By Robert W. Colby, Senior Analyst TraderPlanet.com

Existing major trends continue. Selectivity is the key.

Energy Stock Sector: both Price and Relative Strength set new all-time highs.

Materials Stock Sector: Relative Strength set a new all-time high.

The Financial Stock Sector: Relative Strength fell to a new 7-year low.

The Consumer Discretionary Stock Sector: Relative Strength fell to a new 6-year low, and XLY price made a new 17-month low.

Semiconductor Holders ETF (SMH) Relative Strength fell to a new 5-year low and Price made a new 17-month low.

Crude Oil hit another new all-time high.

Gold hit another new 28-year high.

On Thursday, major stock price indexes opened little changed, had some modest ups and downs, and closed little changed. It was a relatively narrow range, inside day of consolidation. Volume on the NYSE fell 1%, with more downside volume than upside volume.
The stock market appears to be reactive to news reports, and that has led to choppy price action. Relatively weak economic reports appear probable for the days ahead. On Friday, there will be reports on nonfarm payrolls report and ISM Services. On Tuesday, 1/8/07, there will be reports on Pending Home Sales and Consumer Credit.

Selectivity is the key. The components of the major stock price indexes are being pulled in different directions, resulting in little net change. This report drills down to see which sectors and industries are the leaders and which are the lagers. This strategy has been working and seems likely to continue to work in months ahead.

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

8.23% , STT , STATE STREET
8.48% , MON , MONSANTO
4.95% , FLR , FLUOR
0.94% , IGE , Natural Resource iS GS, IGE
3.52% , ISIL , INTERSIL CORP
3.25% , CHKP , Check Point Software Technologies Ltd
2.74% , IP , INTL PAPER
0.91% , PXN , Nanotech Lux, PXN
3.66% , TEVA , Teva Pharmaceutical Industries Limited
2.70% , NTRS , NORTHERN TRUST
1.64% , URBN , Urban Outfitters Inc.
2.24% , EWM , Malaysia Index, EWM
0.85% , SSCC , Smurfit-Stone Container Corporation
0.20% , HHH , Internet H, HHH
4.32% , APOL , APOLLO GROUP
3.28% , SIRI , Sirius Satellite
3.70% , XTO , XTO ENERGY INC
3.22% , RTN , RAYTHEON
2.30% , WYE , WYETH
1.37% , SGP , SCHERING PLOUGH
0.95% , TAP , ADOLPH COORS STK B, TAP
2.57% , WMB , WILLIAMS
2.71% , NEM , NEWMONT MINING
2.26% , PBG , PEPSI BOTTLING
0.65% , PIV , Value Line Timeliness MidCap Gr, PIV
2.05% , RDC , ROWAN COMPANIES
0.77% , DBC , Commodity Tracking, DBC
1.90% , BUD , ANHEUSER BUSCH
1.21% , GD , GENERAL DYNAMICS
2.33% , ITT , ITT INDS
0.87% , NOC , NORTHROP GRUMMAN
0.37% , IIH , Internet Infrastructure H, IIH
1.75% , PHO , Water Resources, PHO
1.18% , ERIC.O , LM Ericsson Telephone Company
3.20% , HUM , HUMANA
3.13% , SHLD , SEARS HOLDINGS
2.76% , OXY , OCCIDENTAL
0.39% , PKB , Building & Construction, PKB
0.35% , EP , EL PASO
1.62% , BDX , BECTON DICKINSON
2.15% , ATI , ALLEGHENY TECH
0.45% , NWS.A , NEWS CORP STK A
0.95% , WY , WEYERHAEUSER
1.42% , BAX , BAXTER INTL
1.23% , CVX , CHEVRONTEXACO
0.36% , NY , Value LargeCap NYSE 100 iS, NY
0.35% , ADRD , Developed 100 BLDRS, ADRD
0.86% , CB , CHUBB
0.25% , PWV , Value LargeCap Dynamic PS, PWV
1.24% , JCI , JOHNSON CONTROLS

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

8.23% , STT , STATE STREET
8.48% , MON , MONSANTO
4.95% , FLR , FLUOR
0.94% , IGE , Natural Resource iS GS, IGE
3.52% , ISIL , INTERSIL CORP
3.25% , CHKP , Check Point Software Technologies Ltd
2.74% , IP , INTL PAPER
0.91% , PXN , Nanotech Lux, PXN
3.66% , TEVA , Teva Pharmaceutical Industries Limited
2.70% , NTRS , NORTHERN TRUST
1.64% , URBN , Urban Outfitters Inc.
2.24% , EWM , Malaysia Index, EWM
0.85% , SSCC , Smurfit-Stone Container Corporation
0.20% , HHH , Internet H, HHH
4.32% , APOL , APOLLO GROUP
3.28% , SIRI , Sirius Satellite
3.70% , XTO , XTO ENERGY INC
3.22% , RTN , RAYTHEON
2.30% , WYE , WYETH
1.37% , SGP , SCHERING PLOUGH
0.95% , TAP , ADOLPH COORS STK B, TAP
2.57% , WMB , WILLIAMS
2.71% , NEM , NEWMONT MINING
2.26% , PBG , PEPSI BOTTLING
0.65% , PIV , Value Line Timeliness MidCap Gr, PIV
2.05% , RDC , ROWAN COMPANIES
0.77% , DBC , Commodity Tracking, DBC
1.90% , BUD , ANHEUSER BUSCH
1.21% , GD , GENERAL DYNAMICS
2.33% , ITT , ITT INDS
0.87% , NOC , NORTHROP GRUMMAN
0.37% , IIH , Internet Infrastructure H, IIH
1.75% , PHO , Water Resources, PHO
1.18% , ERIC.O , LM Ericsson Telephone Company
3.20% , HUM , HUMANA
3.13% , SHLD , SEARS HOLDINGS
2.76% , OXY , OCCIDENTAL
0.39% , PKB , Building & Construction, PKB
0.35% , EP , EL PASO
1.62% , BDX , BECTON DICKINSON
2.15% , ATI , ALLEGHENY TECH
0.45% , NWS.A , NEWS CORP STK A
0.95% , WY , WEYERHAEUSER
1.42% , BAX , BAXTER INTL
1.23% , CVX , CHEVRONTEXACO
0.36% , NY , Value LargeCap NYSE 100 iS, NY
0.35% , ADRD , Developed 100 BLDRS, ADRD
0.86% , CB , CHUBB
0.25% , PWV , Value LargeCap Dynamic PS, PWV
1.24% , JCI , JOHNSON CONTROLS

Sectors: among the 9 major U.S. sectors, 5 rose and 4 fell.
Major Sectors Ranked for the Day
% Price Change, Sector

1.82% Materials
1.18% Energy
0.60% Health Care
0.15% Technology
0.08% Industrial
-0.14% Utilities
-0.53% Consumer Staples
-0.63% Financial
-1.12% Consumer Discretionary

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

Energy (XLE) Bullish, Overweight. Relative Strength made a new all-time high on 1/3/08. XLE also made an all-time price high on 1/3/08. XLE has been strong compared to the S&P since 3/12/03.

Materials (XLB) Bullish, Overweight. The XLB/SPY Relative Strength Ratio made a new all-time high on 1/3/08. Price made new all-time high on 10/29/07. The long-term Relative Strength trend has strongly outperformed since 9/27/2000.

Utilities (XLU) Bullish, Overweight. This defensive sector’s Relative Strength made a new 6-year high on 12/5/07, and price made a new all-time high on 12/10/07.

Consumer Staples (XLP) Bullish, Overweight. This defensive sector’s price made a new all-time high on 12/10/07, and Relative Strength made a new 6-year high on 11/26/07.

Technology (XLK) Neutral, Market Weight. Relative Strength turned up from a low on 11/30/07. And, long term, XLK has been relatively strong compared to the S&P since its low on 7/24/06.

Industrial (XLI) Neutral, Market Weight. Price and Relative Strength have been chopping sideways since 8/3/07. Longer-term trends appear Bullish.

Health Care (XLV) Neutral, Market Weight. XLV price moved up to a new 6-month high on 12/3/07. Relative Strength moved up to a new 13-month high on 11/27/07.

Consumer Discretionary (XLY) Bearish, Underweight. On 1/3/08, the XLY/SPY Relative Strength Ratio fell to its lowest level in 6 years, and XLY price made a new 17-month low. Relative Strength has been trending down since 1/5/05.

Financial (XLF) Bearish, Underweight. On 1/3/08, the XLF/SPY Relative Strength Ratio fell to its lowest level in 7 years. Relative Strength has been trending down since 2/20/07. XLF price hit a new 2.5-year low on 11/26/07.

Foreign stock indices have outperformed U.S. stock indices since 12/24/07. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) made a new price high on 10/31/07 and a new relative strength high on 11/27/07. EFA has substantially outperformed long term, since the Bull market started in 2002, and the secular trend is still Bullish. My Top 10 ETF Relative Strength Ranks have been mostly Foreign for many months.

NASDAQ Composite and NASDAQ 100 underperformed the S&P since 12/26/07. Longer term, NASDAQ outperformed from 8/8/06 to 11/7/07, including a new 6-year Relative Strength high on 11/7/07 and a new price high on 10/31/07.

Growth Stock/Value Stock Relative Strength Ratio has been in a moderately rising trend since 11/30/07. The long-term, the main trend for the Growth/Value ratio (IWF/IWD) has been rising since 8/8/06.

The Small Cap/Large Cap Relative Strength Ratio has been trending down since 4/19/06. Historically, year end and early January often have been good for Small Caps, but it does not seem to be working this year. The main long-term trend is Relatively Bearish for Small Caps.

Crude Oil Futures hit another new all-time high but closed slightly lower. Oil’s main trend is obviously Bullish. 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 outperformed the USO since 11/26/07. Previously, over the 6 months from 5/30/07 to 11/26/07, XLE lagged oil the commodity.

February Gold Futures made another new 28-year high. Gold’s next resistance is at the all-time high at 875 set on 1/21/80. Gold’s main trend is 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 outperformed Gold Futures since 12/19/07 but still has underperformed since 10/31/07.

Inflation expectations turned up. Based on the behavior of the ratio of two ETFs, TIP/IEF, the intermediate-term trend has been choppy since the peak on 11/12/07.

U.S. Treasury Bond prices consolidated a day after reaching their highest levels in 4 weeks. Bonds appear to have ended their intermediate-term correction phase since their price top on 11/26/07. 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 to another new 4-week low, continuing a serious downside correction. Support is at the oversold low at 74.65 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 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 about normal. According to the weekly Investors Intelligence newsletter survey as of 1/2/08, there were 52.2% Bulls and 24.5% Bears. The ratio of Bullish advisors to Bearish advisors fell to 2.13 to 1, which near its 4-year simple moving average at 2.14 and its 4-year median at 2.17. The ratio’s 4-year range is 1.00 to 3.46.

VIX “Fear Index”, now at 22.49 and falling, crossed below its 50-day but remains above its 200-day simple moving average. 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 26.59 and falling, crossed below its 50-day but remains above its 200-day simple moving average. 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 fell to 0.60, indicating neutral sentiment. It is near its 4-year simple moving average and median at 0.62. That means there was normal trading activity in put options and call options. Its 4-year range is 0.35 to 1.28.

ISEE Call/Put Ratio rose to 1.22, indicating moderately 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 appears to have derailed that engine. Economic statistics are weakening and at the same time inflation is rising, suggesting Stagflation.

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

3.27% Gold Mining
2.24% Malaysia
1.82% Materials
1.81% Chemicals
1.76% Paper
1.28% South Korea
1.27% Oil Services
1.24% Mexico
1.18% Energy
0.94% Commodity Related
0.86% Natural Gas
0.63% United Kingdom
0.62% Health Care
0.60% Health Care
0.58% AMEX Composite
0.54% Dow Utilities
0.49% Australia
0.46% Swiss Franc
0.43% Canada
0.40% Drugs
0.38% Japan
0.35% 30Y T-Bond
0.31% Health Care Products
0.24% Oil
0.21% Italy
0.19% Japanese Yen
0.15% Technology
0.15% Switzerland
0.13% Euro Index
0.10% Dow Industrial
0.10% Nasdaq 100
0.09% NYSE Composite
0.08% Industrial
0.07% Singapore
0.03% S&P 100
0.02% Canadian Dollar
0.00% S&P 500
0.00% Hong Kong
-0.05% France
-0.07% Russell 1000
-0.11% Computer Tech
-0.13% Sweden
-0.14% Utilities
-0.14% US Dollar Index
-0.16% Russell 3000
-0.17% Dow Composite
-0.18% Wilshire 5000
-0.21% Network
-0.23% DOT
-0.24% Netherlands
-0.24% Australian Dollar
-0.27% Nasdaq Composite
-0.28% Internet
-0.28% Germany
-0.30% Banks
-0.32% Belgium
-0.34% British Pound
-0.35% Taiwan
-0.42% Brazil
-0.44% Insurance
-0.53% Consumer Staples
-0.58% Spain
-0.63% Financial
-0.69% Hardware
-0.71% S&P Mid Caps
-0.83% Austria
-0.87% Broker Dealers
-1.03% Value Line
-1.08% S&P Small Caps
-1.09% Biotechs
-1.12% Consumer Discretionary
-1.13% Russell 2000
-1.17% Dow Transports
-1.36% Hospitals
-1.37% Semiconductors
-1.47% Disk Drives
-1.79% Retailers
-2.15% Airlines
-3.41% REITs