Stocks May Be Vulnerable to a Downside Shakeout

The S&P 500 Composite (SPX: 1,289.09) fell 0.49% on Friday. SPX broke down from a Bearish Rising Wedge chart pattern formed over the most recent 18 trading days. Volume on the NYSE rose 9% to confirm the bearish chart signal.

Up 13 of the past 18 trading days, SPX was overbought and due for a correction. SPX had relatively low upside momentum going into Friday’s breakdown–despite the previous persistent advance. With the majority of investors already bullish, and therefore already invested in the market, stocks may be vulnerable to a downside shakeout.

Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) price rose above its 50-day SMA and above the highs of the previous 8 trading days on 1/13/12, indicating renewed upside momentum for the short term. TLT remains above its 50-day and 200-day SMAs, and the 50-day SMA has remained bullishly above the 200-day SMA every day since 6/24/11, suggesting a persistently bullish major trend for the longer term.

U.S. dollar ETF (UUP) rose above the high of the previous 12 months on 1/13/12, thereby reconfirming its bullish major trend.

Agriculture, PowerShares DB Agriculture Fund ETF (DBA) whipsawed back below its 50-day SMA on 1/12/12, resuming its bearish major trend.
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Equity Mutual Funds lost 6% in 2011, according to Lipper Research Services.
Hedge funds lost 5%, according to COO Connect.
Hedge funds suffered their second-worst year on record in 2011, according to an index maintained by Eurekahedge, an independent research firm that specializes in hedge fund data. Some of the world’s largest and best-known hedge funds suffered huge losses, down 20% to 50%.

But not all money managers were down in 2011; see:
Robert W. Colby Asset Management, Inc. (click here).
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Defensive sectors, which are relatively insensitive to economic and stock market cycles, suffered moderate setbacks in 2012, as the market mood appeared to shift toward greater optimism over the past 2 weeks. Price dips in the Defensives appear to be minor short-term corrections within larger uptrends. Defensive sectors have been strong in my long-term relative strength rankings for many months, while cyclicals have been weak. That major trend probably will resume soon.

VIX Fear Index broke down below the lows of the previous 5-months on 1/10/12, hitting 20.05 intraday. That is down from recent peaks of 30.91 on 12/8/11, 37.83 on 11/1/11, 46.88 on 10/4/11, and 48.00 on 8/8/11. This drop indicates a shift away from fear and toward confidence, which, according to Humphrey Bancroft Neill’s Art of Contrary Thinking, may be bearish. 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
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
1307.28, Fibonacci 78.6% of 2011 range
1296.82, high of 1/12/2012

The S&P 500 Composite Potential Support
1277.58, low of 11/3/2012
1265.26, low of 1/5/2012
1262.30, low of 12/27/2011
1257.89, 200-day SMA
1257.46, low of 12/30/11
1257.58, Fibonacci 61.8% of 2011 range
1255.22, high of 12/22/2011
1248.64, low of 12/29/2011
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 11/3/11
1231.04, high of 12/16/11
1226.64, low of 11/9/2011
1222.68, Fibonacci 50% of 2011 range
1224.57, high of 12/19/11
1215.20, low of 12/16/11
1209.47, low of 12/14/2011
1209.43, low of 11/17/2011
1204.49, Fibonacci 23.6% of 2009-11 range
1202.37, low of 12/19/11
1187.77, Fibonacci 38.2% of 2011 range
1158.66, low of 11/25/2011
1144.38, Fibonacci 23.6% of 2011 range
1101.73, Fibonacci 38.2% of 2009-11 range
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
1018.69, Fibonacci 50% of 2009-11 range
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
935.64, Fibonacci 61.8% of 2009-11 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
817.40, Fibonacci 78.6% of 2009-11 range
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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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
3.14% , HOG , HARLEY DAVIDSON
1.11% , MWV , MEADWESTVACO
2.65% , STJ , ST JUDE MEDICAL
0.41% , ITF , Japan LargeCap Blend TOPIX 150, ITF
2.18% , BC , BRUNSWICK
0.28% , DBO , Oil Fund PowerShares, DBO
2.13% , KMX , CarMax
1.72% , EQR , EQUITY RESIDENT BEN INT
2.42% , NFLX , Netflix, NFLX
0.99% , MZZ , Short 200% MidCap 400 PS, MZZ
1.01% , USB , US BANCORP
1.45% , FITB , FIFTH THIRD BANC
1.85% , SWY , SAFEWAY
1.29% , OMC , OMNICOM
2.80% , NI , NISOURCE
0.34% , DOG , Short 100% Dow 30, DOG
0.68% , DXD , Short 200% Dow 30 PS, DXD
0.67% , BBT , BB&T
2.34% , NE , NOBLE
0.42% , SLE , SARA LEE
2.45% , WFM.O , Whole Foods Market Inc
2.67% , KBH , KB HOME
0.99% , TLT , Bond, 20+ Years Treasury, TLT
0.46% , LPX , LOUISIANA PAC
0.51% , CI , CIGNA
1.09% , MTB , M&T BANK
0.63% , KR , KROGER
0.36% , LQD , Bond, Corp, LQD
1.21% , KSS , KOHLS
1.42% , SIRI , Sirius Satellite
0.89% , MSFT , MICROSOFT
0.83% , SDS , Short 200% S&P 500 PS, SDS
0.53% , CECO , CAREER EDUCATION CORP

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-1.19% , RPV , Value S&P 500, RPV
-1.00% , JKL , Value SmallCap iS M, JKL
-2.03% , SOXX , Semiconductor iS IGW, SOXX
-0.31% , FPX , IPOs, First Tr IPOX-100, FPX
-2.73% , CHKP , Check Point Software Technologies Ltd
-0.74% , KCE , Capital Markets KWB ST, KCE
-2.12% , EZA , South Africa Index, EZA
-2.42% , SNI , Scripps Networks Interactive
-2.69% , LLTC , LINEAR TECH
-2.68% , ABC , AMERISOURCEBERGN
-0.61% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
-3.89% , NIHD , NII Holdings, Inc.
-2.97% , TE , TECO ENERGY
-1.98% , VGK , European VIPERs, VGK
-1.27% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-0.56% , PZI , Micro Cap Zachs, PZI
-2.49% , SCHW.K , CHARLES SCHWAB, SCHW.O
-3.69% , SVU , SUPERVALU
-2.40% , XSD , Semiconductor SPDR, XSD
-0.52% , CAG , CONAGRA FOODS
-0.44% , XLG , LargeCap Rydex Rus Top 50, XLG
-1.23% , EWT , Taiwan Index, EWT
-2.52% , JPM , J P MORGAN CHASE
-3.13% , CSX , CSX
-1.16% , MCK , MCKESSON CORP
-0.70% , IXC , Energy Global, IXC
-3.04% , EBAY , EBAY
-0.45% , IXN , Technology Global, IXN
-2.45% , EWW , Mexico Index, EWW
-2.22% , NSC , NORFOLK SOUTHERN
-2.95% , MRVL , MARVELL TECHNOLOGY
-1.22% , K , KELLOGG
-2.49% , PMCS , PMC SIERRA
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
0.99% Bond, 20+ Years Treasury, TLT
0.79% Singapore Index, EWS
0.45% Real Estate US DJ, IYR
0.45% Bond, 10 Year Treasury, IEF
0.44% Realty Cohen & Steers, ICF
0.38% Bear, Short S&P 500, SH
0.36% Bond, Corp, LQD
0.29% REIT Wilshire, RWR
0.28% Bond, TIPS, TIP
0.28% Oil Fund PowerShares, DBO
0.26% Oil, Crude, U.S. Oil Fund, USO
0.25% Bond Muni ATM-Free S&P iS, MUB
0.23% Bond, Aggregate, AGG
0.22% REIT VIPERs, VNQ
0.19% South Korea Index, EWY
0.16% Japan Index, EWJ
0.02% Bond, 1-3 Year Treasury, SHY
0.01% Biotech SPDR, XBI
0.01% Bond Treasury Short-Term iS, SHV
0.00% Bond, High-Yield Junk, JNK
-0.04% Bond EmrgMkt JPM iS, EMB
-0.06% Utilities SPDR, XLU
-0.06% India Earnings WTree, EPI
-0.09% Consumer Staples SPDR, XLP
-0.11% Bond, High-Yield Corporate, HYG
-0.12% Consumer Discretionary SPDR, XLY
-0.17% India PS, PIN
-0.19% Utilities VIPERs, VPU
-0.22% Commodity Tracking, DBC
-0.26% Dividend DJ Select, DVY
-0.27% China 25 iS, FXI
-0.29% Growth S&P 500/BARRA, IVW
-0.29% Preferred Stock iS, PFF
-0.30% DIAMONDS (DJIA), DIA
-0.33% Pacific VIPERs, VPL
-0.33% Dividend SPDR, SDY
-0.34% Bond Ex-US Treas, BWX
-0.36% QQQ Nasdaq 100 Trust, QQQ
-0.37% Frontier Markets Guggenheim , FRN
-0.37% Growth 1000 Russell, IWF
-0.37% Energy DJ, IYE
-0.38% Dividend Appreciation Vipers, VIG
-0.38% Value MidCap Russell, IWS
-0.38% S&P 500 iS LargeCap Blend, IVV
-0.39% LargeCap Blend S&P 100, OEF
-0.41% Growth VIPERs, VUG
-0.43% Growth MidCap 400 B, IJK
-0.44% LargeCap VIPERs, VV
-0.45% Small Cap EAFE MSCI iS, SCZ
-0.45% Health Care SPDR, XLV
-0.46% LargeCap 1000 R, IWB
-0.46% MidCap S&P 400 SPDRs, MDY
-0.47% Blend Total Market VIPERs, VTI
-0.48% China LargeCap Growth G D H USX PS, PGJ
-0.48% LargeCap Blend Russell 3000, IWV
-0.48% MidCap S&P 400 iS, IJH
-0.50% Value VIPERs, VTV
-0.50% Russia MV, RSX
-0.50% Energy SPDR, XLE
-0.51% Value LargeCap Dynamic PS, PWV
-0.52% S&P 500 SPDRs LargeCap Blend, SPY
-0.52% MidCap Russell, IWR
-0.53% Value 1000 Russell, IWD
-0.53% SmallCap Russell 2000, IWM
-0.54% Dividend High Yield Equity PS, PEY
-0.56% Telecom DJ US, IYZ
-0.57% Technology SPDR, XLK
-0.60% LargeCap Blend S&P=Weight R, RSP
-0.61% Value S&P 500 B, IVE
-0.61% Financials VIPERs, VFH
-0.62% Financial DJ US, IYF
-0.63% Value SmallCap Russell 2000, IWN
-0.65% Indonesia MV, IDX
-0.66% Growth SmallCap VIPERs, VBK
-0.66% Agriculture DB PS, DBA
-0.66% Materials SPDR, XLB
-0.66% SmallCap S&P 600, IJR
-0.66% Energy VIPERs, VDE
-0.69% Small Cap VIPERs, VB
-0.69% Growth BARRA Small Cap 600, IJT
-0.70% Growth MidCap Russell, IWP
-0.70% Gold Shares S.T., GLD
-0.70% Energy Global, IXC
-0.71% Technology DJ US, IYW
-0.71% Transportation Av DJ, IYT
-0.72% Growth SmallCap R 2000, IWO
-0.73% Microcap Russell, IWC
-0.73% Networking, IGN
-0.74% Capital Markets KWB ST, KCE
-0.75% Financial SPDR, XLF
-0.76% Hong Kong Index, EWH
-0.76% Value MidCap S&P 400 B, IJJ
-0.76% Pacific ex-Japan, EPP
-0.77% Emerging 50 BLDRS, ADRE
-0.77% Canada Index, EWC
-0.77% Industrial SPDR, XLI
-0.77% Info Tech VIPERs, VGT
-0.78% Value SmallCap VIPERS, VBR
-0.80% Australia Index, EWA
-0.80% Malaysia Index, EWM
-0.82% Financial Preferred, PGF
-0.84% Water Resources, PHO
-0.85% Emerging VIPERs, VWO
-0.91% Emerging Markets, EEM
-0.92% Energy & Nat Res iS GS, IGE
-0.95% Global 100, IOO
-0.96% Financial Services DJ, IYG
-0.97% Value SmallCap S&P 600 B, IJS
-0.99% Chile MSCI iS, ECH
-1.02% Dividend International, PID
-1.04% Growth EAFE MSCI, EFG
-1.08% EAFE Index, EFA
-1.10% Basic Materials DJ US, IYM
-1.12% Global ex US ACWI iS, ACWX
-1.14% Switzerland Index, EWL
-1.18% Homebuilders SPDR, XHB
-1.21% Value EAFE MSCI, EFV
-1.23% Taiwan Index, EWT
-1.23% United Kingdom Index, EWU
-1.26% Brazil Index, EWZ
-1.45% Spain Index, EWP
-1.50% Latin Am 40, ILF
-1.61% Thailand MSCI iS, THD
-1.62% Austria Index, EWO
-1.67% Silver Trust iS, SLV
-1.84% Europe 350 S&P Index, IEV
-1.86% Turkey MSCI iS, TUR
-1.98% European VIPERs, VGK
-2.02% France Index, EWQ
-2.03% Semiconductor iS IGW, SOXX
-2.11% Netherlands Index, EWN
-2.12% EMU Europe Index, EZU
-2.12% Sweden Index, EWD
-2.12% South Africa Index, EZA
-2.15% Belgium Index, EWK
-2.35% Italy Index, EWI
-2.40% Semiconductor SPDR, XSD
-2.44% Germany Index, EWG
-2.45% Mexico Index, EWW
-2.70% Metals & Mining SPDR, XME
-3.08% WilderHill Clean Energy PS, PBW