By Robert W. Colby, Senior Analyst

Friday’s Hanging Man is a Bearish Reversal Candlestick.
The previous uptrend is losing momentum.

The weight of the evidence appears mixed for the stock market in general.

Energy and Materials Stock Sectors rose to new all-time highs, again confirming major uptrends. These two have led in my rankings for many months.

Crude Oil June futures rose to a new all-time high, confirming uptrends in all time frames.

Gold June futures turned Bullish by breaking out to a new 3-week high and breaking a downtrend line from the 3/17/08 top.

The U.S. dollar broke down below 2-week lows, turning the minor Ripple Trend down.

On Friday, major stock price indexes gapped higher on the open but immediately declined steeply into the loss column. Prices bottomed at 11:24 a.m. and then launched a recovery that continued into the final hour of the day. Indexes closed mixed, nearer their highs than their lows, but below their opens. Total NYSE volume rose less than 1%, possibly reflecting the uncertainty of the day. The volume of declining stocks modestly exceeded the volume of advancing stocks.

Friday’s action fit the definition of The Hanging Man: a Bearish Reversal Japanese Candlestick Signal that implies that the previous uptrend should reverse to the downside. It occurs within an established uptrend, such as the one from the March low. It has a small real body (white or black) at or near the high (and, therefore, it has little or no upper shadow). Although the color of the real body is not critical, black is more bearish than a white, and we saw a black real body on Friday. Also, it has a long lower shadow, like legs dangling down from the real body. The hanging man’s small real body implies the previous uptrend is losing momentum. The next period’s action (on Monday) would confirm the bearish implications of the hanging man if there is a downward window (gap) or a long black candle. It seems possible that Friday’s session, which included options expiration, might have ended the rally, as options expirations sometimes have in the past.

I have been assuming that the March-May rally was nothing more than a counter-trend rally and Secondary Reaction Continuation Pattern within the context of a Primary Bearish Trend. That may yet prove accurate. The sum total weight of the evidence for the stock market in general appears mixed, so a cautious approach still seems prudent.

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

3.03% , BDH , Broadband H, BDH
7.59% , SRCL , Stericycle, SRCL
2.59% , IXC , Energy Global, IXC
1.11% , VGK , European VIPERs, VGK
0.42% , PXQ , Networking, PXQ
0.37% , PTE , Telecommunications & Wireless, PTE
7.42% , SSCC , Smurfit-Stone Container Corporation
3.25% , CR , CRANE
3.56% , TNB , THOMAS & BETTS
1.50% , ADRE , Emerging 50 BLDRS, ADRE
1.38% , EWD , Sweden Index, EWD
2.56% , JNPR , Juniper Networks Inc
1.05% , TDC , Teradata Corporation, TDC
1.09% , BBH , Biotech H, BBH
1.29% , EWC , Canada Index, EWC
1.45% , DBC , Commodity Tracking, DBC
2.74% , TEVA , Teva Pharmaceutical Industries Limited
1.49% , ADRU , Europe 100 BLDRS, ADRU
1.11% , FEZ , Euro STOXX 50, FEZ
2.48% , IR , INGER RAND
1.92% , BHH , Internet B2B H, BHH
3.59% , KR , KROGER
2.54% , IYE , Energy DJ, IYE
1.38% , PXN , Nanotech Lux, PXN

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

-3.96% , DDS , DILLARD STK A
-3.82% , DRI , DARDEN REST
-5.46% , KEY , KEYCORP
-0.60% , HHH , Internet H, HHH
-3.12% , AN , AUTONATION
-5.87% , URBN , Urban Outfitters Inc.
-0.62% , JKL , Value SmallCap iS M, JKL
-2.42% , KSS , KOHLS
-0.61% , PIC , Insurance, PIC
-3.31% , ZION , ZIONS
-2.62% , MTB , M&T BANK
-2.95% , CIEN.O , CIENA
-3.85% , NYT , NY TIMES STK A
-2.38% , EBAY , EBAY
-1.47% , FLEX , Flextronics International Ltd
-2.82% , TXT , TEXTRON
-1.03% , RZV , Value SmallCap S&P 600, RZV
-2.86% , SWY , SAFEWAY
-2.55% , SLM , SLM CORP
-3.91% , GPS , GAP
-4.30% , BBT , BB&T
-0.65% , EWH , Hong Kong Index, EWH
-2.45% , S , SPRINT NEXTEL
-1.31% , RPV , Value S&P 500, RPV
-2.02% , CHRW.O , CH Robinson Worldwide Inc, CHRWD
-1.72% , PDCO , Patterson Dental Company
-1.54% , EXPD , Expeditors International WA
-2.50% , HAS , HASBRO

Sectors: among the 9 major U.S. sectors, 4 rose and 5 fell.
Major Sectors Ranked for the Day
% Price ChangeSector

3.65% Energy SPDR, XLE
1.23% Materials SPDR, XLB
0.74% Utilities SPDR, XLU
0.38% Health Care SPDR, XLV
-0.04% Consumer Staples SPDR, XLP
-0.24% Technology SPDR, XLK
-0.25% Industrial SPDR, XLI
-0.42% Financial SPDR, XLF
-0.68% Consumer Discretionary SPDR, XLY

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):

Energy (XLE) Neutral, Market Weight. On 5/16/08, both the XLE price close and the XLE/SPY Relative Strength Ratio rose to new all-time highs, again confirming a major uptrend.

Materials (XLB) Neutral, Market Weight. On 5/16/08, XLB price rose to another new all-time high. On 4/16/08, both the XLB price and the XLB/SPY Relative Strength Ratio rose to new all-time highs, confirming the major uptrend.

Industrial (XLI) Neutral, Market Weight. Since 3/31/08, the XLI/SPY Relative Strength Ratio has underperformed moderately.

Technology (XLK) Neutral, Market Weight. On 5/15/08, the XLK/SPY Relative Strength Ratio rose to a new 4-month high, confirming again an improving intermediate-term trend.

Consumer Staples (XLP) Neutral, Market Weight. Since 3/28/08, the XLP/SPY Relative Strength Ratio has underperformed moderately.

Utilities (XLU) Neutral, Market Weight. Since 10/17/02, the XLU/SPY Relative Strength Ratio has outperformed substantially. Since 1/24/08, the XLU/SPY Relative Strength Ratio is flat, meaning that Utilities have performed in line with the S&P 500.

Consumer Discretionary (XLY) Bearish, Underweight. Since 1/5/05, the XLY/SPY Relative Strength Ratio has underperformed substantially. On 1/11/08, the XLY/SPY Relative Strength Ratio fell to a new 6-year low, confirming a major downtrend.

Health Care (XLV) Bearish, Underweight. Since 10/9/02, the XLV/SPY Relative Strength Ratio has underperformed substantially. On 5/15/08, the XLV/SPY Relative Strength Ratio fell to another new 6-year low, again confirming the existing Primary Bearish trend.

Financial (XLF) Bearish, Underweight. Since 3/23/04, the XLF/SPY Relative Strength Ratio has underperformed substantially. 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 are outperforming. EFA outperformed since 2/8/08 and, longer term, since the major bottom on 3/12/03. EFA is the ETF representing the EAFE, the international developed country stock markets, ex the U.S. and Canada.

NASDAQ Composite price outperformed since 3/3/08. Therefore, one might argue that the 2-month Relative Strength trend has been improving. But longer term, the relative trends in larger time frames appear to be contradicting. The NASDAQ underperformed since 11/7/07 and, on 3/3/08, Relative Strength fell to a new 9-month low, confirming downtrends in larger time frames.

Growth Stock/Value Stock Relative Strength Ratio has been in an uptrend for the intermediate term, since 2/1/08. Long term, the Growth/Value ratio (IWF/IWD) has been in an uptrend since 8/8/06.

The Small Cap/Large Cap Relative Strength Ratio has been rising since 3/10/08. But the Relative Strength Ratio is still in a downtrend since the peak on 4/19/06, so the main long-term trend is Relatively Bearish for Small Caps.

Crude Oil June futures rose to a new all-time high, confirming uptrends in all time frames. 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 June futures turned Bullish. Gold broke out to a new 3-week high and broke a downtrend line from the 3/17/08 top. Longer term, the 7-year trend is still Bullish.

Silver is still lagging Gold. Silver sharply underperformed Gold since 3/5/08. 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) / Gold Bullion Relative Strength Ratio fell to another new low on 4/29/08. Longer-term, GDX significantly underperformed Gold since 10/31/07. Therefore, GDX trends are Bearish relative to Gold itself.

U.S. Treasury Bond prices are flat. The minor Ripple Trend is neutral/sideways. Bonds have traced out Secondary Reaction, intermediate-term downside correction phase since the price peak on 3/20/08. Bond prices benefit from fears of financial crisis, and they correct to the downside when financial crisis takes a back seat to some other news of the day.

The U.S. dollar broke down below 2-week lows. The minor Ripple Trend is down. The major Primary Tide Trend of the dollar remains down.

The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood of late. The business and financial news has flipped from fear to hope and back again many times in recent weeks, creating an extremely choppy trading environment. 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, without warning, risk control becomes more important than aggressive profit seeking. Stay flexible.

Sentiment/Contrary Opinion: There were 46.0% Bulls versus 29.9% Bears as of 5/14/08, according to the weekly Investors Intelligence survey of newsletter advisors. The Bull/Bear ratio rose to 1.54, up from 1.37 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 16.47, is in a downtrend, meaning that Fear is decreasing. VIX has been falling since its peak of 32.64 on 3/17/08. The all-time high was 45.74 on 10/8/98. The all-time 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 20.00 and falling, is in a downtrend, meaning that Fear is decreasing. VXN has been falling since its peak of 35.63 on 1/22/08. The all-time high was 114.23 on 10/8/98. The all-time 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 0.59, which indicates relatively neutral 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 1.42, which indicates relatively neutral sentiment. The ratio’s 4-year simple moving average is 1.50, 4-year median is 1.47, and 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.

A Secondary Reaction was signaled on 4/18/28, when the Dow-Jones Industrials and Transports both closed at 3-month highs. But the Primary Tide Major Trend still may be Bearish. 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.

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 (1,425.35):

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
1,435.65, low of 12/18/2007
1,430.28, high of 1/8/08

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 (1,425.35):

Potential Support
1,383.07, low of 5/1/2008
1,324.35, low of 4/15/2008
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

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

3.65% Energy SPDR, XLE
3.04% Energy VIPERs, VDE
3.03% Broadband H, BDH
2.87% Natural Resource iS GS, IGE
2.81% Brazil Index, EWZ
2.73% Oil Services H, OIH
2.70% Energy Exploration & Prod, PXE
2.63% Austria Index, EWO
2.59% Energy Global, IXC
2.57% Metals & Mining SPDR, XME
2.54% Energy DJ, IYE
2.41% Gold Shares S.T., GLD
2.13% Latin Am 40, ILF
2.06% Oil, Crude, U.S. Oil Fund, USO
1.99% Oil & Gas, PXJ
1.94% Germany Index, EWG
1.92% Internet B2B H, BHH
1.77% United Kingdom Index, EWU
1.54% Basic Materials DJ US, IYM
1.50% WilderHill Clean Energy PS, PBW
1.50% Emerging 50 BLDRS, ADRE
1.49% Europe 100 BLDRS, ADRU
1.47% Australia Index, EWA
1.47% Taiwan Index, EWT
1.45% Commodity Tracking, DBC
1.42% Italy Index, EWI
1.42% Materials VIPERs, VAW
1.39% EMU Europe Index, EZU
1.38% Nanotech Lux, PXN
1.38% Sweden Index, EWD
1.29% Canada Index, EWC
1.28% South Africa Index, EZA
1.27% Emerging Markets, EEM
1.24% Europe 350 S&P Index, IEV
1.23% Materials SPDR, XLB
1.18% Silver Trust iS, SLV
1.17% Value EAFE MSCI, EFV
1.16% Global Titans, DGT
1.15% Pacific VIPERs, VPL
1.12% Growth EAFE MSCI, EFG
1.11% European VIPERs, VGK
1.11% Euro STOXX 50, FEZ
1.10% Malaysia Index, EWM
1.10% Emerging VIPERs, VWO
1.09% Biotech H, BBH
1.08% EAFE Index, EFA
1.07% France Index, EWQ
1.04% Developed 100 BLDRS, ADRD
1.02% Belgium Index, EWK
0.99% Value LargeCap Euro STOXX 50 DJ, FEU
0.89% South Korea Index, EWY
0.88% Dividend International, PID
0.88% Pacific ex-Japan, EPP
0.82% Building & Construction, PKB
0.82% Utilities H, UTH
0.81% Global 100, IOO
0.78% Networking, IGN
0.75% Value Line Timeliness MidCap Gr, PIV
0.74% Utilities SPDR, XLU
0.70% Utilities VIPERs, VPU
0.67% Utilities, PUI
0.66% Growth MidCap 400 B, IJK
0.66% Ultra MidCap400 Double, MVV
0.65% Switzerland Index, EWL
0.63% China LargeCap Growth G D H USX PS, PGJ
0.63% Utilities DJ, IDU
0.61% Japan LargeCap Blend TOPIX 150, ITF
0.59% Growth Mid Cap Dynamic PS, PWJ
0.56% Healthcare Global, IXJ
0.56% Telecom DJ US, IYZ
0.55% Growth S&P 500/BARRA, IVW
0.55% Semiconductor iS GS, IGW
0.54% SmallCap Russell 2000, IWM
0.52% Software H, SWH
0.52% Asia 50 BLDRS, ADRA
0.47% LargeCap Blend NYSE Composite iS, NYC
0.46% Value 40 Large Low P/E FT DB, FDV
0.44% Growth MidCap Russell, IWP
0.43% MidCap Growth iS M, JKH
0.42% Growth VIPERs, VUG
0.42% MidCap VIPERs, VO
0.42% Networking, PXQ
0.42% Spain Index, EWP
0.41% Mexico Index, EWW
0.40% Value LargeCap NYSE 100 iS, NY
0.40% MidCap Blend Core iS M, JKG
0.39% Semiconductor H, SMH
0.39% MidCap S&P 400 iS, IJH
0.38% Health Care SPDR, XLV
0.37% Japan Index, EWJ
0.37% Telecommunications & Wireless, PTE
0.36% Growth LargeCap iS M, JKE
0.35% Growth 1000 Russell, IWF
0.35% Pharmaceuticals, PJP
0.35% China 25 iS, FXI
0.35% Biotechnology, IBB
0.33% Netherlands Index, EWN
0.33% Biotech & Genome, PBE
0.33% Growth Large Cap, ELG
0.33% Growth SmallCap R 2000, IWO
0.32% MidCap Russell, IWR
0.32% Water Resources, PHO
0.32% LargeCap Blend Total Market DJ, IYY
0.31% Semiconductor SPDR, XSD
0.30% Wilshire 5000 ST TM, TMW
0.29% Singapore Index, EWS
0.29% LargeCap Blend Russell 3000, IWV
0.28% Short 100% QQQ, PSQ
0.28% Technology MS sT, MTK
0.27% Telecom Services VIPERs, VOX
0.26% LargeCap VIPERs, VV
0.25% Value LargeCap Dynamic PS, PWV
0.25% Hardware & Electronics, PHW
0.25% Technology Global, IXN
0.24% LargeCap 1000 R, IWB
0.24% Ultra S&P500 Double, SSO
0.23% LargeCap Blend S&P 1500 iS, ISI
0.23% Growth LargeCap Russell 3000, IWZ
0.22% Growth BARRA Small Cap 600, IJT
0.21% Software, PSJ
0.21% Growth S&P 500, RPG
0.20% Health Care VIPERs, VHT
0.20% Consumer Staples VIPERs, VDC
0.18% Blend Total Market VIPERs, VTI
0.16% Biotech SPDR, XBI
0.16% Value LargeCap iS M, JKF
0.16% LargeCap Blend Dynamic PS, PWC
0.16% Semiconductors, PSI
0.16% MidCap S&P 400 SPDRs, MDY
0.14% Short 200% Dow 30 PS, DXD
0.14% Value MidCap Russell, IWS
0.13% Technology DJ US, IYW
0.13% Value LargeCap Russell 3000, IWW
0.13% Value 1000 Russell, IWD
0.13% Pharmaceutical H, PPH
0.13% Healthcare DJ, IYH
0.12% Value MidCap S&P 400 B, IJJ
0.10% Growth SmallCap iS M, JKK
0.10% Short 100% S&P 500, SH
0.09% S&P 500 SPDRs LargeCap Blend, SPY
0.08% Growth LargeCap NASDAQ 100, QQQQ
0.08% Value VIPERs, VTV
0.08% Value Large Cap DJ, ELV
0.07% Info Tech VIPERs, VGT
0.06% SmallCap S&P 600, IJR
0.06% Internet Architecture H, IAH
0.05% LargeCap Rydex Rus Top 50, XLG
0.04% Extended Mkt VIPERs, VXF
0.04% Ultra Dow30 Double, DDM
0.04% S&P 500 iS LargeCap Blend, IVV
0.03% Telecommunications Global, IXP
0.02% Bond, 1-3 Year Treasury, SHY
0.02% Technology GS, IGM
0.01% LargeCap Blend Core iS M, JKD
0.00% Ultra QQQ Double, QLD
0.00% Lg Cap Growth PSD, PWB
0.00% LargeCap Blend S&P=Weight R, RSP
0.00% IPOs, First Tr IPOX-100, FPX
0.00% Growth SmallCap VIPERs, VBK
0.00% Growth SmallCap Dynamic PS, PWT
0.00% Bond, TIPS, TIP
-0.02% Consumer Non-Cyclical, IYK
-0.02% Short 100% Dow 30, DOG
-0.04% Consumer Staples SPDR, XLP
-0.04% Dividend Appreciation Vipers, VIG
-0.08% Short 200% QQQ PS, QID
-0.09% Telecom H, TTH
-0.09% Aerospace & Defense, PPA
-0.10% Industrials VIPERs, VIS
-0.11% Value LargeCap Fundamental RAFI 1000, PRF
-0.12% Food & Beverage, PBJ
-0.12% Software, IGV
-0.12% Industrial LargeCap Blend DJ US, IYJ
-0.13% Bond, Corp, LQD
-0.13% Dividend Achievers PS, PFM
-0.14% Growth Small Cap DJ, DSG
-0.14% LargeCap Blend S&P 100, OEF
-0.17% LargeCap Blend Socially Responsible iS, KLD
-0.17% Bond, 10 Year Treasury, IEF
-0.17% Value MidCap Dynamic PS, PWP
-0.18% Growth LargeCap NASDAQ Fidelity, ONEQ
-0.20% Growth MidCap S&P 400, RFG
-0.21% SmallCap PS Zacks, PZJ
-0.22% Small Cap VIPERs, VB
-0.23% Short 100% MidCap 400, MYY
-0.23% Financials Global LargeCap Value, IXG
-0.24% Technology SPDR, XLK
-0.24% Bond, Aggregate, AGG
-0.25% Industrial SPDR, XLI
-0.26% Value SmallCap VIPERS, VBR
-0.27% Value MidCap iS M, JKI
-0.28% SmallCap Core iS M, JKJ
-0.28% Micro Cap Zachs, PZI
-0.31% Short 200% S&P 500 PS, SDS
-0.31% Value S&P 500 B, IVE
-0.36% Homebuilders SPDR, XHB
-0.39% Value SmallCap S&P 600 B, IJS
-0.41% Value Small Cap DJ, DSV
-0.41% Microcap Russell, IWC
-0.41% Bond, 20+ Years Treasury, TLT
-0.42% Financial SPDR, XLF
-0.48% Retail H, RTH
-0.48% OTC Dynamic PS, PWO
-0.49% Value SmallCap Dynamic PS, PWY
-0.51% Realty Cohen & Steers, ICF
-0.60% Internet H, HHH
-0.61% Insurance, PIC
-0.61% Value SmallCap Russell 2000, IWN
-0.62% Value SmallCap iS M, JKL
-0.65% Short 200% MidCap 400 PS, MZZ
-0.65% Hong Kong Index, EWH
-0.66% Real Estate US DJ, IYR
-0.68% Consumer Discretionary SPDR, XLY
-0.68% Consumer D. VIPERs, VCR
-0.75% Consumer Cyclical DJ, IYC
-0.76% Dividend Leaders, FDL
-0.77% Transportation Av DJ, IYT
-0.92% REIT Wilshire, RWR
-0.94% Dividend DJ Select, DVY
-0.99% Dividend SPDR, SDY
-0.99% Capital Markets KWB ST, KCE
-1.03% Value SmallCap S&P 600, RZV
-1.06% Financials VIPERs, VFH
-1.09% Leisure & Entertainment, PEJ
-1.10% Financial DJ US, IYF
-1.14% Dividend Growth PS, PHJ
-1.31% Value S&P 500, RPV
-1.38% Financial Services DJ, IYG
-1.44% Value MidCap S&P 400, RFV
-1.57% Retail, PMR
-1.61% Bank Regional H, RKH
-1.61% Internet Infrastructure H, IIH
-1.80% Dividend High Yield Equity PS, PEY