By Robert W. Colby, Senior Analyst TraderPlanet.com

Stocks rose on light volume.
A temporary oversold bounce?

Sentiment has been moderately pessimistic, and Momentum Oscillators have been extremely oversold.

Stocks have moderate room to bounce further upward, but the pace of the 2-day oversold bounce seems unsustainable.

The market remains vulnerable to bad news, and further waves of selling could hit at any time.

On Thursday, major stock price indexes rose for the second consecutive session on news that U.S. Congressional leaders reached agreement on a bipartisan $150 billion fiscal stimulus plan. Also, these leaders proposed a substantial increase in the dollar limit on home loans. Volume on the NYSE fell by 24%, suggesting less power behind Thursday’s rally.

Aside from temporary oversold bounces, major underlying technical trends remain Bearish. In addition, underlying fundamental trends have turned hostile to stocks. Relatively weak economic and corporate earnings reports seem likely to be already in the pipeline for weeks ahead. It is too late to prevent it, no matter what Congress or the Fed may do.

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

7.23% , BDH , Broadband H, BDH
20.95% , LSI , LSI LOGIC
16.15% , CAR , Avis Budget Group, Inc. (CAR)
2.16% , PEJ , Leisure & Entertainment, PEJ
0.48% , VIG , Dividend Appreciation Vipers, VIG
11.01% , TER , TERADYNE
7.71% , THC , TENET HEALTHCARE
2.69% , MV , METAVANTE TECHNOLOGIES, MV
3.95% , ADRU , Europe 100 BLDRS, ADRU
10.94% , SYMC , SYMANTEC
5.16% , COL , ROCKWELL COLLINS
3.86% , FPX , IPOs, First Tr IPOX-100, FPX
2.45% , PWB , Lg Cap Growth PSD, PWB
0.23% , PJP , Pharmaceuticals, PJP
8.59% , PMCS , PMC SIERRA
13.27% , MOLX , MOLEX
6.04% , KSU , Kansas City Southern, KSU
2.95% , IXG , Financials Global LargeCap Value, IXG
9.97% , BHH , Internet B2B H, BHH
10.87% , MRVL , MARVELL TECHNOLOGY
7.53% , MHP , MCGRAW HILL
3.86% , URBN , Urban Outfitters Inc.
1.65% , PIC , Insurance, PIC
4.49% , ZION , ZIONS
1.66% , EWJ , Japan Index, EWJ
6.92% , PTV , PACTIV
1.29% , PKB , Building & Construction, PKB
4.23% , PHW , Hardware & Electronics, PHW
2.85% , IGW , Semiconductor iS GS, IGW
4.69% , CCU , CLEAR CHANNEL
2.26% , ITF , Japan LargeCap Blend TOPIX 150, ITF
10.32% , QCOM , QUALCOMM
0.85% , LLL , L-3 COMMS HLDGS
6.91% , JNPR , Juniper Networks Inc
1.39% , EMR , EMERSON ELECTRIC
8.03% , COF , CAPITAL ONE FNCL
5.56% , FHN , FIRST TENNESSEE
2.99% , BDX , BECTON DICKINSON
4.20% , WPI , WATSON PHARM
1.30% , DSG , Growth Small Cap DJ, DSG
3.58% , EK , EASTMAN KODAK
1.00% , IWV , LargeCap Blend Russell 3000, IWV
2.52% , SLV , Silver Trust iS, SLV
2.78% , IGV , Software, IGV
3.67% , PXE , Energy Exploration & Prod, PXE
2.79% , SIRI , Sirius Satellite
5.09% , GD , GENERAL DYNAMICS
1.99% , IJK , Growth MidCap 400 B, IJK
1.03% , JKF , Value LargeCap iS M, JKF
2.00% , CFC , COUNTRYWIDE FNCL

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

-13.83% , DLX , DELUXE
-9.34% , SOV , SOVEREIGN BANC
-6.22% , TXT , TEXTRON
-3.11% , ETR , ENTERGY
-17.30% , ABK , AMBAC FINL GRP
-6.08% , EBAY , EBAY
-3.18% , CVG , CONVERGYS
-3.14% , CTAS , CINTAS
-3.75% , AEP , AM ELEC POWER
-2.61% , FE , FIRSTENERGY
-4.82% , ABI , Applera Corp-Applied Biosystems Group (ABI)
-2.14% , BUD , ANHEUSER BUSCH
-1.49% , MRK , MERCK & CO
-1.95% , HSY , HERSHEY FOODS
-2.13% , WY , WEYERHAEUSER
-1.21% , AFL , AFLAC
-0.33% , RPV , Value S&P 500, RPV
-1.65% , LLY , ELI LILLY
-4.09% , EXC , EXELON CORP
-1.91% , PCL , PLUM CREEK TIMB
-2.43% , CVS , CVS
-2.04% , BLL , BALL
-3.84% , UST , UST
-2.43% , FII , FED INVESTORS STK B
-0.49% , FO , FORTUNE BRANDS
-1.49% , PLD , PROLOGIS TRUST
-1.65% , BAC , BANK OF AMERICA
-2.71% , IFF , INTL FLAV & FRAG
-2.41% , VPU , Utilities VIPERs, VPU
-1.39% , NTRS , NORTHERN TRUST
-1.60% , PLL , PALL
-1.07% , VIA.B , VIACOM STK B
-0.53% , ROH , ROHM & HAAS
-0.73% , CINF , CINCINNATI FIN
-0.29% , GR , GOODRICH CORP
-1.09% , PWER , POWER ONE
-1.71% , XHB , Homebuilders SPDR, XHB
-0.32% , PHO , Water Resources, PHO
-0.73% , DISH , EchoStar Communications Corporation
-0.41% , SDY , Dividend SPDR, SDY
-0.11% , HET , HARRAHS ENTER
-1.11% , SCHW.O , CHARLES SCHWAB
-0.26% , JKL , Value SmallCap iS M, JKL
-1.20% , WWY , WM WRIGLEY JR
-1.17% , ACS , AFFILIATED COMPUTER
-0.69% , SH , Short 100% S&P 500, SH
-0.61% , PEY , Dividend High Yield Equity PS, PEY
-0.13% , PZJ , SmallCap PS Zacks, PZJ
-0.27% , IYC , Consumer Cyclical DJ, IYC
-0.10% , EWH , Hong Kong Index, EWH

Sectors: among the 9 major U.S. sectors, 6 rose and 3 fell.

Major Sectors Ranked for the Day
% Price Change, Sector

3.52% Energy
1.59% Materials
1.44% Technology
0.99% Consumer Discretionary
0.59% Industrial
0.04% Financial
-0.39% Health Care
-0.48% Consumer Staples
-2.72% Utilities

Looking beyond the daily fluctuation to the major trends (listed in order of long-term relative strength):

Energy (XLE) Bullish, Overweight. Price hit a new 5-month low on 1/22/08. On 1/3/08, both XLE Price and Relative Strength made new all-time highs. XLE has been strong compared to the S&P since 3/12/03.

Consumer Staples (XLP) Bullish, Overweight. Price touched a new 15-month low on 1/22/08. Price made a new all-time high on 12/10/07, and Relative Strength made a new 3-year high on 1/17/08.

Materials (XLB) Bullish, Overweight. Price touched a new 5-month low on 1/23/08. The XLB/SPY Relative Strength Ratio made a new all-time high on 1/14/08. The long-term Relative Strength trend has strongly outperformed since 9/27/2000.

Utilities (XLU) Bullish, Overweight. Price touched a new 12-month low on 1/22/08. Relative Strength made a new all-time high on 1/9/08, and Price made a new all-time high on 12/10/07.

Health Care (XLV) Bullish, Overweight. Price touched a new 18-month low on 1/22/08. Relative Strength moved up to a new 26-month high on 1/17/08.

Industrial (XLI) Bearish, Underweight. Price touched a new 16-month low on 1/22/08. On 1/11/08, Relative Strength made a new 6-month low. XLI/SPY has underperformed since 8/3/07.

Technology (XLK) Bearish, Underweight. Price touched a new 17-month low on 1/22/08. On 1/16/08, Relative Strength made a new 4-month low. XLK/SPY has underperformed since 11/5/07.

Consumer Discretionary (XLY) Bearish, Underweight. Price touched a new 4-year low on 1/22/08. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to its lowest level in 6 years.

Financial (XLF) Bearish, Underweight. Price touched a new 4-year low on 1/22/08. On 1/8/08, Relative Strength fell to a new 7-year low. These confirmed a Bearish major trend.

Foreign stock indexes remain in downtrends. EFA price fell to a new 17-month low on 1/23/08. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) underperformed since 11/27/07. Previously, EFA outperformed from 2002 to 11/27/07.

NASDAQ Composite price touched a new 15-month low on 1/23/08. Relative Strength underperformed the S&P since 11/7/07.

Growth Stock/Value Stock Relative Strength Ratio has underperformed moderately since the peak on 11/7/07. It may be an intermediate-term consolidation or correction phase. The Growth/Value ratio (IWF/IWD) was in a rising trend from 8/8/06 to 11/7/07.

The Small Cap/Large Cap Relative Strength Ratio broke down to a new 2.5-year low on 1/11/07. It has been trending down since 4/19/06. The main long-term trend is Relatively Bearish for Small Caps.

Crude Oil Futures turned upward. Oil found support just above December’s low at 85.82. Oil is down steeply from 100.09 on 1/6/08, and its short-term trend might be approaching oversold. The U.S. OIL FUND ETF (AMEX: USO) is not a pure play on Crude Oil, although it generally moves in the same direction.

The Energy stock sector has underperformed Crude Oil since 12/10/07.

February Gold Futures rose strongly. Gold is in position to challenge its high of 916.10. Gold’s main trend remains obviously Bullish.

Silver’s main trend is Bearish compared to Gold. The iShares Silver Trust (AMEX: SLV) has been relatively weak since 12/7/06.

The Gold Miners ETF (GDX) has underperformed Gold futures since 10/31/07.

Inflation expectations have been heading down. They have been weak since the peak on 11/12/07, based on the behavior of the ratio of two ETFs, TIP/IEF.

U.S. Treasury Bond prices fell steeply, breaking 1-month uptrend lines. Bonds’ short-term trend had been Bullish from 12/26/07 to 1/23/08. The main long-term trend remains Bullish. Bonds remain reactive to news about the credit crisis: the worse the credit crisis, the higher the Bond prices; the better the credit crisis, the lower the Bond prices.

The U.S. dollar fell steeply. The dollar could retest support down toward the oversold low at 74.65 set on 11/23/07. There could be overhead resistance at the 77.86 high of 12/20/07. The main trend remains Bearish.

The Art of Contrary Thinking: The mood has been moving away from optimism as stock prices move lower. Sentiment is far from a level associated with extreme pessimism. So, crowd psychology could get more Bearish before it is over. The business and financial news has flipped from Bearish to Bullish and back again. Investors’ moods and stock volatility have jumped up and down abruptly with the latest news. When everything shifts so dramatically from one day to the next, risk control becomes more important than aggressive profit seeking. Stay flexible.

Sentiment/Contrary Opinion: Bullish opinion is moderately below normal. According to the weekly Investors Intelligence newsletter survey as of 1/23/08, there were 41.6% Bulls and 31.5% Bears. The ratio of Bullish advisors to Bearish advisors fell to 1.32 to 1, which below its 38-year median at 1.47. The ratio’s 38-year range is 0.28 to 17.51.

VIX “Fear Index”, now at 27.78 and falling, is relatively normal by Bear Market standards (around 20 to 40) but relatively high by Bull Market standards (around 10 to 20). Longer term, VIX has been in a rising trend since it hit a 13-year low of 9.89 on 1/24/07. The all-time high was 45.74 on 10/8/98. 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”, now at 32.22 and falling, is relatively low by Bear Market standards (around 35 to 80) but relatively high by Bull Market standards (around 12 to 26). Longer term, VXN has been in a rising trend since it hit its all-time low of 12.61 on 7/29/05. The all-time high was 114.23 on 10/8/98. VXN measures Nasdaq Volatility using a method comparable to that used for VIX.

CBOE Put/Call Ratio rose to 1.05 on 1/15/07, indicating pessimistic sentiment. It is above its 4-year simple moving average and median at 0.62. That means there was more trading activity in put options and less in call options than normal. Its 4-year range is 0.35 to 1.28.

ISEE Call/Put Ratio fell to 0.60 on 1/17/07, indicating pessimistic sentiment. It is below its 4-year simple moving average at 1.50 and its 4-year median at 1.47. That means customers opened fewer long call options and more long put options than normal. Its 4-year range is 0.51 to 3.04.

Fundamentals: The 2003-2007 Bull Market was fed by abundant global liquidly, M&A, leveraged buyouts, corporate stock buybacks, and the net balance of positive earnings surprises. The unfolding fallout from the subprime credit market crisis has derailed that engine. Economic statistics and corporate earnings have been weakening.

The Primary Tide Major Trend turned Bearish, and that is a strong force. The Dow Theory confirmed a Primary Bear Market on 11/21/07 when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their respective closing price lows of August, 2007. On 11/7/07, the Transports closed below their August low. Then on 11/21/07, the Dow-Jones Industrial Average closed below its 8/16/07 closing price low of 12,845.78, thereby turning the Primary Tide Bearish.

Daily Rankings of Major Global Markets, Ranked from Strongest to Weakest of the Day:

5.83% Gold Mining
4.69% Hardware
4.54% Internet
4.33% Oil
4.22% Disk Drives
4.22% Australia
4.22% Spain
4.05% Netherlands
3.98% France
3.96% Network
3.74% Brazil
3.57% Commodity Related
3.52% Energy
3.46% Oil Services
3.25% Canada
3.21% Germany
3.14% Belgium
3.01% DOT
2.81% Computer Tech
2.50% Semiconductors
2.46% Austria
2.45% Chemicals
2.39% United Kingdom
2.14% Paper
2.09% Nasdaq 100
2.08% Italy
2.02% Canadian Dollar
1.94% Switzerland
1.92% Nasdaq Composite
1.86% Banks
1.77% Natural Gas
1.76% AMEX Composite
1.72% Mexico
1.69% Sweden
1.66% Japan
1.59% Materials
1.55% NYSE Composite
1.44% Technology
1.35% Australian Dollar
1.31% Singapore
1.19% S&P Mid Caps
1.19% Euro Index
1.09% Russell 1000
1.06% British Pound
1.01% S&P 500
1.00% Russell 3000
1.00% Wilshire 5000
0.99% S&P 100
0.99% Consumer Discretionary
0.88% Dow Industrial
0.81% South Korea
0.66% Value Line
0.59% Industrial
0.43% Swiss Franc
0.22% Drugs
0.19% Dow Transports
0.12% S&P Small Caps
0.10% Health Care Products
0.04% Financial
-0.02% Dow Composite
-0.04% Health Care
-0.10% Russell 2000
-0.10% Hospitals
-0.10% Hong Kong
-0.24% Malaysia
-0.32% Biotechs
-0.33% Broker Dealers
-0.39% Health Care
-0.48% Consumer Staples
-0.79% US Dollar Index
-0.88% Taiwan
-1.02% Japanese Yen
-1.18% Retailers
-1.54% Insurance
-2.03% 30Y T-Bond
-2.10% REITs
-2.34% Dow Utilities
-2.72% Utilities
-3.11% Airlines