Technical market conditions suggest that downside risk still may exceed upside potential for the stock market. Choosing safety over risk appears to be the most reasonable approach for conservative traders and investors.

The S&P 500 (SPX: 1,390.99) fell 4 consecutive days last week, Monday through Thursday, but made back all that loss and more on Friday. SPX rose slightly above its highs of the previous 12 weeks intraday on Friday but closed inside its June-July range. SPX gained only 0.36% for the week as a whole.

The Cumulative Daily NYSE Advance-Decline Line failed to rise above its July high. Subscribers, see the chart above.

Various short-term momentum oscillators, such as RSI and Stochastic, failed to rise above June-July highs to confirm the higher high for the S&P 500. Subscribers, see the chart on the first page.

NYSE trading volume fell 10% on Friday, calling into question the strength of demand behind the one-day price surge. On-Balance Volume for the SPX remains in a downtrend with bearish divergence. Cumulative Volume of Advancing Stocks minus Volume of Declining Stocks is weak relative to price. Volume is not confirming price. Subscribers, see the next 2 charts below.

Note also on the next chart below that the S&P 500 is near the top of the Moving Average Envelope Overbought Line, shown in red, suggesting that upside potential may be very limited from this point.

While the S&P 500 Composite Price Index has recovered nearly 80% of its April-June loss, both the percentage of these same 500 stocks that are above their 200-day SMAs and the percentage in bullish Point-and-Figure Chart uptrends have recovered less than half of their losses. They are failing to confirm the strength in the S&P 500. Subscribers, see the 2 charts below.

For extensive coverage of major global markets with illustrative charts, take a free trial for my weekly report —
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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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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 Averages gave an early warning by diverging after 2/3/12, as the Transports turned corrective and failed to confirm higher highs by the Industrials. Again on 5/1/12, the Industrials rose to a higher closing price high while the Transports failed to rise to a higher closing price high, thereby indicating a non-confirmation and bearish divergence. Currently, as of 8/3/12, the Industrials are above June-July highs but the Transports continue to lag well below June-July highs.

NASDAQ 100/S&P 500 Relative Strength Ratio (QQQ/SPY) whipsawed slightly below its 50-day SMA on 8/3/12, thereby turning systematically neutral again. QQQ/SPY remains above its 200-day SMA, and its 50-day SMA has been above its 200-day SMA since 8/5/11. The 50-200 spread has been narrowing since May, however.

iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF/SPY) fell below its lows of the previous 3 years on 7/23/12, reconfirming its bearish trend. Systematically, BKF/SPY remains bearish below its 50-day SMA, below its 200-day SMA, and with the 50-day SMA below the 200-day SMA every day since 1/13/11.

Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) fell below its lows of the previous 3 years on 7/23/12, reconfirming its bearish trend. EEM/SPY is now slightly above its 50-day SMA but remains far below its 200-day SMA. Longer term, the 50-day SMA has remained below the 200-day SMA every day since 2/3/11.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) reconfirmed a bearish major trend when it fell below its lows of the previous 9 years on 7/24/12. EFA/SPY is now slightly above its 50-day SMA but remains far below its 200-day SMA. Longer term, the 50-day SMA has remained below the 200-day SMA consistently every day since 1/14/11.

The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEF/SPY) rose above its highs of the previous 2 years on 7/31/12, reconfirming its preexisting major bullish trend. OEF/SPY remains systematically bullish above its 50-day SMA, above its 200-day SMA, and the 50-day SMA has been above the 200-day SMA consistently every day since 8/24/11. Large Caps tend to outperform in bearish general market trends as investors seek the perceived relative safety of large size. On the other side of the coin, Large Caps tend to underperform Mid Caps and Small Caps in bullish general market trends as investors prefer riskier and more volatile stocks.

The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) fell below its lows of the previous 10 months on 8/1/12, thereby confirming its major downtrend. Systematically, the IWM/SPY ratio remains bearish: below its 50-day SMA, below its 200-day SMA, and its 50-day SMA has remained below its 200-day SMA consistently every day since 4/20/12.

The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) fell below its lows of the previous 10 months on 8/1/12, thereby confirming its major downtrend. MDY/SPY remains systematically bearish: below its 50-day SMA, 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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Tangible Assets, Commodities

U.S. dollar ETF (UUP) fell below its 50-day SMA on 8/3/12, turning systematically neutral. UUP remains above its 200-day SMA, and its 50-day SMA has stayed above its 200-day SMA every day since 10/26/11. Support 22.38, 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, below 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) remains systematically neutral: above its 50-day SMA, above its 200-day SMA, but its 50-day SMA has remained below its 200-day SMA every day since 8/8/11. The 50-200 spread has been narrowing since late June but still may be weeks away from the 2 SMAs meeting. A trend of rising 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 far below its 200-day SMA, and its 50-day remains far below its 200-day SMA. Support 32.45, 31.40, 29.02, 26.28, and 22.74. Resistance 34.84, 35.19, 36.97, 40.29, 41.38, 42.30, and 45.60.

Gold, SPDR Gold Shares ETF (GLD) rose above its 50-day SMA on 8/3/12, thereby turning systematically neutral. GLD remains below its 200-day SMA, and its 50-day SMA has stayed below its 200-day SMA every day since 4/17/12. Support: 148.27, 147.19, 143.97, 143.42, and 142.55. Resistance: 159.20, 162.18, 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) fell below its 50-day SMA on 7/9/12, turning systematically bearish again. GDX/GLD remains below its 200-day SMA, and the 50-day SMA has remained bearishly below the 200-day SMA every day since 2/22/11.

Silver, iShares Silver Trust ETF (SLV) price whipsawed back above its 50-day SMA on 8/3/12, thereby turning systematically neutral again. 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 25.34, 25.00, 24.44, 22.52, 20.73, and 19.44. Resistance: 27.98, 28.26, 29.02, 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) fell below its lows of the previous 20 months on 6/28/12, reconfirming its major downtrend. SLV/GLD remains systematically bearish: below its 50-day SMA, 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 fell to its lowest level in 8 months on 8/2/12, thereby confirming its major bearish trend. JJC price fell below its 50-day SMA on 8/1/12, 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
13.33% , IPG , INTERPUBLIC GRP
4.20% , EWK , Belgium Index, EWK
11.50% , ITT , ITT INDS
1.90% , IYK , Consumer Non-Cyclical, IYK
2.00% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
11.06% , EOG , EOG RESOURCES
7.85% , PKI , PERKINELMER
5.61% , ZEUS , Olympic Steel, ZEUS
4.41% , IEV , Europe 350 S&P Index, IEV
2.39% , JKK , Growth SmallCap iS M, JKK
1.86% , JKF , Value LargeCap iS M, JKF
2.35% , FDV , Value 40 Large Low P/E FT DB, FDV
4.03% , DBO , Oil Fund PowerShares, DBO
7.11% , PBI , PITNEY BOWES
4.02% , WHR , WHIRLPOOL
1.95% , IVV , S&P 500 iS LargeCap Blend, IVV
3.93% , ADRU , Europe 100 BLDRS, ADRU
2.22% , PWO , OTC Dynamic PS, PWO
3.99% , WLP , WELLPOINT HEALTH
2.99% , VIAB.O , VIACOM STK B
4.05% , PLD , PROLOGIS TRUST
3.44% , MTB , M&T BANK
2.30% , JKG , MidCap Blend Core iS M, JKG
3.31% , RZV , Value SmallCap S&P 600, RZV
3.67% , ADRD , Developed 100 BLDRS, ADRD
6.11% , CBS , CBS CORP.
3.71% , BSX , BOSTON SCIENT
3.75% , LAMR , Lamar Advertising Company
4.97% , LPX , LOUISIANA PAC
3.83% , MVV , Ultra MidCap400 Double, MVV
3.71% , KSU , Kansas City Southern, KSU
1.84% , PEY , Dividend High Yield Equity PS, PEY
1.86% , IGN , Networking, IGN

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-1.57% , MSI , Motorola Solutions, MSI
-4.04% , CAH , CARDINAL HEALTH
-1.89% , PSQ , Short 100% QQQ, PSQ
-1.76% , KMB , KIMBERLY CLARK
-2.04% , MYY , Short 100% MidCap 400, MYY
-0.24% , AGG , Bond, Aggregate, AGG
-1.61% , TLT , Bond, 20+ Years Treasury, TLT
-0.64% , CLX , CLOROX
-0.10% , MKC , MCCORMICK
-0.24% , LQD , Bond, Corp, LQD
-0.52% , IEF , Bond, 10 Year Treasury, IEF
-0.36% , CVS , CVS
-0.29% , HUM , HUMANA
-3.89% , SDS , Short 200% S&P 500 PS, SDS
-0.04% , SHY , Bond, 1-3 Year Treasury, SHY
-0.61% , CHD , Church & Dwight
-0.18% , TIP , Bond, TIPS, TIP
-0.14% , WPO , Washington Post
-3.94% , MZZ , Short 200% MidCap 400 PS, MZZ
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
7.94% Italy Index, EWI
7.41% Spain Index, EWP
5.89% France Index, EWQ
5.89% EMU Europe Index, EZU
5.72% Germany Index, EWG
5.26% Austria Index, EWO
4.55% Turkey MSCI iS, TUR
4.51% Oil, Crude, U.S. Oil Fund, USO
4.50% European VIPERs, VGK
4.41% Europe 350 S&P Index, IEV
4.40% Netherlands Index, EWN
4.37% South Africa Index, EZA
4.20% Belgium Index, EWK
4.03% Oil Fund PowerShares, DBO
3.95% Russia MV, RSX
3.64% Sweden Index, EWD
3.56% Capital Markets KWB ST, KCE
3.54% Value EAFE MSCI, EFV
3.41% EAFE Index, EFA
3.24% India PS, PIN
3.10% Emerging Markets, EEM
3.06% United Kingdom Index, EWU
3.05% Global ex US ACWI iS, ACWX
2.98% Emerging VIPERs, VWO
2.95% Water Resources, PHO
2.94% Energy Global, IXC
2.89% Brazil Index, EWZ
2.86% Financial Services DJ, IYG
2.84% Growth EAFE MSCI, EFG
2.77% Global 100, IOO
2.77% Value SmallCap S&P 600 B, IJS
2.73% Switzerland Index, EWL
2.67% India Earnings WTree, EPI
2.57% Metals & Mining SPDR, XME
2.54% Microcap Russell, IWC
2.53% Value SmallCap Russell 2000, IWN
2.47% China 25 iS, FXI
2.47% Taiwan Index, EWT
2.47% Chile MSCI iS, ECH
2.47% Silver Trust iS, SLV
2.45% Energy & Nat Res iS GS, IGE
2.43% Energy DJ, IYE
2.41% SmallCap S&P 600, IJR
2.40% Energy VIPERs, VDE
2.38% SmallCap Russell 2000, IWM
2.37% Singapore Index, EWS
2.36% Indonesia MV, IDX
2.35% Energy SPDR, XLE
2.35% Growth SmallCap R 2000, IWO
2.35% Financial SPDR, XLF
2.34% South Korea Index, EWY
2.34% Latin Am 40, ILF
2.26% Small Cap VIPERs, VB
2.26% Pacific ex-Japan, EPP
2.25% Growth SmallCap VIPERs, VBK
2.24% Homebuilders SPDR, XHB
2.24% Semiconductor iS IGW, SOXX
2.21% Financials VIPERs, VFH
2.21% Dividend International, PID
2.21% Transportation Av DJ, IYT
2.18% Industrial SPDR, XLI
2.16% Growth MidCap Russell, IWP
2.13% Value SmallCap VIPERS, VBR
2.10% Financial DJ US, IYF
2.10% LargeCap Blend S&P=Weight R, RSP
2.09% Growth BARRA Small Cap 600, IJT
2.09% Value S&P 500 B, IVE
2.09% Info Tech VIPERs, VGT
2.09% Small Cap EAFE MSCI iS, SCZ
2.09% Technology DJ US, IYW
2.08% Basic Materials DJ US, IYM
2.08% Emerging 50 BLDRS, ADRE
2.07% LargeCap Blend Russell 3000, IWV
2.04% MidCap Russell, IWR
2.03% Blend Total Market VIPERs, VTI
1.98% S&P 500 SPDRs LargeCap Blend, SPY
1.98% Value MidCap Russell, IWS
1.98% Consumer Discretionary SPDR, XLY
1.98% Value MidCap S&P 400 B, IJJ
1.97% Materials SPDR, XLB
1.97% Technology SPDR, XLK
1.97% Value 1000 Russell, IWD
1.97% MidCap S&P 400 iS, IJH
1.95% Value VIPERs, VTV
1.95% Australia Index, EWA
1.95% Growth VIPERs, VUG
1.95% S&P 500 iS LargeCap Blend, IVV
1.93% MidCap S&P 400 SPDRs, MDY
1.93% Growth MidCap 400 B, IJK
1.93% Canada Index, EWC
1.90% Mexico Index, EWW
1.90% QQQ Nasdaq 100 Trust, QQQ
1.88% Malaysia Index, EWM
1.87% Thailand MSCI iS, THD
1.86% LargeCap VIPERs, VV
1.86% Growth S&P 500/BARRA, IVW
1.86% Networking, IGN
1.84% Dividend High Yield Equity PS, PEY
1.83% Growth 1000 Russell, IWF
1.82% LargeCap Blend S&P 100, OEF
1.81% LargeCap 1000 R, IWB
1.80% Hong Kong Index, EWH
1.75% Dividend Appreciation Vipers, VIG
1.70% DIAMONDS (DJIA), DIA
1.70% Commodity Tracking, DBC
1.68% Semiconductor SPDR, XSD
1.68% Consumer Staples SPDR, XLP
1.64% Value LargeCap Dynamic PS, PWV
1.51% Dividend SPDR, SDY
1.46% Pacific VIPERs, VPL
1.41% Dividend DJ Select, DVY
1.27% Utilities VIPERs, VPU
1.19% China LargeCap Growth G D H USX PS, PGJ
1.18% Health Care SPDR, XLV
1.18% Utilities SPDR, XLU
1.12% Japan Index, EWJ
1.06% Frontier Markets Guggenheim , FRN
1.04% Bond Ex-US Treas, BWX
0.92% Gold Shares S.T., GLD
0.87% Realty Cohen & Steers, ICF
0.81% REIT Wilshire, RWR
0.78% REIT VIPERs, VNQ
0.76% WilderHill Clean Energy PS, PBW
0.74% Real Estate US DJ, IYR
0.67% Biotech SPDR, XBI
0.57% Agriculture DB PS, DBA
0.50% Bond, High-Yield Junk, JNK
0.42% Bond, High-Yield Corporate, HYG
0.31% Preferred Stock iS, PFF
0.29% Bond EmrgMkt JPM iS, EMB
0.17% Telecom DJ US, IYZ
0.16% Financial Preferred, PGF
0.00% Bond Treasury Short-Term iS, SHV
-0.04% Bond, 1-3 Year Treasury, SHY
-0.06% Bond Muni ATM-Free S&P iS, MUB
-0.18% Bond, TIPS, TIP
-0.24% Bond, Corp, LQD
-0.24% Bond, Aggregate, AGG
-0.52% Bond, 10 Year Treasury, IEF
-1.61% Bond, 20+ Years Treasury, TLT
-1.85% Bear, Short S&P 500, SH