Last year, following Fed Chairman Bernanke’s QE2 speech at Jackson Hole, stock prices rose substantially for 5 months. New QE3 might be bullish, while no QE3 might be bearish for stock prices.
The overall technical condition of the stock market remains bearish.
Small and Mid Caps underperformed large caps again, in keeping with their recent trends.
Emerging Markets and Foreign Stocks Relative Strength Ratios broke down, confirming preexisting bearish trends.
“Buffett Moves to Shore Up a Wobbly Bank of America”, said the top story on nytimes.com. Berkshire Hathaway, run by Warren Buffett, will invest $5 billion. Berkshire Hathaway (BRKA: 103,491) fell 2.69% following the news on Thursday and is down 31.76% from its peak of 151,650 on 12/11/07. Financial stocks remain at the bottom of my sector rankings.
The S&P 500 Composite (SPX, 1,159.27) fell 18.33 points or 1.56% on Thursday, August 25, 2011, thereby surrendering more than it gained on Wednesday. Near the open, at 9:33 a.m. ET, SPX rose above the highs of the previous 5 trading days. SPX quickly reversed, and by 3:45 p.m. had fallen below the low of the previous trading day, for an Outside Day Reversal.
NYSE volume rose 9% to confirm the price downturn.
Breadth turned bearish, with 711 advances and 2353 declines, compared with 2110 advances and 938 declines on Wednesday.
I don’t know whether there will be there be a third round of quantitative easing, but I do know that the dominant technical trend has been persistently bearish, and that is the bias. In a bear market, surprises come to the downside. And so, playing minor counter trend bounces is risky.
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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Includes Top Ten ETFs and Major Trend Relative Strength Rankings.
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Stock Market Indicators
NASDAQ Composite/S&P 500 Relative Strength Ratio underperformed since peaking on 8/3/11. The Ratio remains below 20-, 50-, and 200-day SMAs. Absolute price broke down below 10-month closing price lows on 8/19/11 and remains bearish.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) remains bearish. The EEM/SPY Ratio has been in a downtrend since peaking on 10/14/10. EEM/SPY broke down below 6-month lows on 8/25/11, remains below its 50- and 200-day SMAs, and the 50-day SMA remains below the 200-day SMA. Absolute price has been weak since 5/2/11 and broke down below 13-month lows on 8/8/11.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) remains bearish. The EFA/SPY Ratio has been in a major long-term downtrend since peaking on 11/27/07. EFA/SPY broke down below 15-month lows on 8/25/11, remains below its 50- and 200-day SMAs, and the 50-day SMA remains below the 200-day SMA. Absolute price has been weak since 5/2/11 and broke down below 11-month lows on 8/8/11.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) has lost upside momentum since peaking on 8/8/11. Longer term, OEX/SPX fell below 28-year lows on 5/26/11, confirming a bearish major trend. Absolute price of OEX fell below the lows of the previous 11 months on 8/9/11 and remains bearish.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) remains bearish. IWM/SPY fell below 11-month lows on 8/22/11.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) remains bearish. MDY/SPY fell below 11-month lows on 8/8/11, confirming a bearish major trend.
Advisory Service Sentiment: There were 40.9% Bulls versus 33.3% Bears as of 8/24/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio was 1.23, down from 1.95 the previous week. The 20-year median is 1.56 and the mean is 1.64.
VIX Fear Index rose to 48.00 on 8/8/11, its highest level in 14 months, since 5/21/10. VIX is in an uptrend, and it is possible for VIX to rise much higher: VIX was 89.53 on 10/24/08 during the financial crisis. Options players tend to grow more fearful as stock prices decline, and the trend of stock prices is down. 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 Dow Theory signaled a Primary Tide Bear Market on 8/2/11, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their closing price lows of June, 2011.
The S&P 500 Composite (SPX, 1,159.27) fell 18.33 points or 1.56% on Thursday, August 25, 2011.
S&P 500 Cash Index 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
1258.07, low of 6/16/11
1249.05, low of 3/16/11
1246.73, high of 12/13/10
1238.81, Fibonacci 78.6% of 1,576.09 high
1235.05, high of 12/7/10
1234.56, low of 8/3/11
1232.85, low of 12/16/10
1228.74, Fibonacci 61.8% of 2007-2009 range
1227.08, high of 11/5/10
1208.47, high of 8/17/2010
S&P 500 Cash Index Potential Support
1101.54, low of 8/9/2010
1091.15, low of 9/7/2010
1039.70, low of 8/27/10
1039.31, Fibonacci 23.6% of June-Aug. 2010 range
1010.91, low of 7/1/2010
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
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
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) fell below the lows of the previous 4 trading days on 8/24/11, suggesting a minor shakeout. Last year, following Fed Chairman Bernanke’s QE2 speech at Jackson Hole, TLT fell substantially for 5 months. TLT rose above the highs of the previous 2 years on 8/18/11, confirming a major uptrend. Although minor price consolidations and corrections are to be expected in bullish price trends, the dominant trend remains bullish. Support 108.10, 103.20, 102.27, 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance 116.92, and 123.15.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) fell below 2-year lows and fell further below its 20-, 50-, and 200-day simple moving averages on 8/10/11, confirming a major bearish trend.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) fell below 10-month lows on 8/24/11. TIP/IEF has been weak since peaking on 4/8/11 and remains below 3 key SMAs, of 20, 50, and 200 days. This means fixed-income investors have been choosing the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) over the inflation-protected TIPs. Fixed-income investors are not worried about inflation.
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) rose above the highs of the previous 3 trading days on 8/25/11–possibly suggesting skepticism about further quantitative easing. Last year, following Fed Chairman Bernanke’s QE2 speech at Jackson Hole, UUP fell substantially for 2 months. Of course, other things may not be equal, then compared to now. Just 6 trading days ago, on 8/17/11, UUP fell below 3-month lows, suggesting a medium-term downtrend consistent with expectations for QE3. The sideways Continuation Pattern (which suggests that the previous major long-term downtrend may resume) since the low of 20.84 on 5/4/11 recently appeared to be “rolling over”, that is, showing a bearish bias. Support 20.84. Resistance 21.41, 21.74, 21.86, and 22.21.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price fell below the lows of the previous 3 trading days on 8/25/11 before reversing to close 5 pennies higher. Last year, following Fed Chairman Bernanke’s QE2 speech at Jackson Hole, DBA rose substantially for 5 months. DBA rose above the highs of the previous 3 months intraday on 8/23/11, confirming a short-term uptrend–but that might have been a failed breakout. Keep in mind that on 8/9/11, DBA traded below 8-month lows, confirming a medium-term downtrend. Too many whipsaw reversals make this a difficult market to trade.
Crude Oil, United States Oil ETF (USO) showed a Bearish Engulfing Line Candlestick on 8/25/11, giving another bearish warning. Oil rose above the highs of the previous 4 trading days intraday on 8/24/11 but reversed to close down on the day. Oil fell below the lows of the previous 2 years on 8/9/11, confirming a major downtrend. Support 31.45, 30.31, 26.28, 22.74. Resistance 34.63, 35.14, 39.25, 40.74, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) fell below the lows of the previous 12 trading days on 8/25/11, before reversing to close higher. Gold rose above all-time highs on 8/22/11, confirming its major long-term uptrend. Although minor price consolidations and corrections are to be expected in any trend, the dominant trend remains persistently bullish. In a world of too much debt, weak currencies, and self-serving politicians running amok, investors around the globe seek the safety of gold as the only forever-true money. Support: 165.88. 159.68, 156.11, 154.10, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: 184.82.
Gold Mining Stocks ETF/ Gold Shares ETF Relative Strength Ratio (GDX/GLD) fell below 29-month lows on 8/8/11, again confirming a bearish major trend for the long term.
Silver, iShares Silver Trust ETF (SLV) fell below the lows of the previous 7 trading days on 8/24/11, confirming a minor shakeout. Silver rose above 3-month highs on 8/22/11, confirming a medium-term price uptrend. Support 36.04, 35.29, 34.02, and 31.97. Resistance: 44.71 and 48.35.
Silver/Gold ETFs Ratio (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-Idx ETN (JJC ) rose above the highs of the previous 10 days on 8/25/11, possibly suggesting a minor recovery attempt. Last year, following Fed Chairman Bernanke’s QE2 speech at Jackson Hole, JJC rose substantially for 5 months. But JJC fell below the lows of the previous 8 months on 8/10/11, again confirming a significant downtrend. Weakness in Copper suggests doubts about the economic outlook, while strength in Copper suggests confidence. Support 50.59 and 49.00. Resistance: 53.56, 54.29, 56.64, 57.48, 59.06, 60.04, and 61.69.
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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
9.30% , LIZ , LIZ CLAIRBORNE
12.77% , PHM , PULTE HOMES
9.44% , BAC , BANK OF AMERICA
4.85% , C , CITIGROUP
7.51% , MTG , MGIC INVESTMENT
2.37% , MBI , MBIA
0.97% , NE , NOBLE
0.68% , TLH , Bond 10-20 Year US Treas, TLH
2.22% , MYY , Short 100% MidCap 400, MYY
2.69% , MS , MORGAN STANLEY
1.98% , LEN , Lennar Corp. (LEN)
1.35% , WFC , WELLS FARGO
0.27% , IYG , Financial Services DJ, IYG
3.05% , SDS , Short 200% S&P 500 PS, SDS
2.97% , DXD , Short 200% Dow 30 PS, DXD
0.47% , AMD , ADV MICRO DEV
0.49% , USB , US BANCORP
0.30% , ERTS , ELECTRONIC ARTS
0.30% , MUB , Bond Muni ATM-Free S&P iS, MUB
1.50% , DOG , Short 100% Dow 30, DOG
1.52% , SH , Short 100% S&P 500, SH
0.62% , IEF , Bond, 10 Year Treasury, IEF
3.15% , QID , Short 200% QQQ PS, QID
1.12% , PFF , Preferred Stock iS, PFF
0.18% , RKH , Bank Regional H, RKH
0.47% , BSX , BOSTON SCIENT
0.06% , SHY , Bond, 1-3 Year Treasury, SHY
0.45% , DBC , Commodity Tracking, DBC
0.22% , XHB , Homebuilders SPDR, XHB
1.69% , DHI , D.R. HORTON, DHI
0.02% , AXP , AMERICAN EXPRESS
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-2.24% , JKH , MidCap Growth iS M, JKH
-3.12% , PXJ , Oil & Gas, PXJ
-10.16% , PDCO , Patterson Dental Company
-2.60% , EZU , EMU Europe Index, EZU
-5.32% , EIS , Israel MSCI iS, EIS
-1.50% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
-3.33% , EWG , Germany Index, EWG
-1.54% , ADRA , Asia 50 BLDRS, ADRA
-4.17% , IDX , Indonesia MV, IDX
-4.68% , THD , Thailand MSCI iS, THD
-1.43% , TTH , Telecom H, TTH
-2.19% , EWK , Belgium Index, EWK
-2.23% , VOX , Telecom Services VIPERs, VOX
-1.76% , PXE , Energy Exploration & Prod, PXE
-2.40% , PKB , Building & Construction, PKB
-2.41% , EWN , Netherlands Index, EWN
-4.42% , MVV , Ultra MidCap400 Double, MVV
-4.41% , SNV , SYNOVUS
-2.77% , FLEX , Flextronics International Ltd
-4.03% , AES , AES
-2.11% , IXC , Energy Global, IXC
-2.61% , PEJ , Leisure & Entertainment, PEJ
-3.66% , SEE , SEALED AIR
-1.71% , IYH , Healthcare DJ, IYH
-0.55% , BDH , Broadband H, BDH
-2.72% , EWP , Spain Index, EWP
-0.76% , IAH , Internet Architecture H, IAH
-3.03% , VGK , European VIPERs, VGK
-2.31% , VXF , Extended Mkt VIPERs, VXF
-2.86% , CB , CHUBB
-5.52% , CIEN.O , CIENA
-4.64% , DRI , DARDEN REST
-1.07% , PST , 200% Short Bond 7-10 Yr T, PST
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
3.01% Silver Trust iS, SLV
1.65% Financial Preferred, PGF
1.12% Preferred Stock iS, PFF
1.08% Bond, 20+ Years Treasury, TLT
0.89% Silver Miners Global X, SIL
0.78% Bond, TIPS, TIP
0.62% Bond, 10 Year Treasury, IEF
0.55% Bond, Corp, LQD
0.45% Commodity Tracking, DBC
0.42% Gold Shares S.T., GLD
0.30% Bond Muni ATM-Free S&P iS, MUB
0.27% Financial Services DJ, IYG
0.22% Homebuilders SPDR, XHB
0.20% Bond, Aggregate, AGG
0.19% Bond EmrgMkt JPM iS, EMB
0.15% Agriculture DB PS, DBA
0.06% Bond, 1-3 Year Treasury, SHY
0.00% Turkey MSCI iS, TUR
-0.02% Bond Treasury Short-Term iS, SHV
-0.31% China LargeCap Growth G D H USX PS, PGJ
-0.32% Financial SPDR, XLF
-0.33% Oil, Crude, U.S. Oil Fund, USO
-0.40% Bond Ex-US Treas, BWX
-0.47% Oil Fund PowerShares, DBO
-0.68% China 25 iS, FXI
-0.68% Frontier Markets Guggenheim , FRN
-0.78% Basic Materials DJ US, IYM
-0.81% Bond, High-Yield Corporate, HYG
-0.82% Financial DJ US, IYF
-0.83% Canada Index, EWC
-0.85% Financials VIPERs, VFH
-0.91% Bond, High-Yield Junk, JNK
-1.05% Chile MSCI iS, ECH
-1.10% Materials SPDR, XLB
-1.11% Hong Kong Index, EWH
-1.14% Brazil Index, EWZ
-1.20% Singapore Index, EWS
-1.27% Emerging 50 BLDRS, ADRE
-1.28% Latin Am 40, ILF
-1.31% LargeCap Blend S&P 100, OEF
-1.32% Metals & Mining SPDR, XME
-1.36% Value VIPERs, VTV
-1.37% Japan Index, EWJ
-1.40% Value S&P 500 B, IVE
-1.44% Technology SPDR, XLK
-1.46% Pacific VIPERs, VPL
-1.50% DIAMONDS (DJIA), DIA
-1.50% Value 1000 Russell, IWD
-1.51% Utilities VIPERs, VPU
-1.51% Info Tech VIPERs, VGT
-1.52% S&P 500 SPDRs LargeCap Blend, SPY
-1.53% LargeCap 1000 R, IWB
-1.53% Consumer Staples SPDR, XLP
-1.56% LargeCap VIPERs, VV
-1.56% S&P 500 iS LargeCap Blend, IVV
-1.57% Switzerland Index, EWL
-1.57% Dividend DJ Select, DVY
-1.58% LargeCap Blend Russell 3000, IWV
-1.58% Technology DJ US, IYW
-1.58% Growth S&P 500/BARRA, IVW
-1.58% Value LargeCap Dynamic PS, PWV
-1.59% Small Cap EAFE MSCI iS, SCZ
-1.61% Pacific ex-Japan, EPP
-1.61% Dividend Appreciation Vipers, VIG
-1.63% QQQ Nasdaq 100 Trust, QQQ
-1.63% Australia Index, EWA
-1.64% Utilities SPDR, XLU
-1.65% Dividend SPDR, SDY
-1.67% Dividend High Yield Equity PS, PEY
-1.67% Blend Total Market VIPERs, VTI
-1.67% South Africa Index, EZA
-1.68% Growth 1000 Russell, IWF
-1.70% Growth VIPERs, VUG
-1.70% Health Care SPDR, XLV
-1.74% Energy & Nat Res iS GS, IGE
-1.74% WilderHill Clean Energy PS, PBW
-1.83% MidCap Russell, IWR
-1.86% Global ex US ACWI iS, ACWX
-1.86% REIT VIPERs, VNQ
-1.87% Global 100, IOO
-1.88% Russia MV, RSX
-1.88% Industrial SPDR, XLI
-1.88% Transportation Av DJ, IYT
-1.90% LargeCap Blend S&P=Weight R, RSP
-1.91% Austria Index, EWO
-1.94% Emerging Markets, EEM
-1.96% Value MidCap Russell, IWS
-1.96% Emerging VIPERs, VWO
-1.97% Italy Index, EWI
-1.99% Consumer Discretionary SPDR, XLY
-2.01% Water Resources, PHO
-2.05% Value MidCap S&P 400 B, IJJ
-2.06% REIT Wilshire, RWR
-2.08% Growth MidCap Russell, IWP
-2.09% Realty Cohen & Steers, ICF
-2.09% MidCap S&P 400 SPDRs, MDY
-2.11% Real Estate US DJ, IYR
-2.11% Energy SPDR, XLE
-2.11% Energy Global, IXC
-2.13% Capital Markets KWB ST, KCE
-2.14% Dividend International, PID
-2.15% Semiconductor SPDR, XSD
-2.19% MidCap S&P 400 iS, IJH
-2.19% France Index, EWQ
-2.19% Belgium Index, EWK
-2.20% Telecom DJ US, IYZ
-2.29% Energy VIPERs, VDE
-2.30% Malaysia Index, EWM
-2.32% India PS, PIN
-2.32% Value SmallCap VIPERS, VBR
-2.33% Value SmallCap S&P 600 B, IJS
-2.34% Small Cap VIPERs, VB
-2.34% SmallCap S&P 600, IJR
-2.34% Growth SmallCap VIPERs, VBK
-2.35% Growth MidCap 400 B, IJK
-2.36% Energy DJ, IYE
-2.37% Networking, IGN
-2.39% Growth EAFE MSCI, EFG
-2.40% Value SmallCap Russell 2000, IWN
-2.41% Netherlands Index, EWN
-2.42% EAFE Index, EFA
-2.43% India Earnings WTree, EPI
-2.43% South Korea Index, EWY
-2.45% Value EAFE MSCI, EFV
-2.46% SmallCap Russell 2000, IWM
-2.47% Growth SmallCap R 2000, IWO
-2.49% Biotech SPDR, XBI
-2.53% Growth BARRA Small Cap 600, IJT
-2.60% EMU Europe Index, EZU
-2.61% Mexico Index, EWW
-2.62% Semiconductor iS IGW, SOXX
-2.68% Microcap Russell, IWC
-2.72% Spain Index, EWP
-2.77% Europe 350 S&P Index, IEV
-2.94% Sweden Index, EWD
-2.99% Taiwan Index, EWT
-3.03% European VIPERs, VGK
-3.23% United Kingdom Index, EWU
-3.33% Germany Index, EWG
-4.17% Indonesia MV, IDX
-4.68% Thailand MSCI iS, THD
