by Robert W. Colby, Senior Analyst,


Crude Oil futures December contract price fell to a new 22-month low of 53.96.

CRB index of commodities prices fell to a new 5-year low.

iShares Lehman TIPS Bond (TIP) ETF Relative Strength Ratio (TIP/TLT) fell to a new 5-year low.

Semiconductor HOLDRs fell to a new 10-year price low.

Financial Stock Sector Absolute Price and Relative Strength Ratio (XLF/SPY) fell to new 10-year lows.

Consumer Discretionary Stock Sector Relative Strength Ratio (XLY/SPY) fell to a new 7-year low.

U.S. Treasury Bond futures contract price rose to a new 6-week high.

The Cumulative Daily Advance-Decline Lines for the NYSE and for the NASDAQ both fell to new 2-year lows, again reconfirming that the major breadth trends remain Bearish.

The stock market’s clear preference for defensive stocks over cyclical stocks implies expectations for weak business and market trends ahead.

With the business conditions outlook deteriorating, and the possibility of further financial risks, prudent investors will continue to focus on capital preservation.

On Tuesday, major stock price indexes opened lower then turned choppy and erratic. Prices were on the plus side at 11:50 a.m. but to fell into the red to a low at 2:50 p.m. The last hour reversed again, lifting prices above their morning highs. Stocks indexes closed mostly higher and near the highs of the day, but the breadth balance was negative, with significantly more declines than advances. The Standard & Poor’s 500 cash index (859.12) closed up 8.37 points, or 0.98%. Total NYSE volume rose 24%, but the volume a declining stocks exceeded the volume of advancing stocks.

The stock market reflects future fundamental conditions about 6 months ahead. Economic and business news has been growing dramatically worse as time goes on, with no visible end to the downward fundamental spiral. Some economists see weakness for another 12 months. Assuming that, it would be too early for a change in the major trend. The unfolding financial crisis is like an iceberg, and no one has been able to determine how much of it is hidden under water.

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

3.84% , SRCL , Stericycle, SRCL
20.24% , BC , BRUNSWICK
8.65% , YHOO , YAHOO
7.94% , WYE , WYETH
3.04% , VDE , Energy VIPERs, VDE
1.56% , IVW , Growth S&P 500/BARRA, IVW

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

-16.63% , BHH , Internet B2B H, BHH
-25.50% , CIT , CIT GROUP
-13.23% , MDT , MEDTRONIC
-1.81% , FDV , Value 40 Large Low P/E FT DB, FDV
-27.06% , CAR , Avis Budget Group, Inc. (CAR)
-6.79% , MET , METLIFE
-3.77% , BDH , Broadband H, BDH
-10.47% , FLEX , Flextronics International Ltd
-13.04% , SIRI , Sirius Satellite
-6.88% , GLW , CORNING
-12.08% , MBI , MBIA
-2.64% , DSG , Growth Small Cap DJ, DSG
-5.24% , NCR , NCR
-6.32% , PNC , PNC FINL SVC
-0.71% , PWJ , Growth Mid Cap Dynamic PS, PWJ
-4.63% , MAT , MATTEL
-6.41% , ASH , ASHLAND
-4.07% , JWN , NORDSTROM
-5.24% , GRMN , GARMIN LTD
-6.48% , SYK , STRYKER
-2.44% , IXG , Financials Global LargeCap Value, IXG
-8.05% , SLM , SLM CORP
-3.46% , TXT , TEXTRON
-2.30% , RFG , Growth MidCap S&P 400, RFG
-1.51% , DBC , Commodity Tracking, DBC
-4.50% , GNTX , Gentex Corporation
-2.11% , PBE , Biotech & Genome, PBE
-6.31% , LSI , LSI LOGIC
-2.43% , TE , TECO ENERGY
-1.71% , PZI , Micro Cap Zachs, PZI

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

2.80% Energy SPDR, XLE
1.39% Technology SPDR, XLK
0.69% Consumer Staples SPDR, XLP
0.68% Health Care SPDR, XLV
0.09% Industrial SPDR, XLI
-0.48% Consumer Discretionary SPDR, XLY
-1.08% Utilities SPDR, XLU
-1.12% Materials SPDR, XLB
-1.43% Financial SPDR, XLF

Primary Tide Trends for the 9 major sectors can 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 11/12/08, XLP/SPY Relative Strength Ratio rose to a new 10-year high. 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 a new 4-year high.

Utilities (XLU) Neutral, Market Weight. On 11/17/08, the XLU/SPY Relative Strength Ratio rose to a new 10-year high.

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

Technology (XLK) Bearish, Underweight. On 11/13/08, the XLK absolute price fell to a new 5-year low.

Industrial (XLI) Bearish, Underweight. On 11/13/08, the XLI absolute price fell to a new 5-year low.

Consumer Discretionary (XLY) Bearish, Underweight. On 11/13/08, XLY absolute price fell to its lowest level in 10 years. The Relative Strength Ratio (XLY/SPY) has been trending down since 1/5/05 and fell to a new 7-year low on 11/18/08.

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

Financial (XLF) Bearish, Underweight. On 11/18/08, the XLF absolute price hit another new 10-year low. In addition, the XLF long-term trend of Relative Strength Ratio (XLF/SPY) has been trending down since 2/20/07 and fell to a new 10-year low on 11/18/08.

The relative performance measurements of the 9 major sectors have indicated for many months a clear preference for defensive stocks that are insulated to a degree from economic downturns.

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 has been underperforming the S&P 500 since 8/14/08. On 11/13/08, 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 fell to a new 22-month low of 53.96, confirming its preexisting Bearish trend. 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 consolidated with another Inside Day (lower high and higher low). The trend still looks 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 rose to a new 6-week high, which is Bullish 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 Ratio (TIP/TLT) confirmed deflation. On 11/18/08, the Ratio fell to a new 5-year low and has been in a persistent major downtrend since 7/3/08.

The U.S. dollar had another Inside Day (lower high and higher low) of consolidation. Appears uncertain for the short term. The dollar set a new 24-month high on 10/28/08, 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 31.9% Bulls versus 46.1% Bears as of 11/12/2008, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio was 0.69, up from 0.63 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 67.64, eased slightly lower. 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 68.31, eased slightly lower. 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 0.94, 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 0.91, 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 quarters.

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 11/18/08, 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 (859.12):

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 (859.12):

Potential Support
818.69, low of 11/13/2008
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

3.60% Natural Resource iS GS, IGE
3.58% Malaysia Index, EWM
3.53% Ultra Dow30 Double, DDM
3.23% Silver Trust iS, SLV
3.04% Energy VIPERs, VDE
2.95% Energy DJ, IYE
2.80% Energy SPDR, XLE
2.37% Oil Services H, OIH
2.09% Internet Architecture H, IAH
2.06% United Kingdom Index, EWU
1.90% MidCap S&P 400 SPDRs, MDY
1.88% S&P 500 SPDRs LargeCap Blend, SPY
1.77% LargeCap Blend S&P 100, OEF
1.74% Pharmaceuticals, PJP
1.70% Pharmaceutical H, PPH
1.56% Growth S&P 500/BARRA, IVW
1.55% Value 1000 Russell, IWD
1.44% Europe 350 S&P Index, IEV
1.43% Oil & Gas, PXJ
1.40% Dividend Appreciation Vipers, VIG
1.39% Technology SPDR, XLK
1.37% Technology Global, IXN
1.37% Global 100, IOO
1.36% Value LargeCap iS M, JKF
1.29% South Africa Index, EZA
1.29% Bond, 20+ Years Treasury, TLT
1.27% LargeCap Blend Russell 3000, IWV
1.25% Consumer Staples VIPERs, VDC
1.24% LargeCap Rydex Rus Top 50, XLG
1.14% Value VIPERs, VTV
1.11% LargeCap Blend Core iS M, JKD
1.10% Consumer Non-Cyclical, IYK
1.06% Technology DJ US, IYW
1.05% Technology GS, IGM
0.99% Value LargeCap Russell 3000, IWW
0.99% Switzerland Index, EWL
0.98% Dividend SPDR, SDY
0.93% Blend Total Market VIPERs, VTI
0.91% S&P 500 iS LargeCap Blend, IVV
0.87% Energy Global, IXC
0.84% Info Tech VIPERs, VGT
0.80% Netherlands Index, EWN
0.78% Growth VIPERs, VUG
0.78% Bond, 10 Year Treasury, IEF
0.77% Value LargeCap Dynamic PS, PWV
0.74% Ultra S&P500 Double, SSO
0.73% Value LargeCap Euro STOXX 50 DJ, FEU
0.71% LargeCap Blend S&P 1500 iS, ISI
0.69% Consumer Staples SPDR, XLP
0.68% Wilshire 5000 ST TM, TMW
0.68% Health Care SPDR, XLV
0.67% LargeCap 1000 R, IWB
0.66% Value S&P 500 B, IVE
0.63% Healthcare Global, IXJ
0.62% Value LargeCap NYSE 100 iS, NY
0.59% Italy Index, EWI
0.57% LargeCap VIPERs, VV
0.56% Value Large Cap DJ, ELV
0.51% Euro STOXX 50, FEZ
0.41% Short 100% MidCap 400, MYY
0.41% EMU Europe Index, EZU
0.40% LargeCap Blend Total Market DJ, IYY
0.31% Germany Index, EWG
0.27% Utilities VIPERs, VPU
0.27% France Index, EWQ
0.24% Retail H, RTH
0.22% Industrials VIPERs, VIS
0.19% Networking, IGN
0.19% European VIPERs, VGK
0.18% Short 200% MidCap 400 PS, MZZ
0.17% EAFE Index, EFA
0.16% Value EAFE MSCI, EFV
0.15% Short 200% QQQ PS, QID
0.13% Dividend High Yield Equity PS, PEY
0.13% Dividend Achievers PS, PFM
0.13% Industrial LargeCap Blend DJ US, IYJ
0.12% Bond, Corp, LQD
0.11% Bond, 1-3 Year Treasury, SHY
0.10% Food & Beverage, PBJ
0.10% Growth EAFE MSCI, EFG
0.09% Industrial SPDR, XLI
0.08% Short 100% QQQ, PSQ
0.07% Growth MidCap Russell, IWP
0.03% SmallCap PS Zacks, PZJ
0.01% Utilities H, UTH
0.00% Japan Index, EWJ
-0.01% Internet Infrastructure H, IIH
-0.03% Spain Index, EWP
-0.03% Technology MS sT, MTK
-0.03% Mexico Index, EWW
-0.04% Biotech H, BBH
-0.05% LargeCap Blend Socially Responsible iS, KLD
-0.06% Telecommunications Global, IXP
-0.07% Software, IGV
-0.07% Energy Exploration & Prod, PXE
-0.08% Australia Index, EWA
-0.09% Pacific ex-Japan, EPP
-0.09% REIT Wilshire, RWR
-0.11% Growth LargeCap NASDAQ 100, QQQQ
-0.12% Healthcare DJ, IYH
-0.12% Hardware & Electronics, PHW
-0.13% Value LargeCap Fundamental RAFI 1000, PRF
-0.13% Consumer Cyclical DJ, IYC
-0.13% LargeCap Blend Dynamic PS, PWC
-0.14% Health Care VIPERs, VHT
-0.14% Bond, Aggregate, AGG
-0.15% MidCap VIPERs, VO
-0.17% Growth 1000 Russell, IWF
-0.18% SmallCap S&P 600, IJR
-0.18% Value SmallCap S&P 600 B, IJS
-0.19% Gold Shares S.T., GLD
-0.19% Value MidCap Russell, IWS
-0.19% LargeCap Blend S&P=Weight R, RSP
-0.22% Dividend Growth PS, PHJ
-0.24% Dividend DJ Select, DVY
-0.25% Value SmallCap Russell 2000, IWN
-0.25% Utilities DJ, IDU
-0.30% Realty Cohen & Steers, ICF
-0.31% Transportation Av DJ, IYT
-0.35% MidCap Russell, IWR
-0.36% Pacific VIPERs, VPL
-0.38% Growth MidCap 400 B, IJK
-0.38% Growth LargeCap NASDAQ Fidelity, ONEQ
-0.40% Growth LargeCap iS M, JKE
-0.41% Growth Large Cap, ELG
-0.43% MidCap Blend Core iS M, JKG
-0.43% MidCap S&P 400 iS, IJH
-0.43% Financial Services DJ, IYG
-0.45% Internet H, HHH
-0.45% Utilities, PUI
-0.47% Small Cap VIPERs, VB
-0.48% Japan LargeCap Blend TOPIX 150, ITF
-0.48% Consumer Discretionary SPDR, XLY
-0.49% SmallCap Russell 2000, IWM
-0.49% Insurance, PIC
-0.50% Telecommunications & Wireless, PTE
-0.55% Homebuilders SPDR, XHB
-0.58% Water Resources, PHO
-0.61% Value SmallCap VIPERS, VBR
-0.61% Singapore Index, EWS
-0.61% Value MidCap Dynamic PS, PWP
-0.66% Telecom DJ US, IYZ
-0.67% Taiwan Index, EWT
-0.70% Canada Index, EWC
-0.71% Growth Mid Cap Dynamic PS, PWJ
-0.72% Sweden Index, EWD
-0.75% Financials VIPERs, VFH
-0.75% Aerospace & Defense, PPA
-0.80% Bank Regional H, RKH
-0.80% Consumer D. VIPERs, VCR
-0.83% SmallCap Core iS M, JKJ
-0.85% Growth LargeCap Russell 3000, IWZ
-0.86% Oil, Crude, U.S. Oil Fund, USO
-0.87% Software H, SWH
-0.89% Extended Mkt VIPERs, VXF
-0.90% Short 100% S&P 500, SH
-0.90% Ultra QQQ Double, QLD
-0.93% Capital Markets KWB ST, KCE
-0.93% Europe 100 BLDRS, ADRU
-0.94% Lg Cap Growth PSD, PWB
-0.94% Value MidCap S&P 400 B, IJJ
-0.98% MidCap Growth iS M, JKH
-1.01% Bond, TIPS, TIP
-1.01% Developed 100 BLDRS, ADRD
-1.07% Belgium Index, EWK
-1.07% Biotech SPDR, XBI
-1.08% Utilities SPDR, XLU
-1.08% Materials VIPERs, VAW
-1.10% Dividend Leaders, FDL
-1.12% Materials SPDR, XLB
-1.13% Financial DJ US, IYF
-1.19% Microcap Russell, IWC
-1.22% Ultra MidCap400 Double, MVV
-1.24% Growth BARRA Small Cap 600, IJT
-1.26% Global Titans, DGT
-1.32% Growth SmallCap VIPERs, VBK
-1.36% Emerging VIPERs, VWO
-1.38% WilderHill Clean Energy PS, PBW
-1.43% Financial SPDR, XLF
-1.46% LargeCap Blend NYSE Composite iS, NYC
-1.46% Emerging Markets, EEM
-1.51% Commodity Tracking, DBC
-1.61% Telecom Services VIPERs, VOX
-1.64% Value Small Cap DJ, DSV
-1.65% Nanotech Lux, PXN
-1.66% Growth SmallCap R 2000, IWO
-1.66% Latin Am 40, ILF
-1.67% Hong Kong Index, EWH
-1.68% Short 200% S&P 500 PS, SDS
-1.68% Value SmallCap Dynamic PS, PWY
-1.71% Micro Cap Zachs, PZI
-1.72% India Earnings WTree, EPI
-1.75% Brazil Index, EWZ
-1.75% Dividend International, PID
-1.79% Semiconductor H, SMH
-1.81% Value 40 Large Low P/E FT DB, FDV
-1.81% Short 100% Dow 30, DOG
-1.81% IPOs, First Tr IPOX-100, FPX
-1.83% Value MidCap iS M, JKI
-1.84% Basic Materials DJ US, IYM
-1.85% Value Line Timeliness MidCap Gr, PIV
-1.90% Value SmallCap S&P 600, RZV
-1.91% Value SmallCap iS M, JKL
-1.98% Growth SmallCap Dynamic PS, PWT
-1.98% OTC Dynamic PS, PWO
-2.11% Biotech & Genome, PBE
-2.13% Telecom H, TTH
-2.20% Growth SmallCap iS M, JKK
-2.26% Semiconductor iS GS, IGW
-2.27% Software, PSJ
-2.30% Growth MidCap S&P 400, RFG
-2.41% Asia 50 BLDRS, ADRA
-2.44% Financials Global LargeCap Value, IXG
-2.45% Emerging 50 BLDRS, ADRE
-2.60% Networking, PXQ
-2.64% Growth Small Cap DJ, DSG
-2.79% Retail, PMR
-2.91% South Korea Index, EWY
-2.99% Short 200% Dow 30 PS, DXD
-3.07% Austria Index, EWO
-3.10% Growth S&P 500, RPG
-3.12% China LargeCap Growth G D H USX PS, PGJ
-3.27% China 25 iS, FXI
-3.77% Broadband H, BDH
-4.02% Real Estate US DJ, IYR
-4.17% Leisure & Entertainment, PEJ
-4.24% Semiconductors, PSI
-4.80% Value S&P 500, RPV
-4.98% Metals & Mining SPDR, XME
-5.38% Building & Construction, PKB
-6.13% Value MidCap S&P 400, RFV
-7.47% Semiconductor SPDR, XSD
-16.63% Internet B2B H, BHH