Market Preview 19 September 2011

Forex Overnight: USD trading stronger
The USD is trading higher against most of the key currencies, amid a rise in risk aversion. An inconclusive meeting of European Union (EU) officials in Poland has led the EUR to trade weaker against the major currencies this morning. Additionally, the EUR is under pressure, ahead of the EU and the International Monetary Fund’s (IMF) assessment, later today, on the approval of the next tranche of aid for Greece. At 6 am, the EUR has weakened 1.0 percent against the USD to trade at $1.3665, and has declined 0.4 percent against the GBP to trade at £0.8706.
The JPY is trading 0.2 percent lower against the USD, following indications from the Japanese government that it might act to curb the appreciation in the Yen.
The AUD and CAD have lost 1.2 percent and 0.6 percent against the USD, respectively, amid rising concerns about global economic growth.

UK Stocks: Expected to open in negative territory
The FTSE 100 is likely to open 47 to 52 points in the red.
No economic release scheduled for today.

Highland Gold Mining , Petra Diamonds, Greenko Group and International Ferro Metals are scheduled to report their results later today.
Bob Dudley, the CEO of BP, has stated that the company remains committed to achieve its oil production targets at Iraq’s Rumaila field and is not renegotiating contract terms.
The South China Morning Post has reported that Standard Chartered has stated that it does not plan to lay off jobs in Hong Kong.
The Sunday Times has reported that Tesco is mulling to bid for all or part of The Garden Centre Group, in a £300.0 million sale managed by Lloyds Banking Group.
The Financial Times has reported that Tim Tookey, the Finance Director of Lloyds Banking Group, is set to resign from the bank to take over as the CFO of Friends Life.
According to the Sunday Telegraph, William Hill is in the initial discussion stage to acquire Probability Plc, the mobile-phone gaming company.

Asia: Trading lower
Persistent concerns about the sovereign debt crisis in Eurozone are weighing on the Asian markets this morning.
In Japan, markets are closed on account of a holiday for Respect for the Aged Day.
In Hong Kong, markets are trading lower, with financial sector stocks trading in negative territory. Bank of China Limited, Bank of Communications and Ping An Insurance Group have retreated, amid reports that Greece might not receive its next aid tranche without further austerity measures. Cnooc Limited and Jiangxi Copper Company have declined, on concerns about the demand outlook for commodities. In China, Poly Real Estate Group and Industrial & Commercial Bank of China have lost value, after data indicating a rise in new-home prices in all cities in August raised speculation of further monetary tightening. Sany Heavy Industry has eased, after it stated that it plans to raise up to $3.3 billion in a Hong Kong initial public offering. Despite South Korean markets trading weaker, Hyundai Engineering & Construction has advanced, after it stated that it has received a KRW 1.6 trillion order to construct a thermal power plant in Vietnam.

US Stocks: Futures trading weaker
At 6 am, S&P 500 Index Futures are trading 20.1 points lower.
NAHB Housing Market Index for September is scheduled for release today.
Lennar Corporation and Accuray are scheduled to announce their results today.
Goodrich Corporation continued its regular session gains in the extended trading session on Friday, soaring 9.8 percent, amid reports that United Technologies Corporation might make a takeover bid for the company. Wipro, Almaden Minerals and NeoProbe featured amongst other key gainers, rising 8.2 percent, 6.3 percent and 5.7 percent, respectively. Healthcare sector stocks, Complete Genomics, Isis Pharmaceuticals and Curis, the major laggards in the after hours session, tumbled 21.7 percent, 6.8 percent and 6.7 percent, respectively.
On Friday, the S&P 500 index added 0.6 percent in the regular trading session, amid optimism that European leaders would act jointly to tackle the Eurozone debt crisis. Aerospace and defence sector stocks, Rockwell Collins, Goodrich Corporation, Textron and Tyco International jumped 7.8 percent, 7.4 percent, 6.8 percent and 3.1 percent, respectively, following a report that United Technologies Corporation is seeking financing for a major acquisition in the U.S. Amazon.com and Procter & Gamble climbed 5.2 percent and 2.5 percent, respectively, after U.S. consumer sentiment index rose in August. eBay surged 5.2 percent, after a broker upgraded its recommendation on the stock to “Out-Perform” from “Neutral” and hiked its target price. General Electric added 1.6 percent, after it signed two new joint ventures in Russia. Netflix plummeted 8.3 percent, after it slashed its U.S. subscriber addition estimates for the third quarter.

European Stocks: Likely to open in the red
The DAX and CAC are expected to trade 53 to 60 points and 48 to 51 points lower, respectively, at open.
Eurozone’s Construction Output is scheduled for release today.
Tipiak SA, HF Company SA, Maximiles SA and Coheris SA are scheduled to report their results today.
Siemens AG has abandoned plans to make nuclear generating equipment with Russia’s Rosatom, following the German government’s decision to phase out nuclear power by 2022.
Markus Ozegovich, the head of Volkswagen AG in Russia, expects the Russian car market to become the  largest in Europe by 2013.
Il Sole 24 Ore has reported that Edison SpA’s Italian investors may give their stake to Electricite de France SA in exchange for a 50.0 percent of the former’s Edipower unit.
Les Echos has reported that BNP Paribas SA is planning to save €200.0 million a year in its Belgium operations.
Peabody Energy Corporation and ArcelorMittal SA have announced that they have extended their joint bid for coking coal miner, Macarthur Coal Ltd., by 17 days.
UBS AG has raised its estimate of losses from unauthorised speculative trades to $2.3 billion.

Macro Update
UK house prices rise
On a monthly basis, average house prices in the U.K. edged 0.7 percent higher in September, compared to a 2.1 percent decline posted in the previous month.
QE gave economy significant boost, indicates BoE
The Bank of England (BoE), in its quarterly bulletin, has indicated that the first round of asset purchases gave the economy a significant boost, but any future quantitative easing (QE) may not have the same impact.
Moody's says Italy's ratings under review
Moody's Investors Service has stated that it is continuing its review for possible downgrade of Italy's Aa2 local and foreign currency government bond ratings, and would try to conclude its review within the next month.
Chinese Premier pledges to step up inflation fight
Chinese Premier, Wen Jiabao, has indicated that the government will step up the fight to restrain inflation, which has been led by steep rises in the cost of food.

Economic Calendar

Country	BST	Economic Indicator	Relevance	Consensus/*Actual	Previous	Frequency
UK	0:01	Rightmove House Prices (MoM) (Sep)	PP	0.70%*	-2.10%	Monthly
UK	0:01	Rightmove House Prices (YoY) (Sep)	PP	1.50%*	-0.30%	Monthly
Eurozone	10:00	Construction Output s.a. (MoM) (Jul)	P	-	-1.80%	Monthly
Eurozone	10:00	Construction Output w.d.a. (YoY) (Jul)	P	-	-11.30%	Monthly
US	15:00	NAHB Housing Market Index (Sep)	P	15.00	15.00	Monthly
Japan	-	Respect-for-the-Aged Day Bank Holiday		-	-	-

Note: PPPHigh           PPMedium           PLow


Corporate Calendar

Country	Company Name	Index	Announcement
UK	Alliance Trust Plc	FTSE All Share	Interim
UK	Dairy Crest Group Plc	FTSE All Share	Trading
UK	French Connection Group Plc	FTSE All Share	Interim
UK	International Ferro Metals Limited	FTSE All Share	Prelim
UK	Ocado Group Plc	FTSE All Share	Trading
UK	PZ Cussons Plc	FTSE All Share	Trading
US	Lennar Corporation	S&P 500	Q3 Earnings Release

Daily Stock Theme: Will Greece, the IMF and the ECB figure things out in time?

Although the Greek, Irish and many of the Portuguese and Italian banks are trading around 0.2-0.3 Price-to-book, i.e. investors’ reckon that 70-80% of the shareholders’ equity will be lost, there is more bad news ahead for the PIIGs based banking sector. Of these banks Banco Popolare, UBI Banca, Piraeus Bank and Dexia are currently those with the lowest valuations and the highest risk of default (see chart for their earnings revisions and share price performance).

In the last two weeks things have gone from bad to worse for these PIIGs banks and an outright takeover by their respective states may not be far off. In a previous theme Which European banks will get hurt this time? we also highlight the non-PIIGs European banks’ vulnerability to a Greek collapse, with even a “voluntary” restructuring of sovereign debt expected to significantly hurt some of these too.

Is Greece bankrupt?
It’s necessary to take a step back to understand the overall picture. Creditors should be able to throw more money at Greece if the conditions for repayment are acceptable. So, if the International Monetary Fund fails to come to the party, is that due to the fact that it believes that Greece is insolvent?

The current plan to save Greece, or at least handle its Euro 60-70bn refinancing until the end of 2013, is now a mix of Greek privatisation efforts, incentives for private investors to extend the maturity of outstanding bonds, additional European Central Bank credits and European Union involvement in the tax collection process. The last measure is pretty extreme as it means international creditors are actually looking to directly manage Greek cash flow. In other words, disbelief in Greece’s own ability to solve its problems is at an all-time low.

Privatisation is highly unpopular in Greece and likewise increased credit is equally unpopular among taxpayers in the creditor nations. The question is whether this is not the least unattractive solution to “protect” German and other EMU taxpayers’ money? If Greece defaults on its debt, the European Central Bank with its Euro 45bn exposure will have to engage the central banks of the European Monetary Union to pay up, i.e. the taxpayers will have to foot the bill.

Lehman déjà vu?
The destabilising effects of a failed rescue operation in Greece will no doubt have consequences as severe, if not worse, than the Lehman crash in September 2008, according to Lorenzo Bini Smaghi, executive board member of the European Central Bank (ECB). Mr. Smaghi is not alone with this view of the situation in Greece. Even more concerning is the IMF’s reluctance to participate with additional funding, as Greece appears unable to finance itself from March 2012, which was the plan in the Euro 110bn rescue package launched earlier this year. All in all there’s no doubt the situation is getting worse as this Greek economic crisis turns into a political high-stake game.

Given the eventuation of a fully-fledged crisis - in line with what Mr. Smaghi of the ECB fears - resulting from a Greek default, there will be nowhere for European banks to hide. In this phase of the sovereign debt crisis perhaps Greece, Ireland and Portugal have to be treated as one. But until the European Union Finance Ministers’ meeting on 20 June, it is all about the PIGs!

Stocks in the week ahead: Riding the wave

With the European debt crisis somewhat taking the backstage over the past week, the most important event in our view was the agreement reached by the Obama administration and the Republicans over the extension of the George W. Bush tax breaks.

At a cost of USD 700 billion (to be added to the national debt, of course!), the agreement cleared a major hurdle for the stock rally to find renewed impetus. Another market that took notice of the political deal was the bond market, with the yield on 10-year treasuries rising sharply above the 3% key level on the news:

 

We have no doubt that the recent increase in long yields will soon be used by the perma-bears as a major justification to their on-going argument that stock markets are about to collapse.

Call us naive, but we believe that the rise in yields may well be a sign that the tide is turning against deflation. Hence we see this development as part of the process of recovery and potentially very positive for 2011.

Obama tax breaks, Christmas rally, Central Banks Puts… whatever the reason behind it, the S&P500 is still in rally mode and our long advertised 5-wave cycle is still playing out nicely. As we suspected, we are now in the fifth-wave of a 5-wave move and the question now is (as always ), where are we headed?

Following the logic of the cycle and knowing how 50s and 100s attract trading activity on the S&P500 and its components, we expect the index to close in on 1250 by next week and hover around the level for a bit.

We also note how 1220 provided good support after the dynamic break of the previous week, despite the printing of a very bearish shooting star mid-week:

Ultimately, a wave of equal length to the “July 2010” move would bring the S&P500 towards 1291. We therefore look for the 1300 round number to be reached in the coming few weeks.

A level of 1300 points would mean that the S&P500 trades at a 15.2 forward Price Earnings ratio (2011) versus the current level of 14.4, nothing too taxing. From the 1300 level, we would then prepare for some kind of correction.

In Europe, we warned traders last week not to try and fight the ECB by shorting stock indices . Instead, we were preparing for the Euro Stoxx 50, the European benchmark for large caps, to recover towards the middle of its recent uptrend:

 Euro Stoxx 50 cash index (Daily chart), source Bloomberg

Europe was therefore a strong relative performer versus the US.

Looking forward to next week, we expect the Christmas rally to continue and the index to settle closer towards the 2900 level, with 2800 the obvious support zone of this V-shaped index recovery.

Have a safe trading week!

Various stock price indexes tested year-to-date extreme intraday lows

Summary: Various stock price indexes tested year-to-date extreme intraday lows and held them.
Utilities Stock Sector Relative Strength Ratio (XLU/SPY) moved above 4-month highs on 6/7/10 and remains neutral.

Health Care Stock Sector Relative Strength Ratio (XLV/SPY) moved above 2-month highs on 6/7/10 and is neutral.

Growth Stock/Value Stock Relative Strength Ratio (IWF/IWD) rose above 3-month highs on 6/7/10.

Materials Stock Sector Relative Strength Ratio (XLB/SPY) fell below 14-month lows on 6/7/10 and remains bearish. Absolute price of XLB fell below 9-month lows on 6/7/10 and remains neutral.

Industrial Stock Sector absolute price fell below its May low on 6/7/10 and remains neutral.

The following Relative Strength Ratios fell below 50-day SMAs on 6/7/10 and so turned neutral: S&P 500 Equally Weighted ETF (RSP/SPY), Small Cap Russell 2000 Index/Large Cap (IWM/SPY), and S&P MidCap 400/Large Cap (MDY/SPY).

The U.S. dollar price broke out to another new 14-month high on 6/7/10. USD main trend remains bullish.

Gold rose strongly to challenge its all-time high at 1249.7 set on 5/14/10. The main trend remains bullish.

Copper broke down to another new 7-month low on 6/7/10. Copper’s downtrend reflects current uncertainties about the global economic prospects.

S&P 500 Composite (SPX) tested year-to-date extreme intraday lows and held them. SPX remains in a deeply oversold position and at previous support, suggesting that bargain-hunting demand could appear again roughly where it has before, technically speaking.

Various price momentum oscillators show bullish divergence by holding above May lows while S&P 500 closing price made lower lows. These include RSI, Stochastics, MACD, MACDH, Directional Movement, CCI, etc.

The VIX Fear Index recently has been stuck in the 30s after rising to a 14-month high of 48.20 on 5/21/10. This might suggest some kind of divergence compared to price indexes, which are nearer their extreme lows of the year.

Clearly, excessive bullish sentiment has been wrung out of the stock market. This is a major change from last month. On 4/26/10, I wrote: “Investors Intelligence survey of stock market newsletter advisors, Call/Put Volume Ratios, and implied option volatility have shown bullish complacency in recent weeks. Excessive bullish sentiment sometimes precedes a shakeout to the downside.” We got that shakeout, and now it appears to be over.
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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
2.97% , MHS , MEDCO HEALTH
6.33% , BMY , BRISTOL MYERS
4.08% , GCI , GANNETT
3.86% , THC , TENET HEALTHCARE
0.58% , PWO , OTC Dynamic PS, PWO
4.27% , ESRX , EXPRESS SCRIPTS
1.79% , PSQ , Short 100% QQQ, PSQ
0.89% , PUI , Utilities, PUI
0.55% , TLH , Bond 10-20 Year US Treas, TLH
2.67% , FE , FIRSTENERGY
1.99% , PPL , PPL
1.87% , IAU , Gold COMEX iS, IAU
1.93% , GLD , Gold Shares S.T., GLD
0.74% , UTH , Utilities H, UTH
1.02% , NOVL , NOVELL
1.03% , SRE , SEMPRA ENERGY
2.73% , RYAAY , Ryanair Holdings plc
0.98% , NOV , NATIONAL OILWELL VARC0
0.65% , LLY , ELI LILLY
0.46% , PEG , PUBL SVC ENTER
2.69% , NEM , NEWMONT MINING
1.11% , MRO , MARATHON OIL
0.23% , IDU , Utilities DJ, IDU
0.68% , CNP , CENTERPNT ENERGY
1.09% , GENZ , GENZYME
1.00% , AEP , AM ELEC POWER
1.01% , MON , MONSANTO
0.94% , EIX , EDISON INTL
0.40% , MHP , MCGRAW HILL
1.71% , GIS , GENERAL MILLS
0.35% , CMS , CMS ENERGY
0.30% , FDL , Dividend Leaders, FDL
0.83% , D , DOMINION RSCS
0.63% , NI , NISOURCE
0.37% , SYY , SYSCO
0.54% , DGX , QUEST DIAG
0.13% , TE , TECO ENERGY
0.09% , PNW , PINNACLE WEST
0.08% , MCD , MCDONALDS
0.47% , VPU , Utilities VIPERs, VPU

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-2.71% , PZJ , SmallCap PS Zacks, PZJ
-4.25% , RZV , Value SmallCap S&P 600, RZV
-1.42% , SWH , Software H, SWH
-8.14% , CVS , CVS
-2.45% , PMR , Retail, PMR
-2.83% , PSTL , Steel Global PS ETF, PSTL
-2.44% , JKJ , SmallCap Core iS M, JKJ
-10.43% , ABK , AMBAC FINL GRP
-1.70% , EWO , Austria Index, EWO
-2.25% , DSV , Value Small Cap DJ, DSV
-3.81% , XSD , Semiconductor SPDR, XSD
-1.46% , EWN , Netherlands Index, EWN
-2.40% , EWD , Sweden Index, EWD
-3.34% , KWT , Solar Energy MV, KWT
-3.06% , PEJ , Leisure & Entertainment, PEJ
-1.94% , JKG , MidCap Blend Core iS M, JKG
-1.84% , MTK , Technology MS sT, MTK
-2.80% , DSG , Growth Small Cap DJ, DSG
-2.69% , PKB , Building & Construction, PKB
-4.38% , GR , GOODRICH CORP
-4.76% , LVLT , LEVEL 3 COMMUNICATIONS
-1.87% , IJJ , Value MidCap S&P 400 B, IJJ
-4.52% , NVLS , NOVELLUS SYS
-4.81% , CECO , CAREER EDUCATION CORP
-3.98% , MVV , Ultra MidCap400 Double, MVV
-3.67% , IGW , Semiconductor iS GS, IGW
-4.76% , GD , GENERAL DYNAMICS
-3.26% , LEG , LEGGETT & PLATT
-6.61% , FCX , FREEPRT MCMORAN STK B
-4.36% , VMC , VULCAN MATERIALS
-1.80% , NYC , LargeCap Blend NYSE Composite iS, NYC
-5.23% , RIMM , RESEARCH IN MOTION LTD
-4.77% , LPX , LOUISIANA PAC
-2.44% , PPA , Aerospace & Defense, PPA
-1.75% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-5.03% , KLAC , KLA TENCOR
-4.99% , LSI , LSI LOGIC
-2.30% , IGN , Networking, IGN
-1.71% , PWB , Lg Cap Growth PSD, PWB
-4.81% , ASH , ASHLAND

9 major U.S. stock sectors ranked in order of long-term relative strength:

Consumer Discretionary (XLY) Bullish, Overweight. The Relative Strength Ratio (XLY/SPY) rose above 12-year highs on 5/27/10 and remains bullish. Absolute price of XLY remains above its 200-day SMA and May low and remains neutral. Support 30.34. Resistance 34.39, 36.13, 38.25 and 39.09.

Technology (XLK) Neutral, Market Weight. The Relative Strength Ratio (XLK/SPY) rose further above 4-month highs on 6/4/10 but still remains neutral. Absolute price of XLK held above its May low and remains neutral. Support 20.64. Resistance 23.27, 24.16, 24.68, and 25.69.

Consumer Staples (XLP) Neutral, Market Weight. The Relative Strength Ratio (XLP/SPY) has performed about in-line with the broader market for the past 8-months and remains neutral. Absolute price of XLP also remains neutral. Support 25.78 and 24.95. Resistance 27.83, 27.95, 28.20, 28.75, 29.29 and 30.29.

Industrial (XLI) Bullish, Overweight. The Relative Strength Ratio (XLI/SPY) fell below its 50-day SMA on 6/1/10 and remains neutral, according to the 50/200 trend-following moving average system. Absolute price of XLI fell below its May low on 6/7/10 and remains neutral. Support 27.91. Resistance 32.41, 33.46, 34.24, 34.50, and 35.00.

Utilities (XLU) Neutral, Market Weight. The Relative Strength Ratio (XLU/SPY) moved above 4-month highs on 6/7/10 and remains neutral. Absolute price of XLU remains bearish, with price below SMAs and the 50 below the 200 SMA. Support 27.44, 25.76. Resistance 30.59, 30.91, 31.64 and 32.08.

Health Care (XLV) Neutral, Market Weight. The Relative Strength Ratio (XLV/SPY) moved above 2-month highs on 6/7/10 and is neutral. Absolute price of XLV fell below 6-month lows on 5/25/10 and remains neutral. Support 27.96. Resistance 30.83, 32.05, 32.18, 32.42, 32.69, 33.16, 33.37 and 33.74.

Financial (XLF) Neutral, Market Weight. The Relative Strength Ratio (XLF/SPY) fell below 3-month lows on 6/7/10 and remains neutral. Absolute price of XLF also remains neutral. Support 13.82 and 13.51. Resistance 15.67, 16.13, 16.90, 17.12, 17.16, and 17.87.

Energy (XLE) Neutral, Market Weight. The Relative Strength Ratio (XLE/SPY) fell below 2-year lows on 6/1/10 and remains bearish. Absolute price of XLE fell below its 8-month lows on 5/25/10 and remains neutral. Support 50.15 Resistance 58.11, 59.84, 62.30, 62.73, 69.95, and 78.10.

Materials (XLB) Neutral, Market Weight. The Relative Strength Ratio (XLB/SPY) fell below 14-month lows on 6/7/10 and remains bearish. Absolute price of XLB fell below 9-month lows on 6/7/10 and remains neutral. Support 28.87. Resistance 33.06, 35.47, and 37.56.
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Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) fell to a 12-month low on 5/20/10. EEM/SPY trend turned bearish on 4/16/10, according to strict moving average analysis. Absolute price of EEM fell to an 8-month low on 5/25/10.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) fell below 5-year lows on 5/26/10 and remains bearish. Absolute price of EFA fell below 10-month lows on 5/25/10 and remains bearish.

NASDAQ 100/S&P 500 Relative Strength Ratio rose above 9-year highs on 6/4/10 and remains bullish.

NASDAQ Composite/S&P 500 Relative Strength Ratio rose above 9-year highs on 6/3/10 and remains bullish. Absolute price of the NASDAQ held above its May low and remains neutral.

Russell 1000 Value ETF Relative Strength Ratio (IWD/SPY) remains neutral. Absolute price of IWD tested and held above its February low and remains neutral.

Growth Stock/Value Stock Relative Strength Ratio (IWF/IWD) rose above 3-month highs on 6/7/10 and remains neutral. Absolute price of IWF held above its May low and remains neutral.

The S&P 500 Equally Weighted ETF Relative Strength Ratio (RSP/SPY) fell below its 50-day SMA on 6/7/10 and so turned neutral. Absolute price of RSP held above its May low and remains neutral.

The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) fell below the lows of the previous 22 months on 5/27/10 and remains bearish. Absolute price of OEX remains neutral.

The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) fell further below its 50-day SMA on 6/7/10 and remains neutral. Absolute price of IWM held above its May low and remains neutral.

The S&P MidCap 400/Large Cap Relative Strength Ratio (MDY/SPY) fell below its 50-day SMA on 6/7/10 and so turned neutral. Absolute price of MDY held above its May low and remains neutral.

Crude Oil nearest futures contract price rolled to the downside and could test its low of 67.15 set on 5/25/10. Technical trends appear uncertain. Support 67.15 and 65.05. Resistance 75.72, 77.74, 78.81, 81.29, 87.15, 90.51, 98.65, and 102.84.

Gold nearest futures contract price rose strongly to challenge its all-time high at 1249.7 set on 5/14/10. The main trend remains bullish. Support 1196.9, 1168.0, 1156.2, 1124.3, 1084.8, 1045.2, 1026.9 and 989.3. Resistance: 1249.7.

Gold Mining Stocks ETF (GDX) Relative Strength Ratio (relative to the Gold bullion ETF, GDX/GLD) fell steeply on 6/4/10 and is neutral.

Silver/Gold Ratio turned bearish on 5/17/10 when it crossed below both 50- and 200-day SMAs, with the 50-day SMA below the 200-day SMA.

Copper nearest futures price broke down to another new 7-month low on 6/7/10. Copper’s downtrend reflects current uncertainties about the global economic prospects. Strength in Copper suggests renewed hope about prospects for the world economy, while weakness suggests doubts. Support 2.9005 and 2.811. Resistance 3.187, 3.2675, 3.3225, 3.795 and 4.27.

U.S. Treasury Bond nearest futures contract price rose above 5-day highs on 6/4/10, reflecting a flight to safety. Support 121.06, 119.26, 118.24, 118.12, 115.15, 114.06. 113.04, and 112.15. Resistance 126.15 and 130.31.

Junk/Investment-Grade Corporate Bonds Relative Strength Ratio (JNK/LQD) has been moving with the stock market and remains neutral.

U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year Relative Strength Ratio (TIP/IEF) fell below 6-month lows on 5/20/10 but still remains neutral for the intermediate-term trend. This implies that investors are choosing somewhat less inflation protection. Absolute price of TIP remains bullish.

The U.S. dollar nearest futures contract price broke out to another new 14-month high on 6/7/10. USD main trend remains bullish. Support 85.325, 83.07, 81.74, 80.14, 79.73, 79.61, 78.83, 78.20, 76.74 and 75.90. Resistance 89.71 and 92.53.

The Art of Contrary Thinking: The various surveys of investor sentiment are best considered as background factors. The majority of investors can be right for a long time before a major trend finally changes course. The Art of Contrary Thinking is best used together with more precise market timing tools.

Advisory Service Sentiment: There were 39.8% Bulls versus 28.4% Bears as of 6/2/10, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio fell to 1.40, up from 1.35 the previous week. The current Bull/Bear ratio has fallen substantially from its peak at 3.36 set on 1/13/10, which was the highest bullish sentiment in 6 years. The 20-year range is 0.41 to 3.74, the median is 1.51, and the mean is 1.57.

VIX Fear Index recently has been stuck in the 30s after rising to a 14-month high of 48.20 on 5/21/10. This might suggest some kind of divergence compared to price indexes, which are nearer their extreme lows of the year. A high and rising VIX suggests increasing bearish sentiment. 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.

VXN Fear Index recently has been stuck in the 30s after rising to a 14-month high of 48.89 on 5/21/10. This might suggest some kind of divergence compared to price indexes, which are nearer their extreme lows of the year. A high and rising VIX suggests increasing bearish sentiment. VXN measures NASDAQ Volatility using a method comparable to that used for VIX.

ISEE Call/Put Ratio fell to .059 on 5/7/10, a low level that indicates bearish sentiment. Its 2-year mean is 1.20, and its typical range is 0.69 to 1.71, which represents two standard deviations from the mean.

CBOE Put/Call Ratio rose to 0.96 on 5/20/10, its highest level of the year. A high level indicates bearish sentiment. The 2-year mean is 0.70, and the typical range is 0.44 to 0.96, which represents two standard deviations from the mean.

The Dow Theory again confirmed a Bullish Major Trend on 4/26/10, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above their closing price highs of the previous 18 months. The Dow Theory signaled the current Primary Tide Bull Market on 7/23/09, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed above their closing price highs of the previous 6 months. That 7/23/09 bullish signal reversed the previous bearish signal: the two Averages signaled a Primary Tide Bear Market on 11/21/07, when both Averages closed below their closing price lows of August 2007.

S&P 500 Composite (SPX) tested year-to-date extreme intraday lows and held them. SPX remains in a deeply oversold position and at previous support, suggesting that bargain-hunting demand could appear again roughly where it has before, technically speaking. Support 1040.78, 1029.38, 1019.95, 1012.42, and 1008.55. Resistance 1109.17, 1130.29, 1151.41, 1173.57, 1181.49, 1219.80, 1220.03, and 1228.74.

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
1366.59, high of 6/17/2008
1335.63, high of 6/25/2008
1313.15, high of 8/11/2008
1274.42, high of 9/8/2008
1255.09, high of 9/12/2008
1238.81, Fibonacci 78.6% of 1,576.09 high
1228.74, Fibonacci 61.8% of 2007-2009 range
1220.03, high of 9/25/2008
1219.80, high of 4/26/2010
1181.49, Fibonacci 78.6% of 2010 range
1173.57, high of 5/13/2010
1151.41, Fibonacci 61.8% of 2010 range
1130.29, Gann 50.0% of 2010 range
1109.17, Fibonacci 38.2% of 2010 range

S&P 500 Cash Index Potential Support
1040.78, low of 5/25/2010
1029.38, low of 11/2/2009
1019.95, low of 10/2/2009
1012.42, Gann 37.5% of 2009-2010 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
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

One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol

4.46% Silver Trust iS, SLV
1.93% Gold Shares S.T., GLD
0.77% Bond, 20+ Years Treasury, TLT
0.61% Utilities SPDR, XLU
0.47% Utilities VIPERs, VPU
0.42% Bond, Corp, LQD
0.41% Bond, 10 Year Treasury, IEF
0.29% Bond, Aggregate, AGG
0.19% Commodity Tracking, DBC
0.08% Bond, TIPS, TIP
0.00% Preferred Stock iS, PFF
-0.02% Bond Muni ATM-Free S&P iS, MUB
-0.04% Bond, 1-3 Year Treasury, SHY
-0.14% Health Care SPDR, XLV
-0.19% India PS, PIN
-0.27% Financial Preferred, PGF
-0.28% Oil, Crude, U.S. Oil Fund, USO
-0.28% Hong Kong Index, EWH
-0.28% India Earnings WTree, EPI
-0.32% Bond EmrgMkt JPM iS, EMB
-0.39% Dividend High Yield Equity PS, PEY
-0.41% REIT Wilshire, RWR
-0.42% South Africa Index, EZA
-0.42% Thailand MSCI iS, THD
-0.44% Realty Cohen & Steers, ICF
-0.51% Real Estate US DJ, IYR
-0.52% Switzerland Index, EWL
-0.54% REIT VIPERs, VNQ
-0.60% Dividend DJ Select, DVY
-0.64% Value LargeCap Dynamic PS, PWV
-0.67% Bond Ex-US Treas, BWX
-0.69% Bond, High-Yield Corporate, HYG
-0.77% Consumer Staples SPDR, XLP
-0.79% United Kingdom Index, EWU
-0.81% Malaysia Index, EWM
-0.82% Agriculture DB PS, DBA
-0.84% Energy DJ, IYE
-0.85% Turkey MSCI iS, TUR
-0.86% Canada Index, EWC
-0.87% Energy SPDR, XLE
-0.88% Natural Resource iS GS, IGE
-0.91% Belgium Index, EWK
-0.92% Europe 350 S&P Index, IEV
-0.93% Value EAFE MSCI, EFV
-0.95% Dividend Appreciation Vipers, VIG
-0.95% China 25 iS, FXI
-0.97% Germany Index, EWG
-1.01% Singapore Index, EWS
-1.02% Dividend International, PID
-1.03% Dividend SPDR, SDY
-1.07% Energy Global, IXC
-1.08% European VIPERs, VGK
-1.08% Italy Index, EWI
-1.10% Energy VIPERs, VDE
-1.11% Mexico Index, EWW
-1.11% Global 100, IOO
-1.12% France Index, EWQ
-1.18% DIAMONDS (DJIA), DIA
-1.18% Small Cap EAFE MSCI iS, SCZ
-1.18% Growth S&P 500/BARRA, IVW
-1.18% Global ex US ACWI iS, ACWX
-1.19% Chile MSCI iS, ECH
-1.19% EMU Europe Index, EZU
-1.21% S&P 500 iS LargeCap Blend, IVV
-1.23% Growth EAFE MSCI, EFG
-1.25% S&P 500 SPDRs LargeCap Blend, SPY
-1.26% EAFE Index, EFA
-1.28% Value VIPERs, VTV
-1.32% LargeCap Blend S&P 100, OEF
-1.34% Value S&P 500 B, IVE
-1.37% Indonesia MV, IDX
-1.38% Growth 1000 Russell, IWF
-1.39% Emerging VIPERs, VWO
-1.40% Latin Am 40, ILF
-1.42% Value 1000 Russell, IWD
-1.45% Technology SPDR, XLK
-1.45% LargeCap 1000 R, IWB
-1.46% Netherlands Index, EWN
-1.48% LargeCap VIPERs, VV
-1.56% Emerging Markets, EEM
-1.56% Telecom DJ US, IYZ
-1.57% LargeCap Blend Russell 3000, IWV
-1.58% Growth VIPERs, VUG
-1.60% Spain Index, EWP
-1.61% Japan Index, EWJ
-1.63% Blend Total Market VIPERs, VTI
-1.63% LargeCap Blend S&P=Weight R, RSP
-1.63% Emerging 50 BLDRS, ADRE
-1.66% Pacific VIPERs, VPL
-1.70% Austria Index, EWO
-1.71% Pacific ex-Japan, EPP
-1.72% Brazil Index, EWZ
-1.74% Value MidCap Russell, IWS
-1.77% Financial DJ US, IYF
-1.79% Materials SPDR, XLB
-1.82% Financials VIPERs, VFH
-1.82% Growth LargeCap NASDAQ 100, QQQQ
-1.85% China LargeCap Growth G D H USX PS, PGJ
-1.85% South Korea Index, EWY
-1.87% Value MidCap S&P 400 B, IJJ
-1.87% Capital Markets KWB ST, KCE
-1.89% Taiwan Index, EWT
-1.90% Consumer Discretionary SPDR, XLY
-1.93% MidCap Russell, IWR
-1.94% Technology DJ US, IYW
-1.98% Financial SPDR, XLF
-1.98% MidCap S&P 400 SPDRs, MDY
-2.04% Biotech SPDR, XBI
-2.05% Info Tech VIPERs, VGT
-2.07% Growth MidCap Russell, IWP
-2.08% MidCap S&P 400 iS, IJH
-2.08% Basic Materials DJ US, IYM
-2.13% Value SmallCap VIPERS, VBR
-2.16% Russia MV, RSX
-2.22% Financial Services DJ, IYG
-2.25% Australia Index, EWA
-2.26% Metals & Mining SPDR, XME
-2.27% Growth MidCap 400 B, IJK
-2.30% Networking, IGN
-2.36% Value SmallCap Russell 2000, IWN
-2.36% Small Cap VIPERs, VB
-2.40% Sweden Index, EWD
-2.45% SmallCap S&P 600, IJR
-2.46% Value SmallCap S&P 600 B, IJS
-2.52% Growth BARRA Small Cap 600, IJT
-2.57% Industrial SPDR, XLI
-2.57% SmallCap Russell 2000, IWM
-2.62% Water Resources, PHO
-2.81% Growth SmallCap R 2000, IWO
-2.88% Growth SmallCap VIPERs, VBK
-2.89% Transportation Av DJ, IYT
-3.18% Microcap Russell, IWC
-3.20% WilderHill Clean Energy PS, PBW
-3.67% Semiconductor iS GS, IGW
-3.74% Homebuilders SPDR, XHB
-3.81% Semiconductor SPDR, XSD
-4.25% Value SmallCap S&P 600, RZV

Stock Market Commentary

Stock Market: Shake and Bake.

Major stock price indexes broke down below the lows of the previous 3 trading days before whipping around to close up on the day. Sell stops below the 3-day range were elected. New trend-following shorts were lured in--and squeezed. I expect that everybody will be blaming high-frequency trading programs for the whipsaw. We’ve seen a lot of this kind of action, one- or two-day shakeouts, since the March lows.

Financial Stock Sector Relative Strength Ratio (XLF/SPY) broke out to a new 9-month high on 8/27/09, confirming a cyclical uptrend.

NASDAQ Composite Relative Strength Ratio compared to the versus the S&P 500 has turned down since 7/23/09 and broke down below the lows of the previous 11 weeks on 8/27/09.

The U.S. dollar price fell back to the lower end of its range. Still, USD appears to be stabilizing since making an 11-month low on 8/5/09.

Investors Intelligence survey of stock market newsletter advisors shows the highest ratio of Bulls to Bears in 22 months, since 10/17/07, now at 2.61 Bulls for every Bear.

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
% Price Change, Symbol, Name

46.34% , ABK , AMBAC FINL GRP
17.50% , MBI , MBIA
26.93% , AIG , AMER INTL GROUP
22.83% , CIT , CIT GROUP
8.36% , BA , BOEING
6.71% , DELL , DELL
9.46% , GNW , GENWORTH FINANCIAL (NYSE:GNW)
8.35% , ATI , ALLEGHENY TECH
1.14% , ADRU , Europe 100 BLDRS, ADRU
9.07% , C , CITIGROUP
0.53% , SWH , Software H, SWH
1.34% , KG , KING PHARM
0.89% , EWI , Italy Index, EWI
4.31% , HMA , HEALTH MGMT STK A
1.82% , PPA , Aerospace & Defense, PPA
0.82% , EWQ , France Index, EWQ
1.78% , TBH , Telebras HOLDRS, TBH
0.27% , IAH , Internet Architecture H, IAH
2.88% , MCO , MOODYS CORP
2.70% , PPG , PPG INDUSTRIES
3.42% , COL , ROCKWELL COLLINS
3.57% , ETFC.O , E*TRADE FINANCIAL
3.60% , NTAP , NETWK APPLIANCE
0.33% , EWG , Germany Index, EWG
0.41% , JKH , MidCap Growth iS M, JKH
1.13% , EWO , Austria Index, EWO
2.13% , EWA , Australia Index, EWA
1.20% , EWP , Spain Index, EWP
0.35% , VO , MidCap VIPERs, VO
2.27% , WOR , WORTHINGTON INDS
2.65% , ACE , ACE
2.52% , GR , GOODRICH CORP
0.99% , CPB , CAMPBELL SOUP
3.73% , WHR , WHIRLPOOL
0.32% , ISI , LargeCap Blend S&P 1500 iS, ISI
2.06% , EZA , South Africa Index, EZA
10.34% , FRE , FREDDIE MAC
2.81% , KEY , KEYCORP
1.60% , MRVL , MARVELL TECHNOLOGY
4.19% , AMD , ADV MICRO DEV

Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-6.24% , CAR , Avis Budget Group, Inc. (CAR)
-2.20% , PGF , Financial Preferred, PGF
-2.36% , JNS , JANUS CAPITAL
-0.33% , JKK , Growth SmallCap iS M, JKK
-0.34% , UTH , Utilities H, UTH
-2.47% , AM , AMER GREETINGS STK A
-1.60% , RIMM , RESEARCH IN MOTION LTD
-0.84% , NOVL , NOVELL
-1.60% , RFMD , RF Micro Devices Inc
-1.11% , MWV , MEADWESTVACO
-1.39% , DOW , DOW CHEMICAL
-1.38% , EOG , EOG RESOURCES
-1.84% , EP , EL PASO
-1.87% , MOT , MOTOROLA
-1.41% , XTO , XTO ENERGY INC
-0.51% , HYG , Bond High-Yield Corporate, HYG
-1.04% , ALTR , ALTERA
-0.93% , NUE , NUCOR
-0.84% , WAT , WATERS
-2.36% , PTEN , Patterson-UTI Energy Inc
-0.25% , ILF , Latin Am 40, ILF
-1.12% , ACS , AFFILIATED COMPUTER
-0.42% , IYT , Transportation Av DJ, IYT
-1.69% , NIHD , NII Holdings, Inc.
-0.26% , PFM , Dividend Achievers PS, PFM
-0.69% , MU , MICRON TECH
-1.43% , PHM , PULTE HOMES
-0.82% , UIS , UNISYS
-0.33% , EWH , Hong Kong Index, EWH
-1.77% , DLX , DELUXE
-0.60% , PXE , Energy Exploration & Prod, PXE
-0.46% , LQD , Bond, Corp, LQD
-1.47% , CCL , CARNIVAL STK A
-1.22% , WMB , WILLIAMS
-0.75% , RDC , ROWAN COMPANIES
-1.08% , WMT , WAL MART STORES
-0.68% , CSC , COMPUTER SCIENCE
-0.38% , VIA , VIACOM INC. (New)
-0.27% , IEF , Bond, 10 Year Treasury, IEF
-0.28% , EWY , South Korea Index, EWY

9 major U.S. stock sectors ranked in order of long-term relative strength:

Consumer Discretionary (XLY) Neutral, Market Weight. The Relative Strength Ratio (XLY/SPY) has made no progress since 4/30/09. XLY was strong from 11/19/08 to 4/30/09, and that past strength accounts for XLY’s high ranking here. Long term, XLY/SPY has trended downward since 1/5/05.

Technology (XLK) Neutral, Market Weight. The Relative Strength Ratio (XLK/SPY) turned down after 7/22/09. XLK was so strong from 12/31/08 to 7/22/09 that it still ranks high in this long-term relative strength ranking. XLK/SPY rose to its highest level in 7 years on 7/22/09, confirming a long-term uptrend in effect since 9/30/02.

Health Care (XLV) Neutral, Market Weight. The Relative Strength Ratio (XLV/SPY) has flattened out in recent months. XLV/SPY rose strongly from 5/15/08 to 2/23/09, resulting in the relatively high ranking here.

Financial (XLF) Neutral, Market Weight. The Relative Strength Ratio (XLF/SPY) broke out to a new 9-month high on 8/27/09, confirming a cyclical uptrend. XLF has outperformed since 3/6/09. Longer term, XLF/SPY may still be in a secular Bear trend since its major top on 3/23/04.

Materials (XLB) Neutral, Market Weight. The Relative Strength Ratio (XLB/SPY) broke down below the lows of the previous 4 weeks on 8/26/09, thereby confirming a short-term downside correction. Nevertheless, XLB/SPY is still in an uptrend since its low on 12/5/08.

Consumer Staples (XLP) Neutral, Market Weight. The Relative Strength Ratio (XLP/SPY) underperformed moderately since 11/20/08. Longer term, XLP/SPY is still holding a 2-year uptrend line.

Industrial (XLI) Bearish, Underweight. The Relative Strength Ratio (XLI/SPY) in recent months appears to be consolidating previous massive losses. XLI/SPY fell long and hard from 3/31/08 to 3/6/09.

Utilities (XLU) Bearish, Underweight. The Relative Strength Ratio (XLU/SPY) has stabilized and has been about flat since 6/9/09. XLU/SPY underperformed from 11/21/08 to 6/9/09.

Energy (XLE) Bearish, Underweight. The Relative Strength Ratio (XLE/SPY) has been weak since 6/11/09. Longer term, XLE/SPY fell to a 10-month low on 8/17/09, to confirm a Bearish cycle phase in force since it peaked on 7/1/08.

Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) appears to be in a short-term downtrend since 8/3/09 but still in a major long-term uptrend since 10/24/08. Absolute price has been in a rising trend since 11/20/08.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) appears to be firming up since 7/14/09. EFA outperformed from 10/27/08 to 5/22/09, and that uptrend could resume. EFA is the ETF representing the EAFE, the international developed country stock markets, excluding the U.S. and Canada.

NASDAQ Composite Relative Strength Ratio compared to the versus the S&P 500 has turned down since 7/23/09 and broke down below the lows of the previous 11 weeks on 8/27/09.

Growth Stock/Value Stock Relative Strength Ratio (IWF/IWD) broke down below previous 3-month lows on 8/26/09. Long term, the RS Ratio has been in an uptrend since 8/8/06, indicating major trend strength.

Russell 1000 Value ETF Relative Strength Ratio (IWD/SPY) has firmed up short-term, since making a low on 7/8/09. Long term, the IWD RS Ratio remains in a Bearish Major Trend, underperforming the SPY since 3/22/07.

The S&P 500 equally weighted index rose a new high relative to the S&P 500 capitalization weighted index on 8/13/09, confirming a major uptrend in effect since 11/19/08.

The Largest Cap S&P 100 / S&P 500 Relative Strength Ratio (OEX/SPX) has stabilized since making a low on 8/7/09. The ratio had been in a downtrend from 11/20/08 to 8/7/09, indicating that the largest capitalization stocks were lagging the broader market.

The Small Cap/Large Cap Relative Strength Ratio (IWM/SPY) has been in a rising trend since 3/9/09. The ratio made a 9-month high on 8/4/09, which indicated a relative uptrend for the longer term for Small Cap stocks.

The Mid Cap/Large Cap Relative Strength Ratio (MDY/SPY) broke down below 2-week lows on 8/17/09, confirming a downtrend for the short term. Longer term, the ratio was in an uptrend from 11/21/08 to 8/17/09, and that uptrend could resume.

Crude Oil nearest futures contract price broke down below the lows of the previous 5 trading days before reversing to close higher than the 2 previous closes. Oil held a 6-week uptrend line, which is bullish. The cyclical, intermediate-term trend still appears bullish.

The Energy stock sector has underperformed Crude Oil since 2/18/09. The XLE to Crude Oil Ratio broke down to a new 7-month low on 6/29/09.

Gold nearest futures contract price has been confined to a choppy trading range since 8/6/09. Gold appears to have some resistance at previous highs of 957.6 and 960.1. For support, watch previous lows at 931.5, 925.2 and 904.8, based on the nearest futures contract. Intermediate term, Gold appears to be in a triangle consolidation since 2/16/09. Longer term, Gold has been consolidating since making an all-time high at 1,033.9 on 3/17/08. Probabilities appear to favor an upside breakout--eventually.

Gold Mining Stocks ETF (GDX) Relative Strength Ratio (relative to Gold bullion) has been consolidating gains since peaking on 6/2/09. The ratio was in an uptrend from 10/27/08 to 6/2/09, and that uptrend could resume.

Silver/Gold ratio peaked on 6/2/09 and remains lower, suggesting some small diminishment of confidence in world economic recovery.

Copper nearest futures contract price has been confined to a choppy trading range since 8/14/09. Longer term, Copper has been in a 9-month uptrend since 12/08, and that uptrend could resume.

U.S. Treasury Bond nearest futures contract price fell after encountering resistance at 121.07 to 121.12. The Bond broke out above the highs of the previous 6 weeks on 8/26/09, confirming the minor trend as Bullish. Intermediate term, Bonds still may be consolidating in a neutral trading range. On 8/7/09, Bonds found support at the upper end of the 112-115 zone of many previous reversal points (including both lows and highs).

Bond quality ratio (LQD/TLT) has been trending down since 8/7/09. Longer term, the ratio trended up from 12/19/08 to 8/7/09. LQD/TLT is iShares iBoxx $ Invest Grade Corp Bond ETF (LQD) price divided by 20+ Years US Treasury Bond ETF price (TLT).

The U.S. dollar nearest futures contract price fell back to the lower end of its range. Still, USD appears to be stabilizing since making an 11-month low on 8/5/09. Intermediate term, USD has lost downside momentum in August but still may be merely consolidating losses within a Bearish trend. Longer term, USD fell below 10-month lows on 8/5/09 and remains in a Bearish trend since its peak set on 3/4/09.

The Art of Contrary Thinking: The various surveys of investor sentiment are best considered as background factors. The majority of investors can be right for a long time before a major trend finally changes course. So, Contrary Thinking should be used with more precise market timing tools.

Advisory Service Sentiment: There were 51.6% Bulls versus 19.8% Bears as of 8/26/09, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio was 2.61, up from 2.09 the previous week. This 2.61 was the highest reading since 10/17/07. The ratio’s 39-year range is 0.28 to 17.51, the median is 1.43, and the mean is 1.73.

VIX Fear Index has been fluctuating sideways between 23 and 28 since 7/24/09, after falling from a peak of 80.86 set on 11/20/08. 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.

VXN Fear Index has been fluctuating sideways between 24 and 28 since 7/17/09, after falling from a peak of 80.64 set on 11/20/08. VXN measures NASDAQ Volatility using a method comparable to that used for VIX.

ISEE Call/Put Ratio rose to 1.33 on 8/27/09, still indicating neutral sentiment. The ratio’s 5-year mean is 1.43, median is 1.38, and its range is 0.51 to 3.16.

CBOE Put/Call Ratio rose to 0.64 on 8/26/09, indicating neutral sentiment. The ratio’s 5-year mean is 0.67, median is 0.65, and its range is 0.35 to 1.35.

Fundamentals: The 2003-2007 Bull Market was fed by abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and a net balance of positive earnings surprises. The unfolding fallout from the credit market crisis derailed that engine. Since the stock market low on 3/9/09, massive monetary and fiscal stimulation appears to have had an increasingly Bullish impact on investor sentiment.

The Dow Theory signaled a Primary Tide Bull Market on 7/23/09 when both the Dow-Jones Industrial Average the Dow-Jones Transportation Average closed above their May-June 2009 closing price highs. This reverses the previous signal: the two Averages signaled a Primary Tide Bear Market on 11/21/07, when both Averages closed below their closing price lows of August, 2007.

S&P 500 Cash Index Potential Resistance
1,576.09, high of 10/11/2007
1,552.76, high of 10/31/2007
1,523.57, high of 12/11/2007
1,498.85, high of 12/26/2007
1,440.24, high of 5/19/2008
1,406.32, high of 5/29/2008
1,381.50, Fibonacci 78.6% of 2007-2009 drop
1,366.59, high of 6/17/2008
1,335.63, high of 6/25/2008
1,313.15, high of 8/11/2008
1,274.42, high of 9/8/2008
1,255.09, high of 9/12/2008
1,238.807, Fibonacci 78.6% of 1,576.09 high
1,228.74, Fibonacci 61.8% of 2007-2009 drop
1,220.03, high of 9/25/2008
1,121.44, Fibonacci 50.0% of 2007-2009 drop
1,077.08, Fibonacci 61.8% of 2002-2007 upmove
1,044.31, high of 10/14/2008
1,037.75, high of 8/25/2008

S&P 500 Cash Index Potential Support
1,016.20, low of 8/27/2009
1,014.14, Fibonacci 38.2% of 2007-2009 drop
1009.06, low of 8/21/2009
1,007.78, Gann 37.5% of 2007-2009 drop
978.51, low of 8/17/2009
956.23, high of 6/11/2009
930.17, high of 5/8/2009
869.32, low of 7/8/2009
826.83, low of 4/21/2009
814.53, low of 4/7/2009
813.62, high of 4/1/2009
779.81, low of 3/30/2009
666.79, intraday low of 3/6/2009
665.23, Fibonacci 61.8% of 2002-2007 upmove
602.07, Fibonacci 38.2% of 1,576.09 high

Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol

2.36% Internet Infrastructure H, IIH
2.13% Australia Index, EWA
2.08% Oil, Crude, U.S. Oil Fund, USO
2.06% South Africa Index, EZA
1.82% Aerospace & Defense, PPA
1.76% Value S&P 500, RPV
1.64% Pacific ex-Japan, EPP
1.32% Euro STOXX 50, FEZ
1.20% Spain Index, EWP
1.16% Financials Global LargeCap Value, IXG
1.14% Europe 100 BLDRS, ADRU
1.13% Austria Index, EWO
1.13% Canada Index, EWC
1.12% Developed 100 BLDRS, ADRD
1.06% European VIPERs, VGK
1.04% Realty Cohen & Steers, ICF
1.03% Value LargeCap Fundamental RAFI 1000, PRF
1.03% Financial SPDR, XLF
1.03% Financial Services DJ, IYG
1.02% Switzerland Index, EWL
0.97% Value EAFE MSCI, EFV
0.97% REIT VIPERs, VNQ
0.97% Asia 50 BLDRS, ADRA
0.96% Singapore Index, EWS
0.96% Value MidCap iS M, JKI
0.94% 200% Short US T Bond, TBT
0.93% Financial DJ US, IYF
0.91% Industrial SPDR, XLI
0.89% Italy Index, EWI
0.89% REIT Wilshire, RWR
0.87% EMU Europe Index, EZU
0.84% Commodity Tracking, DBC
0.82% France Index, EWQ
0.82% Europe 350 S&P Index, IEV
0.79% Real Estate US DJ, IYR
0.77% Nanotech Lux, PXN
0.76% EAFE Index, EFA
0.75% Financials VIPERs, VFH
0.75% Ultra MidCap400 Double, MVV
0.73% Industrial LargeCap Blend DJ US, IYJ
0.72% Malaysia Index, EWM
0.70% Materials SPDR, XLB
0.70% Technology MS sT, MTK
0.67% Bank Regional H, RKH
0.66% Pacific VIPERs, VPL
0.64% Growth EAFE MSCI, EFG
0.63% Ultra Dow30 Double, DDM
0.62% Japan LargeCap Blend TOPIX 150, ITF
0.61% Industrials VIPERs, VIS
0.61% Sweden Index, EWD
0.59% Netherlands Index, EWN
0.59% Internet H, HHH
0.58% Mexico Index, EWW
0.56% Value MidCap S&P 400 B, IJJ
0.55% Ultra S&P500 Double, SSO
0.54% LargeCap Blend NYSE Composite iS, NYC
0.53% Value Small Cap DJ, DSV
0.53% Software H, SWH
0.52% Growth Mid Cap Dynamic PS, PWJ
0.51% 200% Short Bond 7-10 Yr T, PST
0.49% Global Titans, DGT
0.47% Value SmallCap iS M, JKL
0.47% Taiwan Index, EWT
0.46% Materials VIPERs, VAW
0.45% Semiconductor SPDR, XSD
0.45% Retail, PMR
0.45% Value LargeCap Dynamic PS, PWV
0.44% Value 40 Large Low P/E FT DB, FDV
0.44% Wilshire 5000 ST TM, TMW
0.43% SmallCap Core iS M, JKJ
0.43% Small Cap VIPERs, VB
0.43% Gold Shares S.T., GLD
0.41% MidCap Growth iS M, JKH
0.41% Value MidCap Russell, IWS
0.41% Ultra QQQ Double, QLD
0.40% Technology DJ US, IYW
0.40% Value Large Cap DJ, ELV
0.40% Value S&P 500 B, IVE
0.38% Technology Global, IXN
0.38% Dividend International, PID
0.38% DIAMONDS (DJIA), DIA
0.37% Energy Global, IXC
0.36% Telecommunications Global, IXP
0.36% Growth LargeCap iS M, JKE
0.36% Technology GS, IGM
0.36% LargeCap Blend Socially Responsible iS, KLD
0.35% MidCap VIPERs, VO
0.35% Blend Total Market VIPERs, VTI
0.34% Value SmallCap VIPERS, VBR
0.33% Info Tech VIPERs, VGT
0.33% Consumer D. VIPERs, VCR
0.33% MidCap S&P 400 iS, IJH
0.33% United Kingdom Index, EWU
0.33% Germany Index, EWG
0.32% MidCap S&P 400 SPDRs, MDY
0.32% LargeCap Blend S&P 1500 iS, ISI
0.32% Metals & Mining SPDR, XME
0.31% Value VIPERs, VTV
0.31% S&P 500 iS LargeCap Blend, IVV
0.31% Value MidCap Dynamic PS, PWP
0.31% MidCap Russell, IWR
0.30% LargeCap VIPERs, VV
0.30% Growth MidCap 400 B, IJK
0.29% Growth MidCap Russell, IWP
0.29% LargeCap Blend Total Market DJ, IYY
0.29% Japan Index, EWJ
0.29% Pharmaceutical H, PPH
0.29% LargeCap Blend S&P 100, OEF
0.28% Global 100, IOO
0.27% Value LargeCap Russell 3000, IWW
0.27% Internet Architecture H, IAH
0.27% LargeCap 1000 R, IWB
0.25% Extended Mkt VIPERs, VXF
0.25% Growth VIPERs, VUG
0.25% Growth Large Cap, ELG
0.25% Growth LargeCap NASDAQ 100, QQQQ
0.24% Growth 1000 Russell, IWF
0.24% Consumer Cyclical DJ, IYC
0.23% Natural Resource iS GS, IGE
0.22% S&P 500 SPDRs LargeCap Blend, SPY
0.21% Semiconductor iS GS, IGW
0.20% Dividend SPDR, SDY
0.20% Technology SPDR, XLK
0.20% Growth MidCap S&P 400, RFG
0.19% Software, IGV
0.19% Healthcare Global, IXJ
0.19% Growth LargeCap Russell 3000, IWZ
0.19% Consumer Discretionary SPDR, XLY
0.18% IPOs, First Tr IPOX-100, FPX
0.17% LargeCap Blend S&P=Weight R, RSP
0.17% Value 1000 Russell, IWD
0.16% Basic Materials DJ US, IYM
0.15% Value LargeCap NYSE 100 iS, NY
0.15% Growth S&P 500/BARRA, IVW
0.14% Dividend High Yield Equity PS, PEY
0.13% OTC Dynamic PS, PWO
0.12% Semiconductor H, SMH
0.12% Value LargeCap iS M, JKF
0.11% Dividend Appreciation Vipers, VIG
0.11% Leisure & Entertainment, PEJ
0.10% China 25 iS, FXI
0.08% Belgium Index, EWK
0.08% Value Line Timeliness MidCap Gr, PIV
0.07% Brazil Index, EWZ
0.06% Health Care VIPERs, VHT
0.05% Value SmallCap S&P 600 B, IJS
0.05% Healthcare DJ, IYH
0.05% LargeCap Blend Core iS M, JKD
0.05% LargeCap Blend Russell 3000, IWV
0.05% Dividend DJ Select, DVY
0.04% LargeCap Rydex Rus Top 50, XLG
0.03% MidCap Blend Core iS M, JKG
0.02% Consumer Non-Cyclical, IYK
0.02% Value SmallCap S&P 600, RZV
0.00% Value LargeCap Euro STOXX 50 DJ, FEU
0.00% Utilities SPDR, XLU
0.00% Software, PSJ
0.00% India Earnings WTree, EPI
0.00% Growth S&P 500, RPG
0.00% Consumer Staples SPDR, XLP
-0.01% SmallCap PS Zacks, PZJ
-0.01% Bond, 1-3 Year Treasury, SHY
-0.02% Oil Services H, OIH
-0.03% Growth Small Cap DJ, DSG
-0.03% Capital Markets KWB ST, KCE
-0.03% Growth LargeCap NASDAQ Fidelity, ONEQ
-0.03% Health Care SPDR, XLV
-0.05% Retail H, RTH
-0.06% Growth SmallCap VIPERs, VBK
-0.07% Dividend Leaders, FDL
-0.07% Silver Trust iS, SLV
-0.08% Bond, Aggregate, AGG
-0.08% Emerging 50 BLDRS, ADRE
-0.08% Lg Cap Growth PSD, PWB
-0.08% Networking, IGN
-0.10% SmallCap S&P 600, IJR
-0.11% Growth SmallCap R 2000, IWO
-0.12% Food & Beverage, PBJ
-0.12% Pharmaceuticals, PJP
-0.13% Microcap Russell, IWC
-0.13% Growth BARRA Small Cap 600, IJT
-0.14% Growth SmallCap Dynamic PS, PWT
-0.14% Value SmallCap Russell 2000, IWN
-0.15% SmallCap Russell 2000, IWM
-0.16% Consumer Staples VIPERs, VDC
-0.16% Emerging VIPERs, VWO
-0.19% Emerging Markets, EEM
-0.22% Insurance, PIC
-0.23% Utilities VIPERs, VPU
-0.23% Energy DJ, IYE
-0.24% Short 100% QQQ, PSQ
-0.24% Semiconductors, PSI
-0.25% Energy VIPERs, VDE
-0.25% Latin Am 40, ILF
-0.26% Dividend Achievers PS, PFM
-0.27% Utilities, PUI
-0.27% Bond, 10 Year Treasury, IEF
-0.28% Short 100% S&P 500, SH
-0.28% Telecom DJ US, IYZ
-0.28% South Korea Index, EWY
-0.30% Utilities DJ, IDU
-0.30% LargeCap Blend Dynamic PS, PWC
-0.31% Energy SPDR, XLE
-0.31% Short 100% Dow 30, DOG
-0.31% Telecommunications & Wireless, PTE
-0.32% Oil & Gas, PXJ
-0.33% Hong Kong Index, EWH
-0.33% Growth SmallCap iS M, JKK
-0.34% Utilities H, UTH
-0.36% Short 100% MidCap 400, MYY
-0.36% Bond, TIPS, TIP
-0.38% Homebuilders SPDR, XHB
-0.39% Bond, 20+ Years Treasury, TLT
-0.40% WilderHill Clean Energy PS, PBW
-0.42% Transportation Av DJ, IYT
-0.43% Water Resources, PHO
-0.43% Short 200% QQQ PS, QID
-0.44% Biotech SPDR, XBI
-0.44% China LargeCap Growth G D H USX PS, PGJ
-0.46% Value SmallCap Dynamic PS, PWY
-0.46% Bond, Corp, LQD
-0.51% Bond High-Yield Corporate, HYG
-0.53% Micro Cap Zachs, PZI
-0.54% Telecom H, TTH
-0.58% Telecom Services VIPERs, VOX
-0.60% Energy Exploration & Prod, PXE
-0.67% Short 200% S&P 500 PS, SDS
-0.69% Building & Construction, PKB
-0.76% Short 200% Dow 30 PS, DXD
-0.78% Short 200% MidCap 400 PS, MZZ
-0.83% Biotech H, BBH
-1.13% Preferred Stock iS, PFF
-1.34% Biotech & Genome, PBE
-1.44% Internet B2B H, BHH
-2.20% Financial Preferred, PGF

Stock Market Commentary

Stock Market: after 4 days up, a little hesitation or pullback is normal.

NASDAQ Composite Relative Strength Ratio compared to the S&P 500 has turned down since 7/23/09 and broke down below the lows of the previous 10 weeks on 8/24/09.

Consumer Discretionary Stock Sector Relative Strength Ratio (XLY/SPY) broke down below the lows of the previous 5 weeks on 8/24/07.

Crude price continued its uptrend.

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
% Price Change, Symbol, Name
41.67% , FNM , FANNIE MAE
4.00% , TBH , Telebras HOLDRS, TBH
18.50% , FRE , FREDDIE MAC
2.27% , ADRU , Europe 100 BLDRS, ADRU
0.33% , IAH , Internet Architecture H, IAH
7.96% , ABK , AMBAC FINL GRP
8.11% , AMD , ADV MICRO DEV
0.96% , EWI , Italy Index, EWI
5.16% , SLM , SLM CORP
5.25% , LPX , LOUISIANA PAC
3.29% , HMA , HEALTH MGMT STK A
5.78% , UIS , UNISYS
3.51% , MHP , MCGRAW HILL
2.47% , EP , EL PASO
0.27% , UTH , Utilities H, UTH
2.44% , HUM , HUMANA
2.66% , UNH , UNITEDHEALTH GRP
1.14% , NVLS , NOVELLUS SYS
4.44% , HGSI , Human Genome Sciences Inc
2.62% , HON , HONEYWELL INTL
0.92% , BIG , BIG LOTS
3.16% , EWO , Austria Index, EWO
1.17% , PXN , Nanotech Lux, PXN
0.39% , EFV , Value EAFE MSCI, EFV
2.92% , LAMR , Lamar Advertising Company
1.34% , RAI , RJR TOBACCO HLDS
1.20% , EWT , Taiwan Index, EWT
0.34% , EWK , Belgium Index, EWK
2.38% , HIG , HARTFORD FINL
1.32% , TEVA , Teva Pharmaceutical Industries Limited
2.47% , ASH , ASHLAND
2.00% , DELL , DELL
1.12% , AES , AES
1.30% , VDE , Energy VIPERs, VDE
1.80% , RFMD , RF Micro Devices Inc
0.81% , COL , ROCKWELL COLLINS
3.68% , XL , XL CAPITAL STK A
2.51% , CBS , CBS CORP.
2.75% , BA , BOEING
1.12% , TNB , THOMAS & BETTS

Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-3.46% , KSU , Kansas City Southern, KSU
-2.38% , BHH , Internet B2B H, BHH
-0.22% , JKI , Value MidCap iS M, JKI
-4.26% , F , FORD MOTOR
-1.80% , RKH , Bank Regional H, RKH
-0.56% , JKL , Value SmallCap iS M, JKL
-0.44% , DGT , Global Titans, DGT
-4.08% , PNC , PNC FINL SVC
-4.48% , BBY , BEST BUY
-0.89% , XSD , Semiconductor SPDR, XSD
-3.75% , STI , SUNTRUST BANKS
-2.98% , GNTX , Gentex Corporation
-0.86% , VAW , Materials VIPERs, VAW
-4.39% , MI , MARSHAL & ILSLEY
-5.24% , SNV , SYNOVUS
-2.50% , COH , COACH
-2.25% , MRVL , MARVELL TECHNOLOGY
-3.57% , FITB , FIFTH THIRD BANC
-1.89% , AMAT , APPLIED MATERIAL
-0.48% , IXP , Telecommunications Global, IXP
-0.16% , DSG , Growth Small Cap DJ, DSG
-1.79% , S , SPRINT NEXTEL
-1.43% , IAU , Gold COMEX iS, IAU
-0.29% , JKG , MidCap Blend Core iS M, JKG
-1.21% , ISIL , INTERSIL CORP
-3.15% , SHLD , SEARS HOLDINGS
-0.25% , PKB , Building & Construction, PKB
-1.24% , CSX , CSX
-0.20% , PZJ , SmallCap PS Zacks, PZJ
-1.30% , PST , 200% Short Bond 7-10 Yr T, PST
-2.90% , CIT , CIT GROUP
-1.33% , SPLS , STAPLES
-0.49% , RZV , Value SmallCap S&P 600, RZV
-1.70% , KO , COCA COLA
-2.38% , SBUX , STARBUCKS
-0.98% , ADM , ARCHER DANIELS
-3.47% , RYAAY , Ryanair Holdings plc
-0.41% , IJK , Growth MidCap 400 B, IJK
-5.23% , GT , GOODYEAR TIRE
-0.82% , IYF , Financial DJ US, IYF

9 major U.S. stock sectors ranked in order of long-term relative strength:

Technology (XLK) Neutral, Market Weight. The Relative Strength Ratio (XLK/SPY) turned down after 7/22/09. XLK was so strong from 12/31/08 to 7/22/09 that it still ranks high in this long-term relative strength ranking. XLK/SPY rose to its highest level in 7 years on 7/22/09, confirming a long-term uptrend in effect since 9/30/02.

Consumer Discretionary (XLY) Neutral, Market Weight. The Relative Strength Ratio (XLY/SPY) broke down below the lows of the previous 5 weeks on 8/24/07. The ratio turned down after 8/7/09, suggesting a more defensive tone to the market. Long term, XLY/SPY has trended downward since 1/5/05. XLY was strong from 11/19/08 to 4/30/09, and that past strength accounts for XLY’s high ranking here.

Health Care (XLV) Neutral, Market Weight. The Relative Strength Ratio (XLV/SPY) has flattened out in recent months. Long term, XLV/SPY has trended upward for 15 months, since 5/15/08.

Materials (XLB) Neutral, Market Weight. The Relative Strength Ratio (XLB/SPY) turned down moderately after 8/5/09 for a mild short-term correction. Long term, XLB/SPY has been in a secular Bull trend since 9/27/00.

Financial (XLF) Neutral, Market Weight. The Relative Strength Ratio (XLF/SPY) has flattened out in recent weeks. It outperformed from 3/6/09 to 8/7/09. Long term, XLF/SPY has been in a secular Bear trend since 3/23/04.

Consumer Staples (XLP) Neutral, Market Weight. The Relative Strength Ratio (XLP/SPY) underperformed moderately since 11/20/08. Long term, XLP/SPY was in a secular Bull trend from 3/27/00 to 11/20/08.

Industrial (XLI) Bearish, Underweight. The Relative Strength Ratio (XLI/SPY) in recent months appears to be consolidating previous massive losses. XLI/SPY fell long and hard from 3/31/08 to 3/6/09.

Utilities (XLU) Bearish, Underweight. The Relative Strength Ratio (XLU/SPY) has stabilized and has been about flat since 6/9/09. XLU/SPY underperformed from 11/21/08 to 6/9/09.

Energy (XLE) Bearish, Underweight. The Relative Strength Ratio (XLE/SPY) recovered to a 3-week high on 8/24/09, which may seem bullish for the short term. The problem is that it just made a new 10-month low on 8/17/09, to confirm a Bearish cycle phase. XLE/SPY has trended down since 7/1/08.

The relative performance ratios of the 9 major sectors appear to be shifting back again toward avoidance of risk. The sectors reflected a growing investor appetite for risk in March and April 2009, shifted away from risk from May into early July, then shifted toward risk from 7/13/09 to early August.

Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) has been trending down since making a peak on 8/3/09 and broke 4-week lows on 8/17/09. Still, the EEM/SPY Ratio may be in a rising trend from the low on 10/24/08. In addition, absolute price has been in a rising trend since 11/20/08.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) peaked on 8/3/09 and has eased lower since. EFA/SPY is still up YTD, but only very slightly. Long term, EFA underperformed since 11/27/07. EFA is the ETF representing the EAFE, the international developed country stock markets, excluding the U.S. and Canada.

NASDAQ Composite Relative Strength Ratio compared to the versus the S&P 500 has turned down since 7/23/09 and broke down below the lows of the previous 10 weeks on 8/24/09.

Growth Stock/Value Stock Relative Strength Ratio (IWF/IWD) appears to be turning choppy/neutral/sideways in recent months. Long term, the RS Ratio has been in an uptrend since 8/8/06, indicating major trend strength.

Russell 1000 Value ETF Relative Strength Ratio (IWD/SPY) appears to be turning choppy/neutral/sideways in recent months. Long term, the IWD RS Ratio remains in a Bearish Major Trend, underperforming the SPY since 3/22/07.

The S&P 500 equally weighted index rose a new high relative to the S&P 500 capitalization weighted index on 8/13/09, confirming a major uptrend.

The Largest Cap S&P 100 / S&P 500 Relative Strength Ratio (OEX/SPX) has stabilized since making a low on 8/7/09. The ratio had been in a downtrend from 11/20/08 to 8/7/09, indicating that the largest capitalization stocks were lagging the broader market.

The Small Cap/Large Cap Relative Strength Ratio (IWM/SPY) has firmed modestly since 8/17/09. The ratio made a 9-month high on 8/4/09, which indicated a relative uptrend for the longer term for Small Cap stocks.


The Mid Cap/Large Cap Relative Strength Ratio (MDY/SPY) broke down below 2-week lows on 8/17/09, confirming a downtrend for the short term.

Crude Oil nearest futures contract price continued its uptrend. Oil broke out above its previous high at 73.38 set on 6/30/09. Oil now appears to have further upside potential, possibly to the 85-90 zone.

The Energy stock sector has underperformed Crude Oil since 2/18/09. The XLE to Crude Oil Ratio broke down to a new 7-month low on 6/29/09.

Gold nearest futures contract price gave back most of Friday’s gain. Gold appears to have some resistance at previous highs of 957.6 and 960.1. For support, watch previous lows at 931.5, 927.2, 925.2 and 904.8, based on the nearest futures contract. Intermediate term, Gold appears to be in a triangle consolidation since 2/16/09. Longer term, Gold has been consolidating since making a peak at 1,033.9 on 3/17/08.


Gold Mining Stocks ETF (GDX) Relative Strength Ratio (relative to Gold bullion) broke previous 4-week lows on 8/17/09, which may be Bearish for both GDX and Gold bullion.

Silver/Gold ratio peaked on 6/2/09 and has entered a short-term downtrend since 8/13/09, suggesting waning confidence in world economic recovery.

Copper nearest futures contract price broke out above the highs of the previous 3 trading days, suggesting a minor turn back toward confidence in world economic recovery.

U.S. Treasury Bond nearest futures contract price broke down below the lows of the previous 4 trading days on 8/21/09. The minor trend has been Bullish but now appears to be correcting. Intermediate term, Bonds appear to be consolidating in a neutral trading range. On 8/7/09, Bonds found support at the upper end of the 112-115 zone of many previous reversal points (including both lows and highs).

Bond quality ratio (LQD/TLT) turned down again. LQD/TLT is iShares iBoxx $ Invest Grade Corp Bond ETF (LQD) price divided by 20+ Years US Treasury Bond ETF price (TLT).

The U.S. dollar nearest futures contract price fell below the lows of the previous 10 trading days on 8/21/09, which was a bearish confirmation of the preexisting short-term downtrend. Intermediate term, USD may be merely consolidating losses within a Bearish trend. Longer term, USD fell below 10-month lows on 8/5/09 and remains in a Bearish trend since its peak set on 3/4/09.

The Art of Contrary Thinking: The various surveys of investor sentiment are best considered as background factors. The majority of investors can be right for a long time before a major trend finally changes course. So, Contrary Thinking should be used with more precise market timing tools.

Advisory Service Sentiment: There were 48.3% Bulls versus 23.1% Bears as of 8/19/09, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio was 2.09, down from 2.32 the previous week. That 2.32 was the highest reading since 12/26/07. The ratio’s 39-year range is 0.28 to 17.51, the median is 1.43, and the mean is 1.73.

VIX Fear Index has been fluctuating sideways between 23 and 28 since 7/24/09, after falling from a peak of 80.86 set on 11/20/08. 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.

VXN Fear Index has been fluctuating sideways between 24 and 28 since 7/17/09, after falling from a peak of 80.64 set on 11/20/08. VXN measures NASDAQ Volatility using a method comparable to that used for VIX.

ISEE Call/Put Ratio rose to 1.19 on 8/24/09, still indicating bearish sentiment. The ratio’s 5-year mean is 1.43, median is 1.38, and its range is 0.51 to 3.16.

CBOE Put/Call Ratio rose to 0.54 on 8/24/09, indicating bullish sentiment. The ratio’s 5-year mean is 0.67, median is 0.65, and its range is 0.35 to 1.35.

Fundamentals: The 2003-2007 Bull Market was fed by abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and a net balance of positive earnings surprises. The unfolding fallout from the credit market crisis derailed that engine. Since the stock market low on 3/9/09, massive monetary and fiscal stimulation appears to have had an increasingly Bullish impact on investor sentiment.

The Dow Theory signaled a Primary Tide Bull Market on 7/23/09 when both the Dow-Jones Industrial Average the Dow-Jones Transportation Average closed above their May-June 2009 closing price highs. This reverses the previous signal: the two Averages signaled a Primary Tide Bear Market on 11/21/07, when both Averages closed below their closing price lows of August, 2007.

S&P 500 Cash Index Potential Resistance
1,576.09, high of 10/11/2007
1,552.76, high of 10/31/2007
1,523.57, high of 12/11/2007
1,498.85, high of 12/26/2007
1,440.24, high of 5/19/2008
1,406.32, high of 5/29/2008
1,381.50, Fibonacci 78.6% of 2007-2009 drop
1,366.59, high of 6/17/2008
1,335.63, high of 6/25/2008
1,313.15, high of 8/11/2008
1,274.42, high of 9/8/2008
1,255.09, high of 9/12/2008
1,238.807, Fibonacci 78.6% of 1,576.09 high
1,228.74, Fibonacci 61.8% of 2007-2009 drop
1,220.03, high of 9/25/2008
1,121.44, Fibonacci 50.0% of 2007-2009 drop
1,077.08, Fibonacci 61.8% of 2002-2007 upmove
1,044.31, high of 10/14/2008

S&P 500 Cash Index Potential Support
1,014.14, Fibonacci 38.2% of 2007-2009 drop
1009.06, low of 8/21/2009
1,007.78, Gann 37.5% of 2007-2009 drop
978.51, low of 8/17/2009
956.23, high of 6/11/2009
930.17, high of 5/8/2009
869.32, low of 7/8/2009
826.83, low of 4/21/2009
814.53, low of 4/7/2009
813.62, high of 4/1/2009
779.81, low of 3/30/2009
666.79, intraday low of 3/6/2009
665.23, Fibonacci 61.8% of 2002-2007 upmove
602.07, Fibonacci 38.2% of 1,576.09 high

Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol

3.16% Austria Index, EWO
2.27% Europe 100 BLDRS, ADRU
2.15% Australia Index, EWA
1.81% Bond, 20+ Years Treasury, TLT
1.60% Pacific ex-Japan, EPP
1.30% Energy VIPERs, VDE
1.28% Energy SPDR, XLE
1.28% Singapore Index, EWS
1.23% Energy DJ, IYE
1.21% Oil & Gas, PXJ
1.20% Taiwan Index, EWT
1.17% Nanotech Lux, PXN
1.07% Oil Services H, OIH
0.96% Italy Index, EWI
0.78% Short 200% MidCap 400 PS, MZZ
0.72% Euro STOXX 50, FEZ
0.70% Health Care SPDR, XLV
0.66% South Korea Index, EWY
0.66% Financial Preferred, PGF
0.62% Bond, 10 Year Treasury, IEF
0.58% Value LargeCap Dynamic PS, PWV
0.55% Energy Exploration & Prod, PXE
0.54% Pharmaceutical H, PPH
0.52% Aerospace & Defense, PPA
0.51% Bond, Corp, LQD
0.44% Emerging Markets, EEM
0.44% IPOs, First Tr IPOX-100, FPX
0.42% Telecom H, TTH
0.42% Health Care VIPERs, VHT
0.41% Bond, Aggregate, AGG
0.40% Short 100% MidCap 400, MYY
0.39% Energy Global, IXC
0.39% Value EAFE MSCI, EFV
0.38% Healthcare DJ, IYH
0.37% Internet H, HHH
0.36% Pharmaceuticals, PJP
0.35% Bond, TIPS, TIP
0.34% Belgium Index, EWK
0.33% Internet Architecture H, IAH
0.33% Value 40 Large Low P/E FT DB, FDV
0.32% Natural Resource iS GS, IGE
0.31% Metals & Mining SPDR, XME
0.31% Growth S&P 500/BARRA, IVW
0.27% Utilities H, UTH
0.26% LargeCap Rydex Rus Top 50, XLG
0.26% Growth S&P 500, RPG
0.25% MidCap Russell, IWR
0.25% Value LargeCap NYSE 100 iS, NY
0.25% Value SmallCap Dynamic PS, PWY
0.25% Value LargeCap iS M, JKF
0.25% Ultra S&P500 Double, SSO
0.24% Switzerland Index, EWL
0.23% Short 200% QQQ PS, QID
0.22% Utilities VIPERs, VPU
0.22% Ultra Dow30 Double, DDM
0.20% Malaysia Index, EWM
0.20% Industrial SPDR, XLI
0.19% Emerging VIPERs, VWO
0.19% Healthcare Global, IXJ
0.19% LargeCap Blend S&P 100, OEF
0.18% Oil, Crude, U.S. Oil Fund, USO
0.18% Growth SmallCap R 2000, IWO
0.17% Commodity Tracking, DBC
0.17% Utilities SPDR, XLU
0.17% Growth SmallCap VIPERs, VBK
0.16% Software H, SWH
0.15% Global 100, IOO
0.14% Technology Global, IXN
0.14% Utilities DJ, IDU
0.14% Pacific VIPERs, VPL
0.14% South Africa Index, EZA
0.13% Blend Total Market VIPERs, VTI
0.13% France Index, EWQ
0.13% Industrial LargeCap Blend DJ US, IYJ
0.12% Biotech & Genome, PBE
0.12% Bond, 1-3 Year Treasury, SHY
0.12% Short 100% QQQ, PSQ
0.11% Value VIPERs, VTV
0.11% India Earnings WTree, EPI
0.11% DIAMONDS (DJIA), DIA
0.10% Dividend Leaders, FDL
0.09% Dividend Achievers PS, PFM
0.09% Industrials VIPERs, VIS
0.08% Canada Index, EWC
0.08% Telecom Services VIPERs, VOX
0.07% Growth LargeCap NASDAQ Fidelity, ONEQ
0.06% Spain Index, EWP
0.06% LargeCap Blend Total Market DJ, IYY
0.06% Growth BARRA Small Cap 600, IJT
0.05% Microcap Russell, IWC
0.04% Consumer Staples SPDR, XLP
0.03% Value LargeCap Russell 3000, IWW
0.03% EMU Europe Index, EZU
0.02% LargeCap VIPERs, VV
0.00% Value 1000 Russell, IWD
0.00% Netherlands Index, EWN
0.00% Lg Cap Growth PSD, PWB
0.00% LargeCap 1000 R, IWB
0.00% Growth Large Cap, ELG
0.00% Germany Index, EWG
0.00% Dividend International, PID
0.00% Developed 100 BLDRS, ADRD
-0.01% S&P 500 iS LargeCap Blend, IVV
-0.01% S&P 500 SPDRs LargeCap Blend, SPY
-0.02% LargeCap Blend Dynamic PS, PWC
-0.02% EAFE Index, EFA
-0.02% Growth LargeCap iS M, JKE
-0.03% Wilshire 5000 ST TM, TMW
-0.03% Emerging 50 BLDRS, ADRE
-0.03% Preferred Stock iS, PFF
-0.03% Value LargeCap Euro STOXX 50 DJ, FEU
-0.03% SmallCap Russell 2000, IWM
-0.05% Short 200% S&P 500 PS, SDS
-0.05% Consumer Staples VIPERs, VDC
-0.05% LargeCap Blend Russell 3000, IWV
-0.05% Software, PSJ
-0.05% Growth LargeCap Russell 3000, IWZ
-0.06% Growth VIPERs, VUG
-0.07% Growth 1000 Russell, IWF
-0.07% Software, IGV
-0.07% Food & Beverage, PBJ
-0.07% Value Large Cap DJ, ELV
-0.08% Asia 50 BLDRS, ADRA
-0.08% Growth SmallCap Dynamic PS, PWT
-0.10% LargeCap Blend NYSE Composite iS, NYC
-0.10% Growth LargeCap NASDAQ 100, QQQQ
-0.10% LargeCap Blend Core iS M, JKD
-0.10% Short 100% S&P 500, SH
-0.11% SmallCap Core iS M, JKJ
-0.11% Value SmallCap S&P 600 B, IJS
-0.11% Telecom DJ US, IYZ
-0.11% LargeCap Blend S&P 1500 iS, ISI
-0.11% Value Small Cap DJ, DSV
-0.12% Telecommunications & Wireless, PTE
-0.13% Info Tech VIPERs, VGT
-0.13% Hong Kong Index, EWH
-0.14% Utilities, PUI
-0.14% Europe 350 S&P Index, IEV
-0.14% SmallCap S&P 600, IJR
-0.14% Silver Trust iS, SLV
-0.15% Value SmallCap Russell 2000, IWN
-0.15% Ultra QQQ Double, QLD
-0.16% Growth EAFE MSCI, EFG
-0.16% Growth Small Cap DJ, DSG
-0.17% Short 100% Dow 30, DOG
-0.18% Extended Mkt VIPERs, VXF
-0.19% Dividend SPDR, SDY
-0.20% SmallCap PS Zacks, PZJ
-0.20% Value SmallCap VIPERS, VBR
-0.20% Japan Index, EWJ
-0.20% Technology DJ US, IYW
-0.21% LargeCap Blend Socially Responsible iS, KLD
-0.21% Technology GS, IGM
-0.21% Sweden Index, EWD
-0.22% Short 200% Dow 30 PS, DXD
-0.22% Value MidCap iS M, JKI
-0.22% OTC Dynamic PS, PWO
-0.23% MidCap S&P 400 iS, IJH
-0.24% Value MidCap Russell, IWS
-0.24% Value S&P 500, RPV
-0.24% Financials Global LargeCap Value, IXG
-0.25% Small Cap VIPERs, VB
-0.25% Biotech H, BBH
-0.25% Value MidCap S&P 400 B, IJJ
-0.25% Building & Construction, PKB
-0.25% Micro Cap Zachs, PZI
-0.25% Dividend Appreciation Vipers, VIG
-0.25% European VIPERs, VGK
-0.26% Brazil Index, EWZ
-0.26% Growth Mid Cap Dynamic PS, PWJ
-0.27% MidCap S&P 400 SPDRs, MDY
-0.27% Value S&P 500 B, IVE
-0.27% Growth MidCap Russell, IWP
-0.27% Japan LargeCap Blend TOPIX 150, ITF
-0.28% Dividend High Yield Equity PS, PEY
-0.28% LargeCap Blend S&P=Weight R, RSP
-0.29% Value LargeCap Fundamental RAFI 1000, PRF
-0.29% MidCap Blend Core iS M, JKG
-0.30% Dividend DJ Select, DVY
-0.30% Technology SPDR, XLK
-0.32% Consumer Cyclical DJ, IYC
-0.32% Growth SmallCap iS M, JKK
-0.33% Homebuilders SPDR, XHB
-0.33% United Kingdom Index, EWU
-0.33% Consumer Non-Cyclical, IYK
-0.34% REIT VIPERs, VNQ
-0.37% Growth MidCap S&P 400, RFG
-0.38% Value Line Timeliness MidCap Gr, PIV
-0.41% Biotech SPDR, XBI
-0.41% Growth MidCap 400 B, IJK
-0.44% Global Titans, DGT
-0.44% China LargeCap Growth G D H USX PS, PGJ
-0.44% Insurance, PIC
-0.46% Value MidCap Dynamic PS, PWP
-0.47% Latin Am 40, ILF
-0.48% Telecommunications Global, IXP
-0.49% Water Resources, PHO
-0.49% Value SmallCap S&P 600, RZV
-0.50% MidCap Growth iS M, JKH
-0.50% Transportation Av DJ, IYT
-0.52% Bond High-Yield Corporate, HYG
-0.54% MidCap VIPERs, VO
-0.56% Value SmallCap iS M, JKL
-0.57% Real Estate US DJ, IYR
-0.57% Retail H, RTH
-0.62% Realty Cohen & Steers, ICF
-0.63% Basic Materials DJ US, IYM
-0.66% Ultra MidCap400 Double, MVV
-0.70% Technology MS sT, MTK
-0.71% REIT Wilshire, RWR
-0.72% Consumer Discretionary SPDR, XLY
-0.74% Capital Markets KWB ST, KCE
-0.75% Financials VIPERs, VFH
-0.77% Financial SPDR, XLF
-0.79% WilderHill Clean Energy PS, PBW
-0.79% Materials SPDR, XLB
-0.82% Consumer D. VIPERs, VCR
-0.82% Financial DJ US, IYF
-0.84% Semiconductor H, SMH
-0.86% Materials VIPERs, VAW
-0.89% Semiconductor SPDR, XSD
-0.90% Leisure & Entertainment, PEJ
-0.93% China 25 iS, FXI
-0.96% Semiconductor iS GS, IGW
-0.98% Semiconductors, PSI
-1.06% Networking, IGN
-1.10% Financial Services DJ, IYG
-1.11% Retail, PMR
-1.22% Mexico Index, EWW
-1.30% 200% Short Bond 7-10 Yr T, PST
-1.40% Gold Shares S.T., GLD
-1.80% Bank Regional H, RKH
-1.90% Internet Infrastructure H, IIH
-2.38% Internet B2B H, BHH
-3.29% 200% Short US T Bond, TBT