Daily Stock Market Commentary – 10/5/2007

Seasonal tendencies are a concern in days ahead.

Crude Oil and Gold futures both reversed strongly to the upside with Bullish Engulfing Patterns.

U.S. dollar reversed to the downside following a “typical” 3-day bounce from oversold.

Foreign stocks turned upward as the U.S. dollar turned downward.

My Top 10 ETF Relative Strength Ranks are all Foreign.

On Thursday, major stock price indices opened higher but gave up most of these gains to close only slightly higher. Breadth was Bullish, with more Advances than Declines, and Up Volume was greater than Down Volume. Total volume declined, however, suggesting more apathy than enthusiasm. Again, New Highs/New Lows ratios showed a Bullish net balance, but the difference was not large. Short-term momentum indicators turned higher, but only slightly.

Temporary minor sinking spells are to be expected in any uptrend. The stock market has absorbed 1- to 4-day bouts of normal profit taking with minimal damage and with resilience since the low on 8/16/07. That indicates underlying demand and a Bullish intermediate-term trend for stocks. Finally, the long-term Primary Tide Trend remains Bullish, according to the Dow Theory.

Seasonal tendencies are a concern in days ahead. The month of October has suffered some notable downside shakeouts in past history. So, we definitely do not want to get complacent. Be alert and flexible.

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

0.10% , VIG , Dividend Appreciation Vipers, VIG
4.17% , TBH , Telebras H, TBH
0.27% , ISI , LargeCap Blend S&P 1500 iS, ISI
4.42% , RIMM , RESEARCH IN MOTION LTD
2.75% , AYE , ALLEGHENY ENERGY
2.70% , OXY , OCCIDENTAL
0.88% , UTH , Utilities H, UTH
2.48% , EWK , Belgium Index, EWK
4.38% , LVLT , LEVEL 3 COMMUNICATIONS
0.17% , IYG , Financial Services DJ, IYG
0.44% , IYE , Energy DJ, IYE
0.74% , PSJ , Software, PSJ
3.52% , FRX , FOREST LABS STK A
2.62% , DVN , DEVON ENERGY
0.79% , LQD , Bond, Corp, LQD
1.43% , PPL , PPL
2.18% , Q , QWEST COMMUNICAT
2.08% , CHKP , Check Point Software Technologies Ltd
2.78% , EOG , EOG RESOURCES
2.53% , FE , FIRSTENERGY
0.44% , NYC , LargeCap Blend NYSE Composite iS, NYC
1.33% , PMTC.O , PARAMETRIC
0.25% , KLD , LargeCap Blend Socially Responsible iS, KLD
2.15% , USO , Oil, Crude, U.S. Oil Fund, USO
1.39% , DBC , Commodity Tracking, DBC
1.82% , ANDW , ANDREW
0.49% , IGN , Networking, IGN
0.25% , TMW , Wilshire 5000 ST TM, TMW
1.92% , LMT , LOCKHEED MARTIN
0.60% , EFV , Value EAFE MSCI, EFV
3.37% , PBG , PEPSI BOTTLING
0.24% , PXQ , Networking, PXQ
1.36% , ACS , AFFILIATED COMPUTER
1.99% , MTG , MGIC INVESTMENT
2.04% , JNS , JANUS CAPITAL
0.43% , JKK , Growth SmallCap iS M, JKK
0.65% , IYZ , Telecom DJ US, IYZ
2.15% , PGR , PROGRESSIVE OHIO
1.39% , XTO , XTO ENERGY INC
0.12% , RPV , Value S&P 500, RPV
4.23% , LAMR , Lamar Advertising Company
0.58% , EWM , Malaysia Index, EWM
1.00% , A , AGILENT TECH
0.68% , TEK , TEKTRONIX
0.26% , JKD , LargeCap Blend Core iS M, JKD
1.47% , PNC , PNC FINL SVC
0.69% , VGK , European VIPERs, VGK
0.41% , PBJ , Food & Beverage, PBJ
2.12% , PDCO , Patterson Dental Company
1.39% , TWX , TIME WARNER INC

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

-5.51% , NIHD , NII Holdings, Inc.
-3.71% , MXIM , MAXIM INTEGRATED
-3.24% , TE , TECO ENERGY
-3.85% , ESRX , EXPRESS SCRIPTS
-0.77% , SLR , SOLECTRON
-4.60% , MAR , MARRIOTT INTL STK A
-4.45% , BMS , BEMIS
-3.32% , FDO , FAMILY DLR STRS
-2.62% , HOT , STARWOOD HOTELS
-3.83% , X , US STEEL CORP
-1.61% , DSG , Growth Small Cap DJ, DSG
-3.73% , DLTR , Dollar Tree Stores Inc
-2.12% , JBL , JABIL CIRCUIT
-2.31% , SANM , SANMINA
-2.19% , KLAC , KLA TENCOR
-1.92% , ISIL , INTERSIL CORP
-1.94% , TNB , THOMAS & BETTS
-1.61% , BDK , BLACK & DECKER
-0.86% , SWK , STANLEY WORKS
-1.60% , NTAP , NETWK APPLIANCE
-2.15% , TJX , TJX
-0.34% , KCE , Capital Markets KWB ST, KCE
-0.39% , XBI , Biotech SPDR, XBI
-1.40% , QLGC , QLOGIC
-0.85% , LIZ , LIZ CLAIRBORNE
-0.71% , LNCR , Lincare Holdings Inc
-1.06% , TEVA , Teva Pharmaceutical Industries Limited
-1.84% , MYL , MYLAN LABS
-1.19% , ASD , AMER STANDARD
-0.13% , MTK , Technology MS sT, MTK
-0.92% , CSCO , CISCO SYSTEMS
-0.73% , PBW , WilderHill Clean Energy PS, PBW
-1.86% , HGSI , Human Genome Sciences Inc
-0.63% , PFG , PRINCIPAL FINL
-0.44% , PTV , PACTIV
-0.25% , RFV , Value MidCap S&P 400, RFV
-0.58% , CPB , CAMPBELL SOUP
-0.47% , EK , EASTMAN KODAK
-0.45% , XOM , EXXON MOBIL
-0.41% , PHO , Water Resources, PHO
-0.15% , VGT , Info Tech VIPERs, VGT
-0.32% , ERTS , ELECTRONIC ARTS
-0.20% , IYC , Consumer Cyclical DJ, IYC
-0.84% , SLE , SARA LEE
-0.59% , LXK , LEXMARK INTL STK A
-0.93% , AVY , AVERY DENNISON
-0.24% , PHJ , Dividend Growth PS, PHJ
-3.46% , ETFC.O , E*TRADE FINANCIAL
-0.39% , AW , ALLIED WASTE IND
-0.52% , GIS , GENERAL MILLS

Sectors: among the 9 major U.S. sectors, 2 rose and 7 fell.
Major Sectors Ranked for the Day
% Price Change, Sector

0.60% Financial
0.55% Utilities
0.43% Materials
0.38% Energy
0.34% Industrial
0.26% Technology
0.22% Consumer Staples
-0.11% Health Care
-0.51% Consumer Discretionary

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

Energy (XLE) Bullish, Overweight. XLE made an all-time closing price high on 10/1/07. Relative strength made a new all-time high on 9/21/07. XLE has been strong compared to the S&P since 3/12/03.

Materials (XLB) Bullish, Overweight. Relative strength made a new 10-week high on 10/1/07. The relative strength trend strongly outperformed since the price shakeout low on 8/16/07, and its long term trend has been Bullish since 9/27/2000.

Technology (XLK) Bullish, Overweight. XLK closed at a new 6-year closing price high on 10/2/07, and relative strength made a new 2-year high on 9/26/07. Long term, XLK has been relatively strong compared to the S&P since its low on 7/24/06.

Industrial (XLI) Bullish, Overweight. Industrial stock sector price set an all-time price high on 10/2/07. Longer term, XLI has been relatively strong compared to the S&P since 8/9/06.

Utilities (XLU) Bearish, Underweight. This defensive sector’s relative strength made a new 8-week low on 9/28/07.

Consumer Staples (XLP) Bearish, Underweight. This defensive sector’s relative strength broke down to a new 9-week low on 10/1/07.

Health Care (XLV) Bearish, Underweight. Relative strength has been trending down since 10/9/02, and it made a new 5-year low on 7/19/07, thereby confirming a major downtrend.

Financial (XLF) Bearish, Underweight. The long-term trend of relative strength has been trending down since 2/20/07.

Consumer Discretionary (XLY) Bearish, Underweight. Price hit a new 10-month low on 8/16/07. Relative strength made another new 6-year low on 9/27/07.

Foreign stocks turned upward as the U.S. dollar turned downward. The EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) has substantially outperformed long term, since the Bull market started in 2002, and the secular trend is probably still Bullish. My Top 10 ETF Relative Strength Ranks are all Foreign (see below).

NASDAQ Composite index price consolidated after making a new 6-year high on 10/2/07. Relative strength rose 9 of the past 11 trading days and made a new 17-month high on 10/2/07. Longer term, NASDAQ has outperformed for more than a year, since 8/8/06.

Growth stocks made a new 6-year high on 10/2/07 and substantially outperformed Value stocks since 9/19/07. Also, Growth has outperformed Value since 8/8/06. The main trend is Bullish.

Small Caps rose, but only slightly. They substantially underperformed Large Caps since 4/19/06.The main trend is Bearish.

Crude Oil futures reversed strongly to the upside with a Bullish Engulfing Pattern. Oil held above the 9/26/07 minor low at 78.44. Note that the U.S. OIL FUND ETF (AMEX: USO) is not a pure play on Crude Oil. The longer-term trends for both remain Bullish.

The Energy stock sector underperformed the USO but outperformed the SPY. Longer term, since 3/12/03, the stocks in the Energy Select Sector SPDR ETF (XLE) have significantly outperformed crude oil as a commodity, as well as the S&P 500. So, the Relative Strength major trend is Bullish for the energy stocks.

Gold reversed strongly to the upside with a Bullish Engulfing Pattern. Gold made a new 28-year high on 10/1/07, and the Gold Trust ETF (NYSE: GLD) confirmed. These major trends remain Bullish.

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

The Gold Miners ETF (GDX) underperformed Gold since 9/20/07. Before 8/16/07, Gold Mining stocks substantially underperformed both Gold and the S&P 500 for more than 20 years.

Inflation expectations moved down again. They appear choppy and uncertain since 6/22/07.

U.S. Treasury Bond prices appear to be consolidating. Bonds lack momentum and volume and, therefore, are not impressive. Long-term, it seems possible that the iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT) ended a normal oversold bounce in a Bearish trend on 9/10/07. 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.

U.S. dollar reversed to the downside following a “typical” 3-day bounce from oversold. Longer term, the dollar fell 16% over the past 23 months and its main trend remains very Bearish.

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

2.48% Belgium
1.84% Gold Mining
1.78% Austria
1.74% Singapore
1.32% Italy
1.20% Canada
1.08% Brazil
0.97% Dow Utilities
0.90% Natural Gas
0.86% Oil
0.81% Taiwan
0.78% Oil Services
0.74% Chemicals
0.67% REITs
0.63% Netherlands
0.60% Financial
0.58% Malaysia
0.57% Drugs
0.56% AMEX Composite
0.55% Utilities
0.55% Commodity Related
0.55% DOT
0.54% South Korea
0.43% Materials
0.42% United Kingdom
0.42% Australian Dollar
0.41% NYSE Composite
0.41% Health Care Products
0.41% Internet
0.41% France
0.38% Energy
0.36% Russell 2000
0.36% Health Care
0.34% Industrial
0.32% Swiss Franc
0.29% British Pound
0.28% 30Y T-Bond
0.27% Banks
0.26% Technology
0.26% Insurance
0.26% Switzerland
0.24% Sweden
0.23% S&P Small Caps
0.22% Wilshire 5000
0.22% Consumer Staples
0.21% S&P 500
0.21% Russell 3000
0.20% Russell 1000
0.17% Dow Composite
0.17% Germany
0.16% Japanese Yen
0.15% Nasdaq Composite
0.14% Value Line
0.14% Hospitals
0.12% Nasdaq 100
0.12% S&P 100
0.07% Euro Index
0.06% Network
0.05% Hong Kong
0.04% Dow Industrial
0.00% Canadian Dollar
-0.02% Mexico
-0.04% S&P Mid Caps
-0.07% Biotechs
-0.07% Japan
-0.11% Health Care
-0.11% Spain
-0.12% Australia
-0.21% Dow Transports
-0.22% Computer Tech
-0.24% Semiconductors
-0.27% Paper
-0.29% US Dollar Index
-0.50% Disk Drives
-0.51% Consumer Discretionary
-0.57% Hardware
-0.63% Broker Dealers
-0.80% Airlines
-0.91% Retailers