By Robert W. Colby, Senior Analyst

Cash is king.

Commodities, Oil, Gold, Energy stocks and Materials stocks broke sharply to the downside following warnings by Wall Street strategists.

Fears of financial crisis are just under the surface, cutting into probabilities of more than brief oversold bounces.

Sentiment has been Bearish, but that does not necessarily mean a bounce anytime soon.

Consumer Staples Stock Sector Relative Strength Ratio rose to a new 5-year high, again confirming a Bullish trend relative to the all-sectors index.

On Wednesday, major stock price indexes opened moderately higher but fell steeply all afternoon to close at the lowest levels of the day. NYSE volume fell by 1%, and the volume of declining stocks was 349% greater than the volume of advancing stocks, indicating substantial net selling pressure on balance.

Commodity prices broke sharply to the downside on news that Citigroup strategists warned that the ongoing financial crisis is tightening credit and may force commodity speculators to unwind positions, as price declines feed on themselves due to margin calls. Avoid companies and countries that are highly leveraged and need to borrow money, avoid companies are exposed to over-leveraged customers or highly leveraged investors, and avoid companies whose customers depend on cheap and easy credit. Specifically, avoid financial services, private equity and hedge funds, automakers, home builders, and electronics retailers. Cash is king. This Citigroup strategy, based on fundamental analysis, fits with the price trends we have been detecting in the various groups and sectors by means of technical analysis.

The main technical trend is still down for the broad-based stock price indexes. But some days, the fundamental worries are temporarily displaced by hopes for some kind of a rescue, from the Fed, the government, or big investors. Day to day, the stock market has been quite reactive to the news, rumors, and “reports” of the day, which certainly have been plentiful, although not always accurate. These “reports” strike at any unpredictable moment, like bolts out of the blue, disrupting trends and making short-term trading risky. In such a shifty market, be nimble, be quick, and control your risk.

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

9.00% , ADBE , ADOBE SYS
14.91% , FRE , FREDDIE MAC
3.60% , SUN , SUNOCO
8.82% , FNM , FANNIE MAE
2.20% , SIRI , Sirius Satellite
0.86% , IEF , Bond, 10 Year Treasury, IEF
1.63% , XMSR , XM Satellite R
1.25% , TLAB , TELLABS
4.88% , HGSI , Human Genome Sciences Inc
0.69% , BCR , C R BARD
1.66% , TLT , Bond, 20+ Years Treasury, TLT
1.15% , SNV , SYNOVUS
1.01% , DISH , EchoStar Communications Corporation
0.43% , LQD , Bond, Corp, LQD
0.76% , CEPH , Cephalon Inc
0.93% , KO , COCA COLA
1.05% , FAST , Fastenal Company
1.39% , MAT , MATTEL
0.55% , XLP , Consumer Staples SPDR, XLP
0.14% , PPH , Pharmaceutical H, PPH
1.25% , GNTX , Gentex Corporation
0.26% , NKE , NIKE STK B
0.29% , LH , LAB CRP OF AMER
0.57% , WB , WACHOVIA
0.63% , KSS , KOHLS
0.22% , HAS , HASBRO

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

-0.76% , PBJ , Food & Beverage, PBJ
-5.44% , EWC , Canada Index, EWC
-1.00% , RPG , Growth S&P 500, RPG
-10.31% , ERIC.O , LM Ericsson Telephone Company
-3.52% , FEZ , Euro STOXX 50, FEZ
-11.79% , MON , MONSANTO
-5.09% , PXE , Energy Exploration & Prod, PXE
-5.65% , VAW , Materials VIPERs, VAW
-5.82% , SLV , Silver Trust iS, SLV
-3.24% , IAU , Gold COMEX iS, IAU
-6.77% , XLB , Materials SPDR, XLB
-10.53% , TBH , Telebras HOLDRS, TBH*
-6.72% , RYAAY , Ryanair Holdings plc
-4.16% , EWD , Sweden Index, EWD
-8.10% , SNDK , SanDisk Corporation
-7.47% , EWZ , Brazil Index, EWZ
-5.48% , WAT , WATERS
-4.32% , DBC , Commodity Tracking, DBC
-6.11% , XLE , Energy SPDR, XLE
-3.18% , IXN , Technology Global, IXN
-8.66% , X , US STEEL CORP
-5.68% , QCOM , QUALCOMM
-2.76% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-11.20% , FMCN , Focus Media, FMCN
-3.59% , GLD , Gold Shares S.T., GLD
-6.67% , ILF , Latin Am 40, ILF
-5.41% , BJS , BJ SERVICES
-6.47% , IYM , Basic Materials DJ US, IYM
-5.33% , IXC , Energy Global, IXC
-2.65% , EWN , Netherlands Index, EWN

Sectors: among the 9 major U.S. sectors, 1 rose and 8 fell.
Major Sectors Ranked for the Day
% Price Change Sector

0.55% Consumer Staples SPDR, XLP
-1.30% Health Care SPDR, XLV
-1.33% Consumer Discretionary SPDR, XLY
-1.97% Utilities SPDR, XLU
-2.64% Financial SPDR, XLF
-2.98% Technology SPDR, XLK
-3.65% Industrial SPDR, XLI
-6.11% Energy SPDR, XLE
-6.77% Materials SPDR, XLB

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.

Consumer Staples (XLP) Neutral, Market Weight. On 3/19/08, the XLP/SPY Relative Strength Ratio rose to new 5-year high.

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.

Industrial (XLI) Neutral, Market Weight. On 3/18/08, the XLI/SPY Relative Strength Ratio rose to another 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.

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

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.

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 3/17/08, both absolute price and the XLF/SPY Relative Strength Ratio fell to their lowest levels in nearly 5-years, again confirming a major Bearish trend.

Foreign stock indexes have turned relatively weak in recent days. In addition, intermediate term, 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 turned down since 3/6/08 and underperformed since the peak on 11/7/07. The Growth/Value ratio (IWF/IWD) appears to be in an intermediate-term correction 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) broke down below the lowest lows of the previous 8 trading days. The short-term trend now appears to have turned down, although the long-term trend still appears to be up. 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) broke down below the lowest lows of the previous 15 trading days. The short-term trend now appears to have turned down, although the long-term trend still appears to be up.

Silver underperformed Gold since 3/5/07. In addition, iShares Silver Trust (AMEX: SLV) has been relatively weak compared to Gold longer term, since 12/7/06. Finally, for the past 28 years, since 1/2/80, Silver has underperformed Gold.

The Gold Miners ETF (GDX) fell hard this week. 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 soared to a new 8-week price high. Bond prices benefit from fears of financial crisis, and they correct when crisis takes a back seat to some other news of the day. U.S. governments have been strong ,while corporate have been weak. U.S. Treasury Bond prices 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 over the past 2-days. No trend is a straight line, but the counter-trend corrections are hard to catch, and they pale in comparison to the major trend movements. The major trend of the dollar is down.

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 more Bears than Bulls for the first time in years. According to the weekly Investors Intelligence newsletter survey as of 3/19/08, there were 30.9% Bulls and 44.7% Bears. The ratio of Bullish advisors to Bearish advisors fell to 0.69, the lowest level in more than 5 years, and down from 0.71 the previous week. The ratio’s 38-year range is 0.28 to 17.51, and the median is 1.47.

VIX “Fear Index”, now at 29.84, 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 31.28, 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 0.90, 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 0.68 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:

0.55% Consumer Staples
0.45% 30Y T-Bond
-0.23% Airlines
-0.34% Health Care Products
-0.37% Biotechs
-0.49% Health Care
-0.50% Hospitals
-0.50% German DAX
-0.80% REITs
-0.90% Drugs
-0.99% Euro Top 100
-1.07% London FTSE
-1.30% Health Care
-1.32% Insurance
-1.33% Consumer Discretionary
-1.40% Retailers
-1.70% Banks
-1.77% Australia
-1.97% Utilities
-2.20% Utilities
-2.25% Value Line
-2.26% DOT
-2.34% S&P 100
-2.36% Dow Industrial
-2.36% Dow Utilities
-2.38% Wilshire 5000
-2.43% S&P 500
-2.43% Russell 1000
-2.44% Russell 3000
-2.48% S&P Mid Caps
-2.52% Dow Composite
-2.57% Nasdaq Composite
-2.58% Nasdaq 100
-2.58% S&P Small Caps
-2.61% Russell 2000
-2.64% Financial
-2.78% Comp. Tech
-2.79% CDNX Composite
-2.87% Dow Transports
-2.94% Austria
-2.98% Technology
-2.99% Transport
-3.02% Telecoms
-3.25% Toronto 300
-3.27% Belgium
-3.54% Internet
-3.60% France
-3.63% AMEX Composite
-3.65% Industrial
-3.76% Disk Drives
-4.29% Semis
-4.32% Paper
-4.37% Broker Dealers
-4.44% Network
-4.72% Hardware
-4.84% Oil
-5.44% Canada
-5.84% Natural Gas
-5.88% Chemicals
-6.02% Commodities
-6.10% Oil Services
-6.11% Energy
-6.77% Materials
-7.47% Brazil
-7.67% Gold

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 (1,298.42):

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
1,341.51, high of 3/19/2008

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 (1,298.42):

Potential Support
1,256.98, low of 3/17/2008
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