By Robert W. Colby, Senior Analyst

The Fed to the rescue…dvu.
Be nimble. Be quick.

Down 8 of the 9 trading days, many will say the market was oversold–and it was. An oversold market can have extreme reactions to good news. There probably are many trend-following shorts ripe for squeezing.

Health Care Stock Sector Relative Strength Ratio fell to a new 4-month low.

Crude Oil jumped up above 109, a new high, confirming that all trends are Bullish for oil. But high and rising oil prices are no good for the economy and the stock market.

On Tuesday, the major stock price indexes gapped open much higher on Fed news but soon turned down. By about 12:50 p.m., the market had retraced most of the opening gain and closed the overnight chart gap. A steady afternoon rally carried prices well above the opening highs. Stocks closed very strong at the highs of the day and above the highs of the previous two trading days.

NYSE volume soared 25%, confirming the price upturn and demonstrating strong buying pressure.

Again, commentators attributed the turnaround to “reports”, this time reports of another coordinated central bank effort to increase liquidity in the financial markets. The U.S. Federal Reserve announced a new Term Securities Lending Facility to lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days. Borrowers will be able to pledge a variety of collateral ranging from federal agency debt to private AAA rated residential mortgage backed securities.

Technically, Tuesday’s strong momentum has a chance to carry further upward as shorts cover and underinvested longs buy to adjust positions. Beyond a couple of days, however, the short-term trend could turn quite uncertain. There could still be a lot of fundamental problems, and the main trend is still down for the broad-based stock price indexes. Day to day, the stock market has been quite reactive to the news, rumors, and “reports” of the day. On Tuesday, obviously, the “reports” were Bullish–but that can change at any moment. Be nimble. Be quick.

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

2.70% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
3.75% , PZJ , SmallCap PS Zacks, PZJ
3.84% , EWD , Sweden Index, EWD
3.51% , EWN , Netherlands Index, EWN
6.05% , IXG , Financials Global LargeCap Value, IXG
7.59% , EZA , South Africa Index, EZA
3.01% , DGT , Global Titans, DGT
3.06% , NY , Value LargeCap NYSE 100 iS, NY
3.32% , IIH , Internet Infrastructure H, IIH
2.80% , TTH , Telecom H, TTH
1.74% , EWL , Switzerland Index, EWL
4.56% , ADRA , Asia 50 BLDRS, ADRA
5.84% , ADRE , Emerging 50 BLDRS, ADRE
7.63% , FMCN , Focus Media, FMCN
6.34% , PEY , Dividend High Yield Equity PS, PEY
4.03% , PXE , Energy Exploration & Prod, PXE
7.11% , IYR , Real Estate US DJ, IYR
10.33% , ZION , ZIONS
9.13% , MTB , M&T BANK
2.91% , HHH , Internet H, HHH
6.54% , LEN , Lennar Corp. (LEN)
4.13% , IWD , Value 1000 Russell, IWD
9.17% , BBT , BB&T
3.58% , XLG , LargeCap Rydex Rus Top 50, XLG
7.39% , USB , US BANCORP
8.00% , RKH , Bank Regional H, RKH
10.51% , WFC , WELLS FARGO
3.72% , IWC , Microcap Russell, IWC
3.55% , OEF , LargeCap Blend S&P 100, OEF

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

-24.43% , HUM , HUMANA
-9.82% , CI , CIGNA
-8.30% , AET , AETNA
-8.18% , S , SPRINT NEXTEL
-1.82% , MHP , MCGRAW HILL
-7.22% , SDS , Short 200% S&P 500 PS, SDS
-3.63% , DOG , Short 100% Dow 30, DOG
-0.87% , MCO , MOODYS CORP
-9.16% , QID , Short 200% QQQ PS, QID
-1.85% , SANM , SANMINA
-1.65% , MDP , MEREDITH
-7.12% , DXD , Short 200% Dow 30 PS, DXD
-1.75% , RFMD , RF Micro Devices Inc
-1.09% , IEF , Bond, 10 Year Treasury, IEF
-2.49% , LNCR , Lincare Holdings Inc
-0.81% , PWER , POWER ONE
-1.32% , BA , BOEING
-0.69% , XRAY , DENTSPLY International Inc
-0.41% , FLEX , Flextronics International Ltd
-0.52% , LEG , LEGGETT & PLATT
-0.23% , RHT , Red Hat Inc.
-0.52% , LAMR , Lamar Advertising Company
-0.97% , TIP , Bond, TIPS, TIP
-0.61% , AGG , Bond, Aggregate, AGG
-0.24% , IYH , Healthcare DJ, IYH
-1.14% , LQD , Bond, Corp, LQD
-0.08% , VIA.B , VIACOM STK B
-0.10% , VIA , VIACOM INC. (New)
-0.13% , AMGN , AMGEN

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

6.56% Financial SPDR, XLF
6.09% Materials SPDR, XLB
5.15% Energy SPDR, XLE
3.54% Technology SPDR, XLK
3.40% Industrial SPDR, XLI
2.72% Consumer Discretionary SPDR, XLY
2.12% Consumer Staples SPDR, XLP
1.73% Utilities SPDR, XLU
0.97% Health Care SPDR, XLV

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

Energy (XLE) Neutral, Market Weight. On 3/6/08, the XLE/SPY Relative Strength Ratio rose to new all-time high, confirming a major uptrend.

Materials (XLB) Neutral, Market Weight. On 3/6/08, the XLB/SPY Relative Strength Ratio rose to a new all-time high, confirming a major uptrend.

Consumer Staples (XLP) Neutral, Market Weight. On 3/10/08, the XLP/SPY Relative Strength Ratio rose to new 4-year high.

Industrial (XLI) Neutral, Market Weight. On 3/6/08, the XLI/SPY Relative Strength Ratio made a new all-time high.

Utilities (XLU) Neutral, Market Weight. The XLU/SPY Relative Strength Ratio has eroded significantly since its all-time high on 1/9/08, and so Utilities have been slipping in these rankings.

Technology (XLK) Bearish, Underweight. On 2/25/08, the XLK/SPY Relative Strength Ratio fell to a new 10-month low, confirming a significant downtrend.

Health Care (XLV) Bearish, Underweight. On 3/11/08, the XLV/SPY Relative Strength Ratio made a new 4-month low.

Consumer Discretionary (XLY) Bearish, Underweight. On 2/21/08, the XLY/SPY Relative Strength Ratio fell to a new 3-week low, suggesting short-term weakness. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to a new 6-year low, confirming a major downtrend.

Financial (XLF) Bearish, Underweight. On 3/10/08, the XLF/SPY Relative Strength Ratio fell to a new 7-year low, and price fell to a new 5-year low.

Foreign stock indexes have been relatively strong for the short term since 2/11/08. Intermediate term, however, the EFA (the EAFE, international developed country stock markets,(ex the U.S. and Canada) has underperformed since 11/27/07.

NASDAQ Composite price remains Bearish. On 3/3/08, Relative Strength fell to a new 9-month low, confirming a significant downtrend.

Growth Stock/Value Stock Relative Strength Ratio has recovered significantly from a low on 2/1/08 but still has underperformed since the peak on 11/7/07. The Growth/Value ratio (IWF/IWD) appears to be in an intermediate-term uncertain phase.

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 (April futures contract) moved above 109, and all trends are 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 has underperformed Crude Oil since 12/10/07.

Gold (April futures contract) firmed slightly and the trends are still Bullish.

Silver outperformed Gold since 12/14/07. Although Silver has been strong over this intermediate term, iShares Silver Trust (AMEX: SLV) has been relatively weak compared to Gold longer term, since 12/7/06. In addition, for the past 28 years, since 1/2/80, Silver has underperformed Gold.

The Gold Miners ETF (GDX) fell sharply since 3/4/08. And longer-term, GDX significantly underperformed Gold since 10/31/07. Therefore, GDX trends have been Bearish relative to Gold itself.

U.S. Treasury Bond prices fell steeply on the Fed news. Bonds benefit from financial crisis. U.S. governments have been much stronger than corporates. Bonds generally have been 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 rose for the day but has repeatedly confirmed its downtrend in all time frames.

The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood of late. Beyond the day-to-day swings, sentiment never really reached levels associated with extreme pessimism. So, crowd psychology could get more Bearish before it is over. The business and financial news has flipped from fear to hope and back again every few days. Investors’ moods and stock volatility have jumped up and down abruptly with the latest “reports”. When mass psychology shifts so dramatically and unpredictably from hope to fear from one day to the next, risk control becomes more important than aggressive profit seeking. Stay flexible.

Sentiment/Contrary Opinion: There are still more Bulls than Bears. According to the weekly Investors Intelligence newsletter survey as of 3/5/08, there were 41.9% Bulls and 36.6% Bears. The ratio of Bullish advisors to Bearish advisors fell to 1.14, up from 1.15 to 1 the previous week. This is below its 38-year median at 1.47 to 1. The ratio’s 38-year range is 0.28 to 17.51.

VIX “Fear Index”, now at 26.36, 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 28.56, 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 is 0.89, which indicates Bearish sentiment. Its 4-year simple moving average and median are 0.62, and its 4- year range is 0.35 to 1.28.

ISEE Call/Put Ratio is 0.85, which indicates Bearish 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 8/16/07 closing price low of 4,671.88. 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:

9.06% Banks
8.99% Malaysia
7.33% Hong Kong
7.29% Broker Dealers
6.47% REITs
6.31% Mexico
6.02% Chemicals
5.69% Transport
5.58% Singapore
5.31% Brazil
5.06% Gold
5.03% Spain
4.96% Oil Services
4.76% Commodities
4.56% Dow Transports
4.46% Taiwan
4.43% Belgium
4.35% South Korea
4.22% Italy
4.16% Australia
4.13% Oil
3.98% Nasdaq Composite
3.84% Sweden
3.80% Paper
3.78% Comp. Tech
3.71% S&P 500
3.64% Internet
3.64% Natural Gas
3.61% NYSE Composite
3.58% Retailers
3.56% Hardware
3.55% Dow Industrial
3.54% Technology
3.51% Netherlands
3.47% DOT
3.43% Austria
3.40% Industrial
3.38% Disk Drives
3.31% Germany
3.18% Semis
3.18% Utilities
3.08% Network
2.98% France
2.94% Japan
2.93% Dow Utilities
2.91% Insurance
2.91% Canada
2.82% Telecoms
2.74% Airlines
2.61% Toronto 300
2.57% United Kingdom
1.86% Drugs
1.85% Health Care Products
1.84% AMEX Composite
1.74% Biotechs
1.74% Switzerland
1.73% Utilities
1.33% French CAC
1.28% Hang Seng
1.19% German DAX
1.19% Euro Top 100
1.09% London FTSE
1.01% Tokyo Nikkei
0.45% Dow World Index
0.23% Hospitals
0.12% CDNX Composite
-0.18% Health Care
-1.22% Sydney All Ords
-1.33% 30Y T-Bond

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 (1,320.65):

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
1,403.45, low of 1/7/2008
1,396.02, high of 2/1/2008
1,388.34, high of 2/27/2008

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 (1,320.65):

Potential Support
1,272.66, low of 3/10/2008
1,270.05, low of 1/23/2008
1,261.30, low of 8/10/2006
1,224.54, low of 7/18/2006
1,219.29, low of 6/14/2006
1,214.45, low of 11/4/2005
1,201.07, low of 11/2/2005
1,168.20, low of 10/13/2005
1,163.23, high of 3/5/2004
1,159.86, low of 5/17/2005
1,153.64, low of 5/16/2005
1,146.18, low of 5/13/2005
1,139.14, low of 4/29/2005
1,136.37, low of 4/20/2005