thereby denying confirmation of Wednesday’s bounce.
The S&P 500 Composite (SPX: 1,237.90) rose 19.62 points or 1.61% on Wednesday, November 2, 2011.
SPX recovered a normal fraction of its losses on the previous 2 trading days on light volume, suggesting a minor counter trend reaction.
Short-term Price Momentum Oscillators, designed to gauge the Daily Fluctuations, remain bearish after collapsing down to their most negative levels in 4 weeks on Tuesday.
The stock price recovery from 10/4/11 to 10/27/11 was larger than previous rallies–but it appears to have been a counter-trend correction rather than a change in the major trend.
Just as the spike down to new lows on 10/4/11 proved to be a false breakdown, also known as a “bear trap”, so the brief price run-up last week above the 200-day SMA appears to be a false breakout. This week, the steep downside reversal back into the recent 12-week trading range and below the 200-day SMA suggests a high probability that last week’s upsurge was a “bull trap”.
Note that very high price volatility is typical of bear markets, while bull markets are much less volatile. Markets seem likely to remain volatile, with a continuing heightened sensitivity to news.
Longer-term indicators still are far from confirming any change in the major Primary Tide trend. For example, 50-day SMAs are well below 200-day SMAs for most stocks and indexes.
Ripples and Secondary Reactions opposite to the Dow Theory Primary Tide Trend lure short-term traders into trying to trade a bounce. Price corrections against the larger trends are normal and expected, of course, but playing 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.
The Dow Theory signaled a Primary Tide Bear Market on 8/2/11, when both Dow-Jones Averages, Industrial and Transportation, closed below their closing price lows of the previous 11 months. This Bear Market was confirmed on 10/3/11 by lower closing price lows for both Averages. Both Averages would have to close above their closing price highs for the year to indicate a “Turn in the Tide”.
A Dow Theory Primary Tide Bear Market is a powerful beast that must not be underestimated. The median Dow Theory Primary Tide Bear Market in history lasts 16 months and takes stock prices down 34%. In a Dow Theory Primary Tide Bear Market, the big surprises usually come to the downside. Typically, there is no safe place to hide in a Dow Theory Primary Tide Bear Market. Even those stocks that have held up relatively well through most of the Bear Market eventually succumb to the relentless tide of selling.
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Advisory Service Sentiment: There were 43.2% Bulls versus 36.8% Bears as of 11/2/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio rose to 1.17 , up from a 2-year low of 0.74 on 10/12/11. The Bull/Bear Ratio has been below its 20-year median of 1.56 and mean of 1.64 for 11 consecutive weeks, since 8/24/11.
The S&P 500 Composite (SPX: 1,237.90) 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
1292.66, high of 10/27/11
1274.05, 200-day SMA
1258.07, low of 6/16/11
1257.58, Fibonacci 61.8% of 2011 range
1256.55, high of 10/24/11
1249.05, low of 3/16/11
1246.73, high of 12/13/10
1242.48, high of 11/2/2011
1238.81, Fibonacci 78.6% of 1,576.09 high
S&P 500 Composite (SPX: 1,237.90) Potential Support
1222.68, Fibonacci 50% of 2011 range
1221.06, low of 10/26/2011
1215.42, low of 11/1/2011
1204.49, Fibonacci 23.6% of 2009-11 range
1190.58, low of 10/13/2011
1187.77, Fibonacci 38.2% of 2011 range
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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Fixed-Income Investments
Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) consolidated gains on 11/2/11. Price gapped higher on 11/1/11, opening above the highs of the past 3 weeks. The breakout above Resistance at 116.82 confirmed the bullish trend. The chart suggests a bullish Breakaway Gap, in my interpretation. Support 109.82, 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) consolidated gains on 11/2/11. Price gapped higher on 11/1/11, opening above the highs of the past 3 weeks. The chart suggests a bullish Breakaway Gap, in my interpretation. Longer term, IEF rose above all-time highs on 9/22/11, reconfirming a major uptrend. Support 101.36, 101.11, 99.79, and 97.66. Resistance 106.66.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) fell below 3-week lows and its 50-day SMA on 11/1/11, thereby turning bearish again. Longer term, JNK/LQD broke down below the lows of the previous 29-months on 10/3/11, which reconfirmed a bearish major trend.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF), since making a low on 9/30/11, recovered a normal fraction of previous large losses–but now appears to be losing upside momentum. Longer term, TIP/IEF broke down below the lows of the previous 13-months on 9/30/11, which reconfirmed a bearish major trend. In addition, the 50-day SMA is still far below the 200-day SMA.. This bearish long-term 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) consolidated gains on 11/2/11. Price gapped higher on 11/1/11, opening above the highs of the past 7 trading days. The chart shows a bullish Breakaway Gap. The rising 50-day SMA is bullishly above the 200-day SMA. Support 21.07, 20.84. Resistance 21.91 and 22.63.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) fell below the lows of the previous 14 trading days on 11/1/11, confirming a short-term downtrend. This after falling below the lows of the previous 10 months on 10/3/11, which reconfirmed a major long-term downtrend.
Crude Oil, United States Oil ETF (USO) fell below the lows of the previous 5 trading days on 11/1/11 after losing upside momentum for the short term. Longer term, USO broke down below 2-year lows on 10/4/11 to confirm a major bear market. Support 32.52, 29.10, 26.28, and 22.74. Resistance 36.49, 39.25, 40.74, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) whipsawed back above its 50-day SMA on 11/2/11, indicating a bullish trend again. Price remains above its 200-day SMA. Longer term, new highs on 9/6/11 confirmed a major bull market. Support: 163.61, 154.19, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: 170.32, 172.20, 177.40, and 185.85.
Gold Mining Stocks ETF/ Gold Shares ETF Relative Strength Ratio (GDX/GLD) remains below its 200-day SMA. 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 fell below the lows of the previous 4 trading days on 11/1/11. Longer term, SLV price broke down below the lows of the previous 7 months on 9/26/11, which confirmed a bearish major trend for the long term. SLV fell below its 50-day SMA on 9/19/11, fell below its 200-day SMA on 9/22/11, and remains bearishly below both SMAs. Support 27.41, 26.03, and 24.44. Resistance: 34.44, 34.51, 40.23, 41.49, 42.30, 42.78, 44.71 and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) remains in bearish position, below falling 50-day and 200-day SMAs. Longer term, the SLV/GLD Ratio broke down below the lows of the previous 11 months on 9/30/11, reconfirming a bearish major trend. 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) fell below its 50-day SMA again on 10/31/11, returning to its persistent bearish trend. JJC broke down below the lows of the previous 14 months on 10/5/11, confirming a bearish major trend. 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
2.68% , IIH , Internet Infrastructure H, IIH
2.82% , PZI , Micro Cap Zachs, PZI
11.83% , EOG , EOG RESOURCES
4.45% , GRMN , GARMIN LTD
2.34% , IGN , Networking, IGN
1.14% , PPA , Aerospace & Defense, PPA
2.20% , JKH , MidCap Growth iS M, JKH
9.03% , CVG , CONVERGYS
1.51% , PKB , Building & Construction, PKB
1.34% , PWO , OTC Dynamic PS, PWO
1.54% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
2.93% , IGE , Energy & Nat Res iS GS, IGE
1.30% , PWV , Value LargeCap Dynamic PS, PWV
9.24% , S , SPRINT NEXTEL
1.61% , VPU , Utilities VIPERs, VPU
1.74% , TEVA , Teva Pharmaceutical Industries Limited
3.70% , CHKP , Check Point Software Technologies Ltd
0.39% , IXJ , Healthcare Global, IXJ
4.89% , DVN , DEVON ENERGY
1.55% , IYZ , Telecom DJ US, IYZ
3.22% , ECL , ECOLAB
1.84% , PWB , Lg Cap Growth PSD, PWB
1.83% , VO , MidCap VIPERs, VO
4.12% , NFLX , Netflix, NFLX
0.21% , GVI , Bond Interm U.S. Gov, GVI
3.06% , WYNN , Wynn Resorts L
1.15% , XL , XL CAPITAL STK A
1.61% , PEJ , Leisure & Entertainment, PEJ
2.45% , BIG , BIG LOTS
1.83% , JKI , Value MidCap iS M, JKI
1.22% , RFV , Value MidCap S&P 400, RFV
1.56% , JKD , LargeCap Blend Core iS M, JKD
4.14% , DISCA , Discovery Communications
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-47.84% , CECO , CAREER EDUCATION CORP
-4.61% , BDX , BECTON DICKINSON
-3.32% , HGSI , Human Genome Sciences Inc
-3.60% , PBI , PITNEY BOWES
-3.30% , TAP , ADOLPH COORS STK B, TAP
-1.22% , APOL , APOLLO GROUP
-1.41% , CTSH , Cognizant Technology Solutions
-0.74% , CNP , CENTERPNT ENERGY
-0.61% , KBH , KB HOME
-3.24% , UNM , UNUMPROVIDENT
-1.42% , WPO , Washington Post
-2.02% , RIMM , RESEARCH IN MOTION LTD
-0.80% , TWX , TIME WARNER INC
-0.65% , FISV , FISERV
-1.83% , TXT , TEXTRON
-1.74% , NVDA , NVIDIA
-2.18% , XLNX , XILINX
-1.31% , CLX , CLOROX
-0.35% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-2.87% , ISIL , INTERSIL CORP
-0.45% , ROST , Ross Stores Inc
-1.03% , EXPD , Expeditors International WA
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
5.44% China 25 iS, FXI
4.08% China LargeCap Growth G D H USX PS, PGJ
3.63% Silver Miners Global X, SIL
3.29% Russia MV, RSX
3.24% Capital Markets KWB ST, KCE
3.23% Indonesia MV, IDX
3.19% Financial Services DJ, IYG
3.18% Austria Index, EWO
3.07% Thailand MSCI iS, THD
3.06% Emerging Markets, EEM
3.01% Energy SPDR, XLE
3.01% Energy VIPERs, VDE
2.95% Financial SPDR, XLF
2.93% Energy & Nat Res iS GS, IGE
2.92% Metals & Mining SPDR, XME
2.86% South Africa Index, EZA
2.86% Energy DJ, IYE
2.85% Silver Trust iS, SLV
2.81% Microcap Russell, IWC
2.71% Singapore Index, EWS
2.71% Emerging 50 BLDRS, ADRE
2.68% Emerging VIPERs, VWO
2.67% Financial DJ US, IYF
2.66% Financials VIPERs, VFH
2.63% Basic Materials DJ US, IYM
2.59% Value SmallCap Russell 2000, IWN
2.48% Materials SPDR, XLB
2.47% SmallCap Russell 2000, IWM
2.45% Hong Kong Index, EWH
2.44% Turkey MSCI iS, TUR
2.44% Growth SmallCap R 2000, IWO
2.41% Water Resources, PHO
2.40% Value SmallCap S&P 600 B, IJS
2.37% South Korea Index, EWY
2.36% Value MidCap S&P 400 B, IJJ
2.34% Networking, IGN
2.31% Realty Cohen & Steers, ICF
2.29% Germany Index, EWG
2.29% SmallCap S&P 600, IJR
2.29% Latin Am 40, ILF
2.27% India PS, PIN
2.26% Homebuilders SPDR, XHB
2.25% Value SmallCap VIPERS, VBR
2.23% REIT Wilshire, RWR
2.22% Small Cap VIPERs, VB
2.22% Growth BARRA Small Cap 600, IJT
2.17% Chile MSCI iS, ECH
2.10% MidCap S&P 400 iS, IJH
2.08% Energy Global, IXC
2.05% Value MidCap Russell, IWS
2.03% Brazil Index, EWZ
2.02% Real Estate US DJ, IYR
2.02% Mexico Index, EWW
2.02% Growth SmallCap VIPERs, VBK
1.99% MidCap S&P 400 SPDRs, MDY
1.97% Industrial SPDR, XLI
1.92% REIT VIPERs, VNQ
1.91% Italy Index, EWI
1.91% Growth MidCap 400 B, IJK
1.90% LargeCap Blend S&P=Weight R, RSP
1.89% MidCap Russell, IWR
1.89% Value S&P 500 B, IVE
1.86% Dividend Appreciation Vipers, VIG
1.83% Value 1000 Russell, IWD
1.77% Value VIPERs, VTV
1.76% LargeCap Blend Russell 3000, IWV
1.76% Utilities SPDR, XLU
1.71% Growth MidCap Russell, IWP
1.71% Taiwan Index, EWT
1.70% Global ex US ACWI iS, ACWX
1.69% India Earnings WTree, EPI
1.68% Pacific ex-Japan, EPP
1.67% European VIPERs, VGK
1.66% LargeCap 1000 R, IWB
1.65% Blend Total Market VIPERs, VTI
1.63% S&P 500 SPDRs LargeCap Blend, SPY
1.61% Dividend DJ Select, DVY
1.61% Utilities VIPERs, VPU
1.60% LargeCap VIPERs, VV
1.58% S&P 500 iS LargeCap Blend, IVV
1.57% Dividend SPDR, SDY
1.55% Telecom DJ US, IYZ
1.51% Growth VIPERs, VUG
1.51% Dividend High Yield Equity PS, PEY
1.50% DIAMONDS (DJIA), DIA
1.49% Growth 1000 Russell, IWF
1.43% Sweden Index, EWD
1.41% United Kingdom Index, EWU
1.41% EMU Europe Index, EZU
1.40% LargeCap Blend S&P 100, OEF
1.39% Global 100, IOO
1.35% Growth S&P 500/BARRA, IVW
1.34% Europe 350 S&P Index, IEV
1.34% Oil, Crude, U.S. Oil Fund, USO
1.33% France Index, EWQ
1.32% Canada Index, EWC
1.30% Value LargeCap Dynamic PS, PWV
1.29% Value EAFE MSCI, EFV
1.28% Dividend International, PID
1.24% Oil Fund PowerShares, DBO
1.23% Technology SPDR, XLK
1.22% Australia Index, EWA
1.21% WilderHill Clean Energy PS, PBW
1.18% Frontier Markets Guggenheim , FRN
1.15% Transportation Av DJ, IYT
1.14% Technology DJ US, IYW
1.13% Info Tech VIPERs, VGT
1.05% Small Cap EAFE MSCI iS, SCZ
1.02% Consumer Discretionary SPDR, XLY
1.00% Gold Shares S.T., GLD
1.00% Bond, High-Yield Junk, JNK
0.95% Bond, High-Yield Corporate, HYG
0.95% Consumer Staples SPDR, XLP
0.94% Netherlands Index, EWN
0.90% Growth EAFE MSCI, EFG
0.85% QQQ Nasdaq 100 Trust, QQQ
0.85% EAFE Index, EFA
0.79% Preferred Stock iS, PFF
0.75% Switzerland Index, EWL
0.74% Malaysia Index, EWM
0.69% Spain Index, EWP
0.67% Health Care SPDR, XLV
0.62% Commodity Tracking, DBC
0.58% Pacific VIPERs, VPL
0.54% Financial Preferred, PGF
0.53% Semiconductor SPDR, XSD
0.50% Biotech SPDR, XBI
0.37% Semiconductor iS IGW, SOXX
0.37% Bond, Corp, LQD
0.32% Japan Index, EWJ
0.31% Bond Ex-US Treas, BWX
0.18% Bond EmrgMkt JPM iS, EMB
0.09% Belgium Index, EWK
0.05% Bond Muni ATM-Free S&P iS, MUB
0.03% Bond, TIPS, TIP
0.02% Bond, 1-3 Year Treasury, SHY
0.00% Bond, Aggregate, AGG
0.00% Bond Treasury Short-Term iS, SHV
-0.24% Bond, 10 Year Treasury, IEF
-0.26% Agriculture DB PS, DBA
-1.25% Bond, 20+ Years Treasury, TLT
