/2012
1397.68, low of 11/26/2012
1396.56, low of 9/4/2012
1395.14, Fibonacci 38.2% of June-Sept 2012 range
1391.52, 200-day SMA
1391.04, low of 8/6/2012
1388.71, low of 5/3/2012
1385.43, low of 11/28/2012
1381.50, Fibonacci 78.6% of 2007-2009 range
1380.39, high of 7/19/2012
1374.81, high of 7/3/2012
1370.62, Fibonacci 50.0% of June-Sept 2012 range
1370.58, high of 5/2/2011
1363.49, high of 6/19/2012
1357.38, low of 4/10/2012
1355.70, low of 7/2/2012
1346.11, Fibonacci 61.8% of June-Sept 2012 range
1343.35, low of 11/16/2012
1340.03, low of 3/6/2012
1335.52, high of 6/11/2012
1334.93, high of 5/31/2012
1329.24, low of 7/24/2012
1329.05, high of 6/7/2012
1328.49, high of 5/22/2012
1325.41, low of 7/12/2012
1311.20, Fibonacci 78.6% of June-Sept 2012 range
1306.62, low of 6/12/2012
1291.98, low of 5/18/2012
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
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
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
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
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible Assets, Commodities
U.S. dollar ETF (UUP) turned systematically bearish again on 1/7/13 when it fell below its 50-day SMA and a 6-months long downtrend line. UUP fell below its 200-day SMA on 8/31/12, and the 50-day SMA fell below the 200-day SMA on 10/2/12. Support 21.57, 21.07, and 20.84. Resistance 22.05, 22.30, 22.45, 23.14, 23.52, 25.84, 27.19, 28.97.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price fell below its lows of the previous 6 months on 1/4/13. DBA turned systematically neutral on 11/30/12 when price crossed back down below its 50-day SMA. The 50-day SMA remains above the 200-day SMA, although the 50-200 spread has been narrowing, and the two SMAs could cross in weeks ahead.
Crude Oil, United States Oil ETF (USO) price rose above its highs of the previous 2 months on 1/2/13. USO turned systematically neutral on 12/26/12, when price rose back above its 50-day SMA. USO price fell below its 200-day SMA on 9/17/12, and the 50-day SMA has remained below its 200-day SMA consistently every day since 6/7/12. Support 31.00, 29.02, 26.28, and 22.74. Resistance 34.70, 37.17, 38.31, 40.29, 41.38, 42.30, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) price fell below its lows of the previous 4 months on 12/20/12. GLD turned systematically neutral on 11/27/12, when price fell below its 50-day SMA. Support: 158.39, 157.40, 154.83, 148.27, 147.19, 143.97, 143.42, and 142.55. Resistance: 164.14, 166.94, 170.01, 174.07, 175.46, 177.40, and 185.85.
Gold Mining Stocks ETF/Gold Shares ETF Relative Strength Ratio (GDX/GLD) turned systematically bearish on 12/27/12 when the 50-day SMA crossed below the 200-day SMA.
Silver, iShares Silver Trust ETF (SLV) price fell below its lows of the previous 4 months on 1/4/13–intraday–before reversing to close above its December low and above the previous day’s close. Price probed new lows but the new levels were rejected by the market. This flush out and reversal price action may set up a short-term trade on the long side. SLV turned systematically neutral on 12/13/12 when it fell below its 50-day SMA. Support 28.61, 27.97, 26.87, 26.13, 25.34, 25.00, 24.44, 22.52, 20.73, and 19.44. Resistance: 30.04, 30.47, 32.72, 33.31, 34.08, 36.44, 40.23, 41.49, 42.30, 42.78, 44.71, and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) fell below its lows of the previous 4 months on 12/20/12. SLV/GLD turned systematically neutral on 12/14/12 when it fell below its 50-day SMA.
Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) turned systematically neutral on 12/26/12, when it rose above its 50-day SMA. Long term, JJC has been consolidating losses in Triangle chart pattern trading range between 38.99 and 51.41 for more than a year since October 2011. “Dr. Copper” is widely accepted as one of the better indicators of investor confidence (or lack thereof) in the global industrial economy.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
5.77% , MPEL , Melco Crown Entertainment, MPEL
3.59% , AMZN , Amazoncom Inc
3.36% , NFLX , Netflix, NFLX
2.96% , RYAAY , Ryanair Holdings plc
2.81% , HAR , Harman International
2.81% , STLD , Steel Dynamics, STLD
3.16% , MU.O , MICRON TECH
0.21% , IXP , Telecommunications Global, IXP
0.74% , ECH , Chile MSCI iS, ECH
2.42% , CTXS , CITRIX SYSTEMS
2.46% , LEN , Lennar Corp. (LEN)
1.49% , HES , AMERADA HESS
1.62% , TDC , Teradata Corporation, TDC
1.38% , EBAY , EBAY
1.48% , COF , CAPITAL ONE FNCL
1.17% , MDT , MEDTRONIC
2.29% , WAG , WALGREEN
0.59% , PJP , Pharmaceuticals, PJP
1.01% , BSX , BOSTON SCIENT
0.70% , HOG , HARLEY DAVIDSON
3.09% , AMD , ADV MICRO DEV
2.46% , PBI , PITNEY BOWES
0.67% , ERIC.O , LM Ericsson Telephone Company
1.34% , RL , Polo Ralph Lauren
0.50% , IYH , Healthcare DJ, IYH
0.53% , MSI , Motorola Solutions, MSI
0.91% , PNC , PNC FINL SVC
0.88% , VZ , VERIZON COMMS
0.82% , DELL , DELL
1.69% , XRX , XEROX
0.69% , DBA , Agriculture DB PS, DBA
0.19% , DBO , Oil Fund PowerShares, DBO
0.44% , NUE , NUCOR
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-0.42% , EZU , EMU Europe Index, EZU
-3.08% , WFM.O , Whole Foods Market Inc
-4.85% , TLAB , TELLABS
-0.44% , EPP , Pacific ex-Japan, EPP
-2.90% , UIS , UNISYS
-2.01% , BA , BOEING
-1.15% , VPU , Utilities VIPERs, VPU
-2.32% , YHOO , YAHOO
-2.88% , VFC , VF
-2.46% , NTAP , NETWK APPLIANCE
-3.43% , APA , APACHE
-4.14% , ADM , ARCHER DANIELS
-0.61% , IYK , Consumer Non-Cyclical, IYK
-2.21% , LEG , LEGGETT & PLATT
-2.66% , FII , FED INVESTORS STK B
-2.30% , LOW , LOWES
-2.20% , KMB , KIMBERLY CLARK
-2.70% , KSU , Kansas City Southern, KSU
-1.12% , RTN , RAYTHEON
-2.24% , RHI , ROBERT HALF
-1.19% , AMAT , APPLIED MATERIAL
-0.20% , VAW , Materials VIPERs, VAW
-0.45% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
-1.74% , SO , SOUTHERN
-0.41% , EFG , Growth EAFE MSCI, EFG
-1.82% , NWL , NEWELL RUBBER
-0.47% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-1.85% , TAP , ADOLPH COORS STK B, TAP
-1.06% , XEL , XCEL ENERGY
-1.51% , PXE , Energy Exploration & Prod, PXE
-0.50% , JKL , Value SmallCap iS M, JKL
-0.28% , PKB , Building & Construction, PKB
-0.64% , PH , PARKER HANNIFIN
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
0.97% Biotech SPDR, XBI
0.83% Turkey MSCI iS, TUR
0.74% Chile MSCI iS, ECH
0.69% Agriculture DB PS, DBA
0.42% Austria Index, EWO
0.34% Bond, TIPS U.S. Treasury iS, TIP
0.32% Health Care SPDR, XLV
0.30% Bear, Short S&P 500, SH
0.28% Bond Ex-US Treas, BWX
0.24% SmallCap Blend EAFE MSCI iS, SCZ
0.23% REIT VIPERs, VNQ
0.22% Bond, High-Yield Junk, JNK
0.22% REIT Wilshire, RWR
0.20% Hong Kong Index, EWH
0.19% Netherlands Index, EWN
0.19% Oil Fund PowerShares, DBO
0.18% Commodity Tracking, DBC
0.17% Metals & Mining SPDR, XME
0.17% Bond, Muni S&P ATM-Free iS, MUB
0.17% Bond, Long-Term Corp iBoxx iS, LQD
0.15% Real Estate US DJ iS, IYR
0.15% Capital Markets KWB ST, KCE
0.14% Realty Cohen & Steers, ICF
0.12% Oil, Crude, U.S. Oil Fund, USO
0.11% Financial Preferred, PGF
0.09% Bond, High Yield Corp iBoxx iS, HYG
0.08% Telecom DJ US, IYZ
0.07% Bond, 10 Year Treasury, IEF
0.06% Bond, Emerg Mkt JPM iS, EMB
0.04% Bond, 20+ Years Treasury, TLT
0.03% QQQ Nasdaq 100 Trust, QQQ
0.00% Switzerland Index, EWL
0.00% Malaysia Index, EWM
0.00% Bond, 1-3 Year Treasury, SHY
-0.01% Bond Treasury Short-Term iS, SHV
-0.05% Preferred Stock iS, PFF
-0.05% Bond, Intermediate US Aggregate iS, AGG
-0.06% Basic Materials DJ US, IYM
-0.08% Europe 350 S&P Index, IEV
-0.08% SmallCap Growth Russell 2000 iS, IWO
-0.10% Belgium Index, EWK
-0.12% LargeCap Growth Russell 1000 iS, IWF
-0.13% Technology SPDR, XLK
-0.14% Growth SmallCap VIPERs, VBK
-0.16% Info Tech VIPERs, VGT
-0.16% Spain Index, EWP
-0.18% Dividend ex-U.S. DJ iS, IDV
-0.18% Technology DJ US, IYW
-0.19% MidCap Growth S&P 400 iS, IJK
-0.19% Growth VIPERs, VUG
-0.19% Financial Services DJ, IYG
-0.20% Silver Trust iS, SLV
-0.21% LargeCap Growth S&P 500 iS, IVW
-0.21% Materials SPDR, XLB
-0.21% Mexico Index, EWW
-0.21% Canada Index, EWC
-0.21% LargeCap Blend S&P 100, OEF
-0.21% Value EAFE MSCI, EFV
-0.22% United Kingdom Index, EWU
-0.23% Financial SPDR, XLF
-0.24% Consumer Discretionary SPDR, XLY
-0.25% SmallCap Growth S&P 600 iS, IJT
-0.26% France Index, EWQ
-0.26% MidCap Blend S&P 400 iS, IJH
-0.27% Value LargeCap Dynamic PS, PWV
-0.27% S&P 500 SPDRs LargeCap Blend, SPY
-0.28% MidCap S&P 400 SPDRs, MDY
-0.28% Growth MidCap Russell, IWP
-0.28% Frontier Markets Guggenheim , FRN
-0.28% Financials VIPERs, VFH
-0.28% Germany Index, EWG
-0.29% Blend Total Market VIPERs, VTI
-0.30% Small Cap VIPERs, VB
-0.31% LargeCap Blend S&P 500 iS, IVV
-0.31% LargeCap VIPERs, VV
-0.31% Value VIPERs, VTV
-0.31% Australia Index, EWA
-0.32% Networking, IGN
-0.32% LargeCap Blend Russell 3000 iS, IWV
-0.33% Sweden Index, EWD
-0.33% LargeCap Blend Russell 1000 iS, IWB
-0.34% MidCap Value S&P 400 iS, IJJ
-0.35% Financial DJ US, IYF
-0.35% Global 100, IOO
-0.35% LargeCap Value S&P 500 iS, IVE
-0.35% South Africa Index, EZA
-0.35% China LargeCap Growth G D H USX PS, PGJ
-0.36% Transportation Av DJ, IYT
-0.36% Semiconductor iS IGW, SOXX
-0.36% MidCap Russell, IWR
-0.37% Dividend International, PID
-0.38% Dividend Appreciation Vipers, VIG
-0.38% SmallCap Blend Russell 2000 iS, IWM
-0.38% LargeCap Blend S&P=Weight R, RSP
-0.40% Value MidCap Russell, IWS
-0.41% European VIPERs, VGK
-0.41% Global LargeCap Blend MSCI iS, ACWI
-0.41% DIAMONDS (DJIA), DIA
-0.41% Growth EAFE MSCI, EFG
-0.42% EMU Europe Index, EZU
-0.43% Industrial SPDR, XLI
-0.43% Foreign LargeCap EAFE MSCI iS, EFA
-0.44% LargeCap Value Russell 1000 iS, IWD
-0.44% Pacific ex-Japan, EPP
-0.46% Value SmallCap VIPERS, VBR
-0.47% Semiconductor SPDR, XSD
-0.47% SmallCap Blend S&P 600 iS, IJR
-0.48% Dividend SPDR, SDY
-0.50% SmallCap Value Russell 2000 iS, IWN
-0.50% Thailand MSCI iS, THD
-0.54% Microcap Russell, IWC
-0.57% Brazil Index, EWZ
-0.57% Pacific VIPERs, VPL
-0.57% Latin Am 40, ILF
-0.59% SmallCap Value S&P 600 iS, IJS
-0.61% Water Resources, PHO
-0.63% Gold Shares S.T., GLD
-0.67% Consumer Staples SPDR, XLP
-0.68% Energy VIPERs, VDE
-0.68% Global ex U.S. LargeCap Blend, ACWX
-0.69% Homebuilders SPDR, XHB
-0.70% Dividend U.S. DJ iS, DVY
-0.71% Energy DJ, IYE
-0.71% Emerging 50 BLDRS, ADRE
-0.71% Energy & Nat Res iS GS, IGE
-0.76% Emerging Markets MSCI iS, EEM
-0.76% Energy Global, IXC
-0.77% Energy SPDR, XLE
-0.79% China 25 iS, FXI
-0.83% South Korea Index, EWY
-0.86% Emerging VIPERs, VWO
-0.88% Italy Index, EWI
-0.91% India Earnings WTree, EPI
-0.91% Japan Index, EWJ
-0.93% Indonesia MV, IDX
-0.94% Singapore Index, EWS
-0.98% Utilities SPDR, XLU
-1.02% Dividend High Yield Equity PS, PEY
-1.07% India PS, PIN
-1.11% Taiwan Index, EWT
-1.15% Utilities VIPERs, VPU
-1.41% Russia MV, RSX
-2.27% WilderHill Clean Energy PS, PBW
