Weakness in Copper Suggests Doubts About Economic Outlook

by Robert W. Colby

The S&P 500 Composite (SPX, 1,260.34) rose 6.29 points or 0.50% on Wednesday, August 3, 2011. This is a very small recovery of the 6.76% loss over the previous 7 trading days. The trend remains bearish.

The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) fell further below 5-month lows and key SMAs. MDY/SPY appears bearish for the medium term.

Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) closed above the highs of the previous 9 months, again confirming a significant uptrend.

Copper, iPath DJ-UBS Copper TR Sub-Idx ETN (JJC ) fell below the lows of the previous 4 weeks, suggesting a short-term downtrend. Weakness in Copper suggests doubts about the economic outlook.

Crude Oil, United States Oil ETF (USO) fell further below the lows of the previous 5 weeks, again confirming a short-term downtrend.

Gold, SPDR Gold Shares ETF (GLD) rose above all-time highs.

Silver, iShares Silver Trust ETF (SLV) rose above 3-month highs, suggesting a significant rally.

Stock Market Indicators

NASDAQ Composite/S&P 500 Relative Strength Ratio has been strong since bottoming on 6/20/11. The NASDAQ Composite has been holding above its June low, thereby demonstrating strength relative to most other stock price indexes, which broke down below their June lows. Although the Ratio’s 50-day SMA remains below the 200-day SMA, the spread is closing and the SMAs may cross in days ahead. Long term, the trend remains bullish. Absolute price peaked on 5/2/11 at 2,887.75 (intraday) and appears to be consolidating.

Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY)rose above 7-week highs on 8/1/11, suggesting a recovery attempt. The EEM/SPY ratio remains below the 200-day SMA, and the 50-day SMA remains below the 200-day SMA, so the trend is neutral. Absolute price is bearish: EEM broke down below 4-month lows on 8/3/11.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) has been in a major long-term downtrend since peaking on 11/27/07. The Ratio fell below its 50-day SMA on 8/1/11, remains below the 200-day SMA, and the 50-day SMA remains below the 200-day SMA. Absolute price has been weak since 5/2/11 and is bearish relative to the same SMAs.

The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) rose above the highs of the previous 5 months on 8/2/11, suggesting a medium-term recovery. OEX did not close below its June closing price low, thereby demonstrating strength relative to most other stock price indexes, which broke down below their June lows. Longer term, however, OEX/SPX fell below 28-year lows on 5/26/11, confirming a bearish major trend.

The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) fell below 7-week lows on 8/2/11. IWM/SPY appears bearish for the short term and medium term.

The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) fell further below 5-month lows and key SMAs on 8/3/11. MDY/SPY appears bearish for the medium term.

Advisory Service Sentiment: There were 46.3% Bulls versus 24.7% Bears as of 8/3/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio fell to 1.87, down from 2.30. This ratio indicates moderate bullish complacency when compared to the 20-year median of 1.56 and mean of 1.64.

VIX Fear Index made lower highs in recent days, after jumping to 25.94 intraday on 7/29/11. VIX remains well below its peak of 31.28 on 3/18/11. Options players appear less fearful than I would estimate when I consider the sharp drop in stock prices. 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, 1,260.34) rose 6.29 points or 0.50% on Wednesday, August 3, 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
1370.50, 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

S&P 500 Cash Index Potential Support 
1238.81, Fibonacci 78.6% of 1,576.09 high
1235.05, high of 12/7/10
1,234.56, 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
1173.00, low of 11/16/10
1171.70, low of 10/27/10
1166.74, low of 10/20/10
1159.71, low of 10/19/10
1,151.41, low of 10/7/10
1,131.87, low of 10/4/10
1122.79, low of 9/23/2010
1114.63, low of 9/15/2010
1110.88, low of 9/10/2010
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) closed above the highs of the previous 9 months on 8/3/11, again confirming a significant uptrend. Support 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance 106.32, and 109.34.

Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) fell below 6-weeks lows and fell further below its 20-, and 50-, and 200-day simple moving averages on 8/2/11, confirming a significant bearish trend. JNK/LQD broke down below 9-month lows on 6/16/11.

U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) fell below the lows of the previous 5 weeks on 8/3/11, suggesting a short-term downtrend. TIP/IEF fell below 3 key SMAs, of 20, 50, and 200 days. This means fixed-income investors currently prefer the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) over the inflation-protected TIPs.
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Tangible Assets, Commodities

U.S. dollar ETF (UUP) fell below the lows of the previous 11 weeks on 7/26/11, again confirming a significant downtrend. In addition, on 7/21/11, UUP fell below the lower boundary line of a Symmetrical Triangle Consolidation Pattern from the low at 20.84 on 5/4/11. Support 20.91 and 20.84. Resistance 21.18, 21.74, 21.86, and 22.21.

Agriculture, PowerShares DB Agriculture Fund ETF (DBA) rose above last week’s high on 8/2/11, but it fell below the lows of the previous 4 weeks on 7/29/11, suggesting a downtrend. Call it uncertain. In the longer time frame. DBA may be forming a bearish Descending Triangle Top Reversal Pattern since its high at 35.58 set on 3/4/11. Support 32.17, 31.65, and 31.46. Resistance 33.42, 34.83, and 35.58.

Crude Oil, United States Oil ETF (USO) fell further below the lows of the previous 5 weeks and closed further below its 20-, 50-, and 200-day simple moving averages on 8/3/11, again confirming a short-term downtrend. Support 35.14. Resistance 39.25, 40.74, and 45.60.

Gold, SPDR Gold Shares ETF (GLD) rose above all-time highs on 8/3/11. The dominant trend remains persistently bullish. In a world of too much debt, weak currencies, and self-serving politicians, investors around the globe seek the safety of gold as the only forever-true money. Support: 156.11, 154.10, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: none.

Gold Mining Stocks ETF (GDX) Relative (to the Gold bullion ETF) Strength Ratio (GDX/GLD) fell further below its 50- and 200-day SMAs on 7/29/11. GDX/GLD fell below 27-month lows on 6/17/11, which was a bearish indication for the long term. The Ratio is down substantially since its peak on 4/8/11, and the main trend remains bearish.

Silver, iShares Silver Trust ETF (SLV) rose above 3-month highs on 8/3/11, suggesting a significant rally. Longer term, Silver appears to have emerged on the bullish side of a 2-month Triangle Consolidation. Support 38.03, 37.23, 34.02, and 31.97. Resistance: 44.71 and 48.35.

Silver/Gold ETFs Ratio (SLV/GLD) is in a bullish position, rising above rising 50- and 200-day SMAs.

Copper, iPath DJ-UBS Copper TR Sub-Idx ETN (JJC ) fell below the lows of the previous 4 weeks on 8/3/11, suggesting a short-term downtrend. JJC had been in a bullish trend much of the time since bottoming at 51.13 on 5/11/11. Strength in Copper suggests confidence in the economic outlook, while Weakness suggests doubts about the future. Support 55.50, 52.93, 52.12, 51.13. Resistance: 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 

1.16% , JKK , Growth SmallCap iS M, JKK
9.29% , EK , EASTMAN KODAK
0.80% , IXN , Technology Global, IXN
0.23% , TMW , Wilshire 5000 ST TM, TMW
8.74% , XL , XL CAPITAL STK A
4.89% , RIMM , RESEARCH IN MOTION LTD
0.33% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
1.20% , PBJ , Food & Beverage, PBJ
1.91% , EWP , Spain Index, EWP
1.34% , IGM , Technology GS, IGM
0.75% , IYC , Consumer Cyclical DJ, IYC
1.44% , XSD , Semiconductor SPDR, XSD
0.85% , JKH , MidCap Growth iS M, JKH
1.36% , VGT , Info Tech VIPERs, VGT
0.91% , FEZ , Euro STOXX 50, FEZ
3.51% , SNV , SYNOVUS
2.20% , MAR , MARRIOTT INTL STK A
0.26% , JKI , Value MidCap iS M, JKI
2.74% , SRCL , Stericycle, SRCL
0.49% , SWH , Software H, SWH
1.30% , PMR , Retail, PMR
3.11% , AGN , ALLERGAN
0.51% , OEF , LargeCap Blend S&P 100, OEF
1.29% , IGV , Software, IGV
1.83% , SLV , Silver Trust iS, SLV
4.60% , SNDK , SanDisk Corporation
5.74% , LXK , LEXMARK INTL STK A
2.90% , ROST , Ross Stores Inc
1.19% , MTK , Technology MS sT, MTK
0.87% , ONEQ , Growth LargeCap NASDAQ Fidelity, ONEQ
0.52% , IWV , LargeCap Blend Russell 3000, IWV
3.31% , UNM , UNUMPROVIDENT
0.32% , RZV , Value SmallCap S&P 600, RZV

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name 

-1.95% , PWO , OTC Dynamic PS, PWO
-1.86% , UTH , Utilities H, UTH
-0.24% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-6.15% , CTL , CENTURYTEL
-5.12% , MRO , MARATHON OIL
-2.16% , ERIC.O , LM Ericsson Telephone Company
-2.13% , GRMN , GARMIN LTD
-0.92% , PSQ , Short 100% QQQ, PSQ
-2.01% , CLX , CLOROX
-0.97% , MZZ , Short 200% MidCap 400 PS, MZZ
-1.86% , SNI , Scripps Networks Interactive
-0.79% , RWR , REIT Wilshire, RWR
-1.31% , NY , Value LargeCap NYSE 100 iS, NY
-1.36% , ECH , Chile MSCI iS, ECH
-2.74% , HP , Helmerich & Payne HP
-1.48% , PKI , PERKINELMER
-3.30% , MBI , MBIA
-2.55% , KWT , Solar Energy MV, KWT
-2.02% , BHI , BAKER HUGHES
-2.03% , AVP , AVON
-1.34% , RTN , RAYTHEON
-1.72% , BIG , BIG LOTS
-3.36% , PHM , PULTE HOMES
-1.42% , DBO , Oil Fund PowerShares, DBO
-1.26% , BBBY , BED BATH BEYOND
-1.08% , PSTL , Steel Global PS ETF, PSTL
-1.30% , SYMC , SYMANTEC
-1.31% , KSS , KOHLS
-1.49% , DBC , Commodity Tracking, DBC
-0.45% , VWO , Emerging VIPERs, VWO
-1.51% , MTB , M&T BANK
-1.04% , EL , Estee Lauder
-1.31% , APA , APACHE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

2.80% Networking, IGN
2.44% Silver Miners Global X, SIL
2.12% Turkey MSCI iS, TUR
1.91% Spain Index, EWP
1.83% Silver Trust iS, SLV
1.45% South Africa Index, EZA
1.44% Semiconductor SPDR, XSD
1.36% Info Tech VIPERs, VGT
1.19% Telecom DJ US, IYZ
1.18% Semiconductor iS IGW, SOXX
1.10% Financial Services DJ, IYG
1.03% Technology SPDR, XLK
1.01% Technology DJ US, IYW
1.01% EMU Europe Index, EZU
0.96% QQQ Nasdaq 100 Trust, QQQ
0.96% Italy Index, EWI
0.93% Growth MidCap Russell, IWP
0.93% European VIPERs, VGK
0.92% Bond Muni ATM-Free S&P iS, MUB
0.90% Industrial SPDR, XLI
0.88% France Index, EWQ
0.86% Capital Markets KWB ST, KCE
0.84% Growth SmallCap VIPERs, VBK
0.84% Germany Index, EWG
0.83% Microcap Russell, IWC
0.79% Growth VIPERs, VUG
0.78% Growth SmallCap R 2000, IWO
0.76% Growth 1000 Russell, IWF
0.75% Growth MidCap 400 B, IJK
0.75% Growth S&P 500/BARRA, IVW
0.74% Consumer Discretionary SPDR, XLY
0.74% Financial DJ US, IYF
0.73% Water Resources, PHO
0.71% Europe 350 S&P Index, IEV
0.70% Growth BARRA Small Cap 600, IJT
0.67% Netherlands Index, EWN
0.66% SmallCap Russell 2000, IWM
0.65% Bond Ex-US Treas, BWX
0.64% Frontier Markets Guggenheim , FRN
0.62% LargeCap Blend S&P=Weight R, RSP
0.60% LargeCap 1000 R, IWB
0.58% EAFE Index, EFA
0.56% Blend Total Market VIPERs, VTI
0.54% S&P 500 SPDRs LargeCap Blend, SPY
0.54% SmallCap S&P 600, IJR
0.54% LargeCap VIPERs, VV
0.54% Value EAFE MSCI, EFV
0.52% S&P 500 iS LargeCap Blend, IVV
0.52% LargeCap Blend Russell 3000, IWV
0.52% Materials SPDR, XLB
0.51% Dividend Appreciation Vipers, VIG
0.51% LargeCap Blend S&P 100, OEF
0.50% MidCap Russell, IWR
0.50% Canada Index, EWC
0.49% Financial SPDR, XLF
0.49% Global 100, IOO
0.47% Belgium Index, EWK
0.47% Value SmallCap S&P 600 B, IJS
0.46% Small Cap VIPERs, VB
0.45% Austria Index, EWO
0.44% Transportation Av DJ, IYT
0.41% MidCap S&P 400 SPDRs, MDY
0.40% Financials VIPERs, VFH
0.40% Consumer Staples SPDR, XLP
0.37% MidCap S&P 400 iS, IJH
0.37% Value SmallCap Russell 2000, IWN
0.35% Switzerland Index, EWL
0.34% Thailand MSCI iS, THD
0.33% Malaysia Index, EWM
0.32% Value VIPERs, VTV
0.32% Value MidCap Russell, IWS
0.31% Value 1000 Russell, IWD
0.31% Value S&P 500 B, IVE
0.31% Global ex US ACWI iS, ACWX
0.29% United Kingdom Index, EWU
0.29% DIAMONDS (DJIA), DIA
0.27% India PS, PIN
0.26% Preferred Stock iS, PFF
0.25% WilderHill Clean Energy PS, PBW
0.23% Financial Preferred, PGF
0.22% Dividend SPDR, SDY
0.20% Bond, 20+ Years Treasury, TLT
0.19% Dividend International, PID
0.19% Growth EAFE MSCI, EFG
0.19% Japan Index, EWJ
0.19% Basic Materials DJ US, IYM
0.18% Homebuilders SPDR, XHB
0.18% Health Care SPDR, XLV
0.18% Indonesia MV, IDX
0.15% Value SmallCap VIPERS, VBR
0.12% Dividend High Yield Equity PS, PEY
0.10% Bond, Aggregate, AGG
0.08% Bond, 10 Year Treasury, IEF
0.08% Dividend DJ Select, DVY
0.05% Value LargeCap Dynamic PS, PWV
0.01% Bond Treasury Short-Term iS, SHV
0.00% Utilities SPDR, XLU
0.00% Sweden Index, EWD
-0.01% Bond, 1-3 Year Treasury, SHY
-0.01% Utilities VIPERs, VPU
-0.02% Gold Shares S.T., GLD
-0.04% Bond, Corp, LQD
-0.04% Bond EmrgMkt JPM iS, EMB
-0.04% Value MidCap S&P 400 B, IJJ
-0.06% Bond, High-Yield Corporate, HYG
-0.13% India Earnings WTree, EPI
-0.21% Singapore Index, EWS
-0.23% Bond, High-Yield Junk, JNK
-0.23% Pacific VIPERs, VPL
-0.27% Small Cap EAFE MSCI iS, SCZ
-0.32% Hong Kong Index, EWH
-0.33% Energy & Nat Res iS GS, IGE
-0.35% Emerging Markets, EEM
-0.35% China LargeCap Growth G D H USX PS, PGJ
-0.36% Metals & Mining SPDR, XME
-0.40% Taiwan Index, EWT
-0.45% Emerging VIPERs, VWO
-0.45% Energy VIPERs, VDE
-0.49% Agriculture DB PS, DBA
-0.52% Russia MV, RSX
-0.53% China 25 iS, FXI
-0.55% Biotech SPDR, XBI
-0.58% Energy SPDR, XLE
-0.61% Energy DJ, IYE
-0.62% Bond, TIPS, TIP
-0.62% Real Estate US DJ, IYR
-0.65% Emerging 50 BLDRS, ADRE
-0.68% Realty Cohen & Steers, ICF
-0.70% Energy Global, IXC
-0.77% Pacific ex-Japan, EPP
-0.79% REIT Wilshire, RWR
-0.82% REIT VIPERs, VNQ
-0.84% Mexico Index, EWW
-0.88% Latin Am 40, ILF
-1.10% Australia Index, EWA
-1.36% Chile MSCI iS, ECH
-1.42% Oil Fund PowerShares, DBO
-1.48% Oil, Crude, U.S. Oil Fund, USO
-1.49% Commodity Tracking, DBC
-1.51% South Korea Index, EWY
-1.70% Brazil Index, EWZ

This article reprinted from http://www.traderplanet.com/newsletter_articles/view/5295/distribution:7

Thursday, August 4th, 2011 Uncategorized

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