All-Time High Stocks: Market update

While I focus this blog on finding high-potential stocks from the list of all-time high stocks, it would be absolutely foolish to ignore the broad market. Even great stocks cannot swim against the current for very long. This market update helps me stay in tune with the changing trends across sectors and markets and to watch for possible reversals. As a rule, I only enter trades when both a stock and its market are in uptrends -- though I will hold an uptrending stock even if the market weakens (but I have an exit plan). Tonights update shows that the market's health has gotten worse since last week. Not a single market or sector has improved while some have deteriorated. The exceptions, of course, are gold and the US dollar, which are both in uptrends on every single timeframe. Although the US and Canadian markets have maintained positive sloping 200-day simple moving averages, the exponential moving averages are flattening and starting to turn down. The small-cap index (IWM), that previously led the market higher, now has a downward sloping 200-day exponential moving average.

Trend Direction by Broad Index 07-Jun-2010 vs. 21-May-2010
Index	Slope of 20-day SMA	Slope of 50-day SMA	Slope of 200-day SMA	Slope of 200-day EMA
QQQQ Nasdaq	DOWN (down)	DOWN (down)	UP (up)	FLAT (flat)
SPY S&P500	DOWN (down)	DOWN (down)	UP (up)	DOWN (down)
IWM Russell 2000	DOWN (down)	DOWN (down)	UP (up)	DOWN (up)
EWC Canada	DOWN (down)	DOWN (down)	UP (up)	FLAT (flat)
EFA MSCI EAFE	DOWN (down)	DOWN (down)	DOWN (down)	DOWN (down)
FXI China	DOWN (down)	DOWN (down)	DOWN (down)	DOWN (down)
GLD Gold	UP (up)	UP (up)	UP (up)	UP (up)
UUP US Dollar	UP (up)	UP (up)	UP (up)	UP (up)
Trend in parentheses are from 10 trading-days ago SMA = Simple Moving Average, EMA = Exponential Moving Average

Focusing on the US market:
New lows are crushing new highs on all time frames, which is consistent with the downtrends shown in the previous table. This is a time to take a look at the stocks that made new highs and find out what their story is... some of these are the "salmon stocks" that can swim upstream and might be good to keep on the watch list for a future date.

US Stocks Making New Highs and Lows 07-Jun-2010
Period	New Highs	New Lows	Hi vs Lo	Hi/Lo Ratio
20 day¹	54	1376		0.0
50 day¹	24	1125		0.0
52 week¹	16	214		0.1
All-Time²	25	42		0.6
¹ Out of 5084 US Stocks on FINVIZ ² From uglychart.com based on the previous close (includes funds)

Currently the US market is quite oversold, but not extremely so. A relief rally could be in the cards, but the probability of that happening may not be high enough to drive a counter-trend move. The last oversold rallys have been short-lived, giving way to the downtrend without much fight.

US Stocks in Overbought and Oversold Conditions 07-Jun-2010
Level	Overbought	Oversold	Overbought vs Oversold	OB/OS Ratio
Mild RSI(14)=60 vs 40	117	2586		0.0
Moderate RSI(14)=70 vs 30	26	376		0.1
Extreme RSI(14)=80 vs 20	5	28		0.2
Ridiculous RSI(14)=90 vs 10	1	3		0.3
¹ Out of 5084 US Stocks on FINVIZ

The T2108 and other indicators below show stocks are getting stretched beyond where they were a week ago. Last week the % above the 20 day was 16%, 18% above the 50-day, and 50% were above the 200-day. Today all the needles are farther down. Noteably, less than 50% of stocks are above their 200-day moving average, which means the majority of stocks have ugly charts. "Normally" one would expect a rally when T2108 gets below 20, but in the past couple years it has fallen much lower before a reversal (and stocks fall fast when that happens).

US Stocks in Relation to their Moving Averages 07-Jun-2010

Worden's T2108 is currently 14.81

Across US Sectors, there are only two remaining uptrends using exponential moving averages, but a handful still have upward sloping 200-day simple moving averages. Several sectors were downgraded and no sectors improved. No major sector is immune.

Trend Direction by Sector 07-Jun-2010 vs. 21-May-2010
Index	Slope of 20-day SMA	Slope of 50-day SMA	Slope of 200-day SMA	Slope of 200-day EMA
XLY Consumer Discretionary	DOWN (down)	DOWN (down)	UP (up)	UP (up)
XLP Consumer Staples	DOWN (down)	DOWN (down)	UP (up)	DOWN (flat)
XLE Energy	DOWN (down)	DOWN (down)	UP (up)	DOWN (down)
XLF Financial Services	DOWN (down)	DOWN (down)	DOWN (flat)	DOWN (flat)
XLV Health Care	DOWN (down)	DOWN (down)	DOWN (up)	DOWN (down)
XLI Industrial	DOWN (down)	DOWN (down)	UP (up)	DOWN (up)
RWR US Real Estate	DOWN (down)	DOWN (up)	UP (up)	UP (up)
RWX Intl Real Estate	DOWN (down)	DOWN (down)	DOWN (down)	DOWN (down)
XLK Technology	DOWN (down)	DOWN (down)	UP (up)	DOWN (flat)
IYZ Telecom	DOWN (down)	DOWN (down)	UP (up)	FLAT (flat)
XLU Utilities	DOWN (down)	DOWN (down)	DOWN (down)	DOWN (down)
Trend in parentheses is from 10 trading-days ago SMA = Simple Moving Average, EMA = Exponential Moving Average

In summary, this is probably not a good time to initiate long-positions (because of the downtrends) or short stocks (because it is already oversold). The 200-day slopes are transitioning from UP to DOWN, so pay attention. Listen to the market and don't fight the trend.

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