by Robert W. Colby, Senior Analyst, TraderPlanet.com


Stock Market: The bulls led a charge up the mountain but could not hold the ground. Candlestick Chart Dark Cloud Cover implies that the bears are pushing the bulls back down the mountain.

Shrinking volume indicates a lack of buying power.

Semiconductor Relative Strength Ratio SMH/SPY fell to a new 10-year low, confirming a Major Bear Trend.

On Monday, major stock price indexes gapped opened higher. After about 5 minutes, stocks reversed to the downside and continued to decline until about 3:23 p.m. Prices recovered somewhat into the close, but still finished below the previous day’s close and below the midpoint of the day. The Standard & Poor’s 500 cash index (919.21) closed down 11.78 points, or 1.27%. Total NYSE volume fell 7%, revealing a lack of buying demand for stocks.

Japanese Candlestick Chart pattern recognition is a technical tool of notable popularity among many astute traders, and Monday’s action qualified as a bearish reversal pattern. With the Dark Cloud Cover, following a strong white Candle, there is a decisive black Candle, with an opening gap up to a new high, a reversal and weak close well into the previous white real body. The weaker the second black Candlestick’s close, the more meaningful and bearish. For example, a close near the low of the current black candle and below the midpoint (or lower) of the previous white real body would be significant. The bulls led a charge up the mountain to new price highs but could not hold the ground. Now the bears are pushing them back down the mountain.

The stock market reflects future fundamental conditions several months ahead, more than it reflects current conditions. The problem is that currently there is no visible end to the downward fundamental spiral. Economic news seems to be growing worse and worse as time goes on. Atlanta Fed President Lockhart stated that he sees economic weakness and higher unemployment at least through the first half of 2009. President-elect Obama said, “Some of the choices that we’re going to make are going to be difficult. It is not going to be quick. It’s not going to be easy for us to dig ourselves out of the hole that we are in.”

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

0.53% , PXE , Energy Exploration & Prod, PXE
8.06% , AIG , AMER INTL GROUP
9.71% , OMX , OFFICEMAX INC., OMX
1.59% , TTH , Telecom H, TTH
2.69% , PGJ , China LargeCap Growth G D H USX PS, PGJ

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

-32.97% , UIS , UNISYS
-16.24% , SSCC , Smurfit-Stone Container Corporation
-2.38% , IAH , Internet Architecture H, IAH
-6.19% , KCE , Capital Markets KWB ST, KCE
-2.67% , XSD , Semiconductor SPDR, XSD
-2.58% , RFV , Value MidCap S&P 400, RFV
-8.78% , ECL , ECOLAB
-2.76% , DGT , Global Titans, DGT
-14.69% , DISH , EchoStar Communications Corporation
-10.67% , SLM , SLM CORP
-1.25% , TMW , Wilshire 5000 ST TM, TMW
-10.67% , JCP , JC PENNEY
-8.85% , THC , TENET HEALTHCARE
-21.82% , CTB , COOPER TIRE
-4.21% , PXN , Nanotech Lux, PXN
-9.09% , PWER , POWER ONE
-1.88% , JKH , MidCap Growth iS M, JKH
-10.40% , CVG , CONVERGYS
-2.13% , IWW , Value LargeCap Russell 3000, IWW
-8.74% , CMI , CUMMINS
-2.83% , HHH , Internet H, HHH
-1.78% , DSV , Value Small Cap DJ, DSV
-0.76% , PIV , Value Line Timeliness MidCap Gr, PIV
-8.45% , GS , GOLDMAN SACHS
-15.60% , JNS , JANUS CAPITAL
-2.70% , IJS , Value SmallCap S&P 600 B, IJS
-1.48% , EWD , Sweden Index, EWD
-2.30% , JKG , MidCap Blend Core iS M, JKG
-6.19% , EXC , EXELON CORP
-0.75% , PTE , Telecommunications & Wireless, PTE
-7.58% , DDS , DILLARD STK A
-8.69% , URBN , Urban Outfitters Inc.
-11.78% , MBI , MBIA
-3.73% , GOOG , Google
-1.57% , PUI , Utilities, PUI
-1.52% , IJT , Growth BARRA Small Cap 600, IJT
-3.78% , IXG , Financials Global LargeCap Value, IXG
-6.60% , NWL , NEWELL RUBBER
-8.92% , JNY , JONES APPAREL
-1.58% , IJK , Growth MidCap 400 B, IJK

9 Major U.S. Stock Sectors
Ranked on Latest One-Day Price Change
% Price Change, Sector ETF, Symbol

0.34% Energy SPDR, XLE
0.29% Consumer Staples SPDR, XLP
0.04% Industrial SPDR, XLI
0.04% Materials SPDR, XLB
-0.72% Health Care SPDR, XLV
-1.09% Technology SPDR, XLK
-2.32% Consumer Discretionary SPDR, XLY
-2.41% Utilities SPDR, XLU
-2.95% Financial SPDR, XLF

Primary Tide Trends for the 9 major sectors last for years. Here are my up-to-date Relative Strength Rankings, as measured with emphasis on these long-term Primary Tide Trends (listed in order of long-term relative strength):

Consumer Staples (XLP) Neutral, Market Weight. On 10/10/08, XLP/SPY Relative Strength Ratio rose to another new 5-year high, but XLP absolute price fell to a new 2-year low. All 9 sectors have lost in 2008, but XLP has lost least.

Health Care (XLV) Neutral, Market Weight. On 10/24/08, XLV/SPY Relative Strength Ratio rose to another new 4-year high. But on 10/10/08, XLV absolute price fell to a new 5-year low.

Utilities (XLU) Bearish, Underweight. On 10/10/08, the XLU absolute price fell to another new 2-year low.

Energy (XLE) Bearish, Underweight. On 10/10/08, the XLE absolute price hit another new 18-month intraday low.

Technology (XLK) Bearish, Underweight. On 10/24/08, the XLK absolute price fell to a new 5-year low.

Industrial (XLI) Bearish, Underweight. On 10/24/08, the XLI absolute price fell to a new 5-year low.

Consumer Discretionary (XLY) Bearish, Underweight. On 10/24/08, XLY absolute price fell to its lowest level in 5 years.

Materials (XLB) Bearish, Underweight. On 10/27/08, the XLB absolute price fell to a new 5-year low.

Financial (XLF) Bearish, Underweight. On 10/10/08, the XLF absolute price hit another new 10-year low. The XLF long-term trend of relative strength has been trending down since 2/20/07.

Foreign stock index EFA Relative Strength Ratio has sharply underperformed the S&P 500 since 11/27/07. EFA absolute price fell to a new 5-year low on 10/27/08 and has been in a falling trend since 10/31/07. EFA is the ETF representing the EAFE, the international developed country stock markets, ex the U.S. and Canada.

NASDAQ Composite remains Bearish. Relative Strength underperforming S&P 500 since 8/14/08. On 10/24/08, the absolute price made another new 5-year low, reconfirming absolute long-term trend weakness.

Growth Stock/Value Stock Relative Strength Ratio has been trending down since it peaked on 7/15/08.

The Small Cap/Large Cap Relative Strength Ratio has been trending down since it peaked on 9/19/08.

Crude Oil futures December contract price broke down below previous 2008 lows but reversed modestly to close slightly higher. Oil fell to a new 19-month low of 59.10. The intermediate-term trend remains clearly Bearish. 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 outperformed Crude Oil since 10/9/08.

Gold futures contract price trend still appears choppy and uncertain for the short-term. Gold remains in an intermediate-term downtrend since the peak of 1,033.90 on 3/17/08.

Gold Mining stocks continue to underperform Gold futures on a major trend basis.

U.S. Treasury Bond futures contract price trends appear uncertain. Bonds trends appear uncertain both for the short term and for the intermediate term. Long term, Bonds have been in a neutral sideways trend since June 2003.

iShares iBoxx $ Invest Grade Corp Bond (LQD) ETF absolute price and LQD/TLT Relative Strength Ratio both fell to multi-year new lows on 10/10/08. Bond investors appear to be seriously concerned about the economic outlook.

iShares Lehman TIPS Bond (TIP) ETF Relative Strength suggests deflation. The TIP/TLT Relative Strength ratio has been in a persistent downtrend since 7/3/08.

The U.S. dollar rose modestly but still seems uncertain. The short-term trend appears to have turned choppy over the past 2 weeks. The dollar just made a new 24-month high on 10/27/08, so the longer-term trend is still Bullish.

The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood. The business and financial news has flipped from fear to hope and back again this year, creating record high levels of volatility. Investors might be wise to focus on risk control.

Sentiment/Contrary Opinion: There were 30.3% Bulls versus 48.3% Bears as of 11/5/2008, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio was 0.63, up from 0.44 the previous week. This is still an extreme level of pessimism. The ratio’s 38-year range is 0.28 to 17.51, and the median is 1.47. Contrary Opinion must be tempered with other timing tools, of course.

VIX Fear Index, now at 59.98, rose slightly. Its 18-year high was 80.06 on 10/27/08. Its 18-year low was 9.89 on 1/24/07. 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 58.44, rose slightly. Its 7-year high was 79.16 on 10/27/08. Its record high was 114.23 on 10/8/98. Its record low was 12.61 on 7/29/05. VXN measures NASDAQ Volatility using a method comparable to that used for VIX.

CBOE Put/Call Ratio is 0.93, which indicates Bearish sentiment. Its 4-year mean and median are 0.62, and its 4-year range is 0.35 to 1.28.

ISEE Call/Put Ratio is 1.08, which indicates Bearish sentiment. The ratio’s 4-year mean is 1.50, 4-year median is 1.47, and 4-year range is 0.51 to 3.16.

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 credit market crisis has derailed that engine. Economic statistics and corporate earnings have been weakening and seem likely to weaken further over the next several months…or longer.

The Dow Theory last reconfirmed a Primary Tide Bear Market on 10/27/08, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their previous lowest closing prices of 2006-2008. These two Averages originally signaled a Primary Tide Bear Market on 11/21/07, when both closed below their closing price lows of August, 2007.

Shock and Fear. There is nothing new under the sun. The Dow Theory described this type of market many decades ago. From my book, The Encyclopedia of Technical Market Indicators , Second Edition : “The second Bear phase is marked by a sudden mood change, from optimism and hope to shock and fear. One day, the public wakes up and sees, much to its surprise, that “the emperor has no clothes”. Actual fundamental business conditions are not panning out to be as positive as previously hoped. In fact, there may be a little problem. The smart money is long gone, and there is no one left to buy when the public wants out. Stock prices drop steeply in a vacuum. Fear quickly replaces greed. Repeated waves of panic may sweep the market. Transactional volume swells as the unsophisticated investor screams, “Get me out at any price!” Sharp professional traders are willing to bid way down in price for stocks when prices drop too far too fast. The best that can be expected, however, is a dead-cat bounce that recovers only a fraction of the steep loss.”

The breadth of the market has been in a Bearish trend long term since June 2007. The number of New Lows has exceeded the number of New Highs most days for more than a year, since July 2007, and that is one sign of a Bear Market. On 10/27/08, the Cumulative Daily Advance-Decline Lines for the NYSE and for the NASDAQ both fell to new 2-year lows, reconfirming that the major breadth trends remain Bearish.

To discover the next Resistance, traders probably will be watching how the market acts at the following levels for the Standard & Poor’s 500 cash index (919.21):

Potential Resistance
1,576.09, high of 10/11/2007
1,552.76, high of 10/31/2007
1,523.57, high of 12/11/2007
1,498.85, high of 12/26/2007
1,440.24, high of 5/19/2008
1,406.32, high of 5/29/2008
1,366.59, high of 6/17/2008
1,335.63, high of 6/25/2008
1,313.15, high of 8/11/2008
1,274.42, high of 9/8/2008
1,255.09, high of 9/12/2008
1,238.807, Fibonacci 78.6% of 1,576.09 high
1,220.03, high of 9/25/2008
1,077.08, Fibonacci 61.8% of 2002-2007 upmove
1,044.31, high of 10/14/2008
1,001.84, high of 11/4/2008

To discover the next Support, traders probably will be watching how the market acts at the following levels for the S&P 500 cash index (919.21):

Potential Support
839.80, low of 10/10/2008
788.05, Fibonacci 50.0% of 1,576.09 high
768.63, low of 10/10/2002
602.07, Fibonacci 38.2% of 1,576.09 high

Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol

5.97% Short 200% MidCap 400 PS, MZZ
3.95% China 25 iS, FXI
3.23% Internet B2B H, BHH
2.77% Short 200% QQQ PS, QID
2.69% China LargeCap Growth G D H USX PS, PGJ
2.39% India Earnings WTree, EPI
2.38% Oil, Crude, U.S. Oil Fund, USO
2.19% Mexico Index, EWW
1.99% South Africa Index, EZA
1.99% Short 200% Dow 30 PS, DXD
1.81% Short 100% QQQ, PSQ
1.59% Telecom H, TTH
1.54% Short 100% MidCap 400, MYY
1.49% Gold Shares S.T., GLD
1.35% Metals & Mining SPDR, XME
1.30% Short 200% S&P 500 PS, SDS
1.21% Silver Trust iS, SLV
1.19% Short 100% S&P 500, SH
1.11% Emerging 50 BLDRS, ADRE
1.01% Biotech SPDR, XBI
0.93% Emerging Markets, EEM
0.89% Biotech & Genome, PBE
0.88% Japan Index, EWJ
0.85% Transportation Av DJ, IYT
0.76% Short 100% Dow 30, DOG
0.76% Latin Am 40, ILF
0.71% Energy DJ, IYE
0.70% Hardware & Electronics, PHW
0.68% Telecom DJ US, IYZ
0.65% Commodity Tracking, DBC
0.61% Natural Resource iS GS, IGE
0.57% Energy Global, IXC
0.56% Asia 50 BLDRS, ADRA
0.55% Pharmaceuticals, PJP
0.53% Energy Exploration & Prod, PXE
0.52% Canada Index, EWC
0.52% Growth S&P 500, RPG
0.49% Bond, 20+ Years Treasury, TLT
0.45% Energy VIPERs, VDE
0.42% Brazil Index, EWZ
0.39% Growth SmallCap iS M, JKK
0.36% Emerging VIPERs, VWO
0.35% Bond, TIPS, TIP
0.34% Energy SPDR, XLE
0.32% Telecom Services VIPERs, VOX
0.31% Bond, 1-3 Year Treasury, SHY
0.29% Consumer Staples SPDR, XLP
0.29% Japan LargeCap Blend TOPIX 150, ITF
0.26% Lg Cap Growth PSD, PWB
0.22% Aerospace & Defense, PPA
0.20% Basic Materials DJ US, IYM
0.12% Developed 100 BLDRS, ADRD
0.10% Bond, 10 Year Treasury, IEF
0.07% Growth Mid Cap Dynamic PS, PWJ
0.04% Bond, Corp, LQD
0.04% Industrial SPDR, XLI
0.04% Materials SPDR, XLB
0.03% Consumer Staples VIPERs, VDC
0.03% Dividend Growth PS, PHJ
0.02% Biotech H, BBH
-0.05% Pacific VIPERs, VPL
-0.16% Technology Global, IXN
-0.19% Food & Beverage, PBJ
-0.40% Dividend Appreciation Vipers, VIG
-0.40% Oil Services H, OIH
-0.41% Insurance, PIC
-0.42% Building & Construction, PKB
-0.43% Software, PSJ
-0.44% Materials VIPERs, VAW
-0.44% Oil & Gas, PXJ
-0.45% Health Care VIPERs, VHT
-0.45% LargeCap Blend Socially Responsible iS, KLD
-0.49% Telecommunications Global, IXP
-0.50% Industrials VIPERs, VIS
-0.50% SmallCap PS Zacks, PZJ
-0.54% Dividend Leaders, FDL
-0.57% Consumer Non-Cyclical, IYK
-0.58% Value Large Cap DJ, ELV
-0.59% Industrial LargeCap Blend DJ US, IYJ
-0.60% Water Resources, PHO
-0.60% Software H, SWH
-0.61% Germany Index, EWG
-0.61% Retail H, RTH
-0.63% Growth 1000 Russell, IWF
-0.64% Bond, Aggregate, AGG
-0.64% Pharmaceutical H, PPH
-0.66% Growth S&P 500/BARRA, IVW
-0.68% Healthcare Global, IXJ
-0.68% LargeCap Rydex Rus Top 50, XLG
-0.68% LargeCap Blend Dynamic PS, PWC
-0.69% Networking, PXQ
-0.70% Dividend Achievers PS, PFM
-0.70% LargeCap Blend Core iS M, JKD
-0.72% Health Care SPDR, XLV
-0.72% Growth LargeCap Russell 3000, IWZ
-0.75% Telecommunications & Wireless, PTE
-0.75% Software, IGV
-0.76% Value Line Timeliness MidCap Gr, PIV
-0.81% Malaysia Index, EWM
-0.82% Healthcare DJ, IYH
-0.82% LargeCap Blend Total Market DJ, IYY
-0.83% Italy Index, EWI
-0.83% S&P 500 iS LargeCap Blend, IVV
-0.85% Retail, PMR
-0.86% OTC Dynamic PS, PWO
-0.86% Switzerland Index, EWL
-0.86% LargeCap VIPERs, VV
-0.87% Value LargeCap Euro STOXX 50 DJ, FEU
-1.00% LargeCap 1000 R, IWB
-1.06% Value 40 Large Low P/E FT DB, FDV
-1.07% Ultra Dow30 Double, DDM
-1.07% SmallCap Core iS M, JKJ
-1.08% Value LargeCap Dynamic PS, PWV
-1.09% Technology SPDR, XLK
-1.09% Singapore Index, EWS
-1.09% Growth Large Cap, ELG
-1.11% Blend Total Market VIPERs, VTI
-1.13% LargeCap Blend S&P 1500 iS, ISI
-1.21% Value MidCap Dynamic PS, PWP
-1.25% Wilshire 5000 ST TM, TMW
-1.27% Consumer Cyclical DJ, IYC
-1.30% Value VIPERs, VTV
-1.31% LargeCap Blend S&P 100, OEF
-1.31% S&P 500 SPDRs LargeCap Blend, SPY
-1.31% Growth MidCap S&P 400, RFG
-1.33% DIAMONDS (DJIA), DIA
-1.35% Growth LargeCap NASDAQ 100, QQQQ
-1.35% Growth SmallCap Dynamic PS, PWT
-1.37% Value S&P 500 B, IVE
-1.42% Value 1000 Russell, IWD
-1.44% Value LargeCap Fundamental RAFI 1000, PRF
-1.45% Growth VIPERs, VUG
-1.45% Technology MS sT, MTK
-1.48% Growth EAFE MSCI, EFG
-1.48% Sweden Index, EWD
-1.50% EAFE Index, EFA
-1.52% Growth BARRA Small Cap 600, IJT
-1.57% Growth LargeCap iS M, JKE
-1.57% Utilities, PUI
-1.58% Europe 100 BLDRS, ADRU
-1.58% Growth MidCap 400 B, IJK
-1.58% Global 100, IOO
-1.61% Belgium Index, EWK
-1.67% Ultra QQQ Double, QLD
-1.70% Networking, IGN
-1.74% France Index, EWQ
-1.74% Growth MidCap Russell, IWP
-1.75% Technology DJ US, IYW
-1.76% Info Tech VIPERs, VGT
-1.78% Value Small Cap DJ, DSV
-1.79% Value SmallCap Dynamic PS, PWY
-1.83% United Kingdom Index, EWU
-1.84% Technology GS, IGM
-1.84% Micro Cap Zachs, PZI
-1.85% LargeCap Blend S&P=Weight R, RSP
-1.86% LargeCap Blend NYSE Composite iS, NYC
-1.87% MidCap VIPERs, VO
-1.88% LargeCap Blend Russell 3000, IWV
-1.88% MidCap Growth iS M, JKH
-1.90% Growth SmallCap VIPERs, VBK
-1.92% Growth LargeCap NASDAQ Fidelity, ONEQ
-1.94% Value LargeCap NYSE 100 iS, NY
-1.95% Bank Regional H, RKH
-1.96% Dividend DJ Select, DVY
-1.98% Dividend International, PID
-1.99% Utilities DJ, IDU
-2.00% Value EAFE MSCI, EFV
-2.04% Growth Small Cap DJ, DSG
-2.07% Broadband H, BDH
-2.09% Leisure & Entertainment, PEJ
-2.13% Small Cap VIPERs, VB
-2.13% Value LargeCap Russell 3000, IWW
-2.15% Europe 350 S&P Index, IEV
-2.17% Euro STOXX 50, FEZ
-2.20% SmallCap S&P 600, IJR
-2.20% Growth SmallCap R 2000, IWO
-2.22% Value MidCap iS M, JKI
-2.29% South Korea Index, EWY
-2.30% MidCap Blend Core iS M, JKG
-2.30% Netherlands Index, EWN
-2.31% SmallCap Russell 2000, IWM
-2.32% Consumer Discretionary SPDR, XLY
-2.33% MidCap Russell, IWR
-2.36% Hong Kong Index, EWH
-2.38% Internet Architecture H, IAH
-2.39% Utilities VIPERs, VPU
-2.41% Utilities H, UTH
-2.41% Utilities SPDR, XLU
-2.42% Extended Mkt VIPERs, VXF
-2.43% MidCap S&P 400 iS, IJH
-2.45% EMU Europe Index, EZU
-2.46% Taiwan Index, EWT
-2.52% Dividend SPDR, SDY
-2.58% European VIPERs, VGK
-2.58% Value MidCap S&P 400, RFV
-2.60% Value MidCap S&P 400 B, IJJ
-2.65% Value SmallCap iS M, JKL
-2.67% Semiconductor SPDR, XSD
-2.68% IPOs, First Tr IPOX-100, FPX
-2.70% Value SmallCap S&P 600 B, IJS
-2.72% Value LargeCap iS M, JKF
-2.76% Global Titans, DGT
-2.81% Consumer D. VIPERs, VCR
-2.83% Internet H, HHH
-2.87% Value SmallCap Russell 2000, IWN
-2.90% Microcap Russell, IWC
-2.91% Semiconductor iS GS, IGW
-2.95% Semiconductors, PSI
-2.95% Financial SPDR, XLF
-3.05% Value SmallCap VIPERS, VBR
-3.06% Value MidCap Russell, IWS
-3.31% Financial Services DJ, IYG
-3.35% Pacific ex-Japan, EPP
-3.53% Value SmallCap S&P 600, RZV
-3.61% MidCap S&P 400 SPDRs, MDY
-3.76% Internet Infrastructure H, IIH
-3.78% Financials Global LargeCap Value, IXG
-3.88% Spain Index, EWP
-3.98% Semiconductor H, SMH
-4.19% Ultra S&P500 Double, SSO
-4.21% Nanotech Lux, PXN
-4.23% Austria Index, EWO
-4.29% Financial DJ US, IYF
-4.39% Ultra MidCap400 Double, MVV
-4.41% Value S&P 500, RPV
-4.61% Financials VIPERs, VFH
-4.63% Australia Index, EWA
-5.12% WilderHill Clean Energy PS, PBW
-5.18% Homebuilders SPDR, XHB
-5.41% Dividend High Yield Equity PS, PEY
-6.19% Capital Markets KWB ST, KCE
-8.57% Real Estate US DJ, IYR
-8.95% REIT VIPERs, VNQ
-8.97% REIT Wilshire, RWR
-9.70% Realty Cohen & Steers, ICF