By Robert W. Colby, Senior Analyst

Stocks: Energy Sector is strong.
Financial Sector is weak.

Most stocks fell on reports that the credit crisis might extend well into 2009 or even longer.

The popular DOW JONES INDUSTRIAL AVERAGE broke below an uptrend line rising from its 3/17/08 low.

The weight of the evidence appears to be turning more Bearish for the stock market in general. But the most important action remains in the sectors and groups.

Stock Sectors: Energy rose to a new price high. Utilities and Materials also rose in price, bucking a broader downtrend for the general market.

Energy and Materials Stock Sectors both rose to new all-time highs in Relative Strength, again confirming major uptrends. These two have been at the top of my rankings for many months.

The Financial Stock Sector fell the most. Financial Relative Strength Ratio fell to its lowest level in more than 7 years, again confirming a major downtrend. Financial has been at the bottom of my rankings for many months.

Crude Oil July futures rose to another new all-time closing price high at 128.98.

Gold June futures rose to another new 3-week high, confirming again a short-term uptrend.

The U.S. dollar broke down below 3-week lows, confirming again that the minor Ripple Trend remains down.

On Tuesday, major stock price indexes gapped down on the open and kept on working lower most of the day. A last half hour bounce trimmed the loss somewhat–but not enough to erase the damage done to trend and momentum indicators. Total NYSE volume rose 5%, suggesting greater selling pressure on stocks. The volume of declining stocks was 169% greater than the volume of advancing stocks.

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 has appeared mixed for weeks but now seems to be taking on more of a Bearish bias. 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

7.40% , HUM , HUMANA
4.05% , SLV , Silver Trust iS, SLV
1.48% , TNB , THOMAS & BETTS
2.77% , TBH , Telebras HOLDRS, TBH*
2.30% , UIS , UNISYS
1.36% , DOG , Short 100% Dow 30, DOG
1.69% , GLD , Gold Shares S.T., GLD
0.84% , SH , Short 100% S&P 500, SH
1.73% , DISH , EchoStar Communications Corporation
1.18% , XME , Metals & Mining SPDR, XME
0.68% , XLU , Utilities SPDR, XLU
0.86% , IXC , Energy Global, IXC
1.37% , AET , AETNA
0.40% , VAW , Materials VIPERs, VAW
0.60% , TIP , Bond, TIPS, TIP
1.03% , APD , AIR PRODS & CHEM
1.38% , DBC , Commodity Tracking, DBC
1.46% , USO , Oil, Crude, U.S. Oil Fund, USO
0.52% , PCAR , PACCAR
2.11% , X , US STEEL CORP
5.16% , SLM , SLM CORP

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

-0.93% , PMR , Retail, PMR
-1.16% , IOO , Global 100, IOO
-5.20% , HD , HOME DEPOT
-4.06% , BMS , BEMIS
-1.35% , VNQ , REIT VIPERs, VNQ
-6.28% , MU , MICRON TECH
-0.52% , RFG , Growth MidCap S&P 400, RFG
-4.43% , SEE , SEALED AIR
-4.82% , CIEN.O , CIENA
-0.68% , JKJ , SmallCap Core iS M, JKJ
-1.41% , IGN , Networking, IGN
-2.22% , RYAAY , Ryanair Holdings plc
-1.05% , PPA , Aerospace & Defense, PPA
-1.06% , PHJ , Dividend Growth PS, PHJ
-3.60% , NIHD , NII Holdings, Inc.
-1.29% , SDY , Dividend SPDR, SDY
-3.21% , BC , BRUNSWICK
-0.63% , PWP , Value MidCap Dynamic PS, PWP
-3.05% , MTB , M&T BANK
-2.44% , KG , KING PHARM
-0.60% , JKK , Growth SmallCap iS M, JKK
-4.73% , DRI , DARDEN REST
-1.36% , EWU , United Kingdom Index, EWU
-3.73% , CIT , CIT GROUP
-2.58% , MAS , MASCO
-1.89% , PEY , Dividend High Yield Equity PS, PEY
-4.76% , TER , TERADYNE
-3.24% , AMP , Ameriprise Financial Inc.
-3.66% , KLAC , KLA TENCOR
-2.61% , EWH , Hong Kong Index, EWH
-3.83% , C , CITIGROUP
-1.48% , SNPS , Synopsys Inc

Sectors: among the 9 major U.S. sectors, 3 rose and 6 fell.
Major Sectors Ranked for the Day
% Price Change Sector

0.99% Energy SPDR, XLE
0.68% Utilities SPDR, XLU
0.52% Materials SPDR, XLB
-0.28% Health Care SPDR, XLV
-1.50% Consumer Staples SPDR, XLP
-1.55% Consumer Discretionary SPDR, XLY
-1.57% Technology SPDR, XLK
-1.59% Industrial SPDR, XLI
-2.33% 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):

Energy (XLE) Neutral, Market Weight. On 5/20/08, 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 5/20/08, XLB/SPY Relative Strength Ratio 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.

Utilities (XLU) Neutral, Market Weight. Since 10/17/02, the XLU/SPY Relative Strength Ratio has outperformed substantially. Since 5/15/08, the XLU/SPY Relative Strength Ratio has been rising again, meaning that Utilities have outperformed the S&P 500.

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.

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. On 5/20/08, the XLF/SPY Relative Strength Ratio fell to its lowest level in more than 7 years. 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 might be stalling out, short term. 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 underperformed in recent days. Longer term, the relative trends in larger time frames are not encouraging. 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 going nowhere since 3/26/08. 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 July futures rose to another new all-time closing price high at 128.98, 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 rose to another new 3-week high. On 5/16/08, Gold broke out to a new 3-week high and broke a downtrend line from the 3/17/08 top, thereby turning Bullish. 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 rose modestly. The minor Ripple Trend is still 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 3-week lows. The minor Ripple Trend remains 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 months, 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 17.58, is in a downtrend, meaning that Fear has been decreasing. Generally, 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 21.37, is in a downtrend, meaning that Fear has been decreasing. Generally, 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 0.70, 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 0.99, which indicates relatively Bearish 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 (1,413.40):

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 5/19/08

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 (1,413.40):

Potential Support
1,388.28, low of 5/9/2008
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:

4.05% Silver Trust iS, SLV
3.23% Short 200% Dow 30 PS, DXD
1.90% Internet Infrastructure H, IIH
1.77% Short 200% QQQ PS, QID
1.70% Energy Exploration & Prod, PXE
1.69% Gold Shares S.T., GLD
1.58% Short 200% S&P 500 PS, SDS
1.46% Oil, Crude, U.S. Oil Fund, USO
1.38% Commodity Tracking, DBC
1.36% Short 100% Dow 30, DOG
1.35% Natural Resource iS GS, IGE
1.18% Metals & Mining SPDR, XME
1.14% Oil & Gas, PXJ
1.02% Canada Index, EWC
0.99% Energy SPDR, XLE
0.94% Energy DJ, IYE
0.89% Utilities H, UTH
0.89% Energy VIPERs, VDE
0.86% Energy Global, IXC
0.84% Short 100% S&P 500, SH
0.78% Short 100% QQQ, PSQ
0.74% Oil Services H, OIH
0.68% Utilities SPDR, XLU
0.60% Bond, TIPS, TIP
0.52% Materials SPDR, XLB
0.52% Bond, 20+ Years Treasury, TLT
0.48% Basic Materials DJ US, IYM
0.47% Short 200% MidCap 400 PS, MZZ
0.44% Brazil Index, EWZ
0.40% Materials VIPERs, VAW
0.37% Utilities DJ, IDU
0.34% Utilities VIPERs, VPU
0.30% Bond, 10 Year Treasury, IEF
0.28% Value Line Timeliness MidCap Gr, PIV
0.22% Bond, Aggregate, AGG
0.17% Ultra MidCap400 Double, MVV
0.14% Bond, 1-3 Year Treasury, SHY
0.10% Utilities, PUI
0.10% Growth MidCap 400 B, IJK
0.03% Biotech SPDR, XBI
0.03% Bond, Corp, LQD
0.02% Microcap Russell, IWC
-0.01% Belgium Index, EWK
-0.03% Latin Am 40, ILF
-0.03% Healthcare DJ, IYH
-0.04% Growth Mid Cap Dynamic PS, PWJ
-0.05% Biotechnology, IBB
-0.05% Building & Construction, PKB
-0.05% Health Care VIPERs, VHT
-0.07% Healthcare Global, IXJ
-0.11% MidCap S&P 400 iS, IJH
-0.11% Switzerland Index, EWL
-0.12% IPOs, First Tr IPOX-100, FPX
-0.13% Netherlands Index, EWN
-0.13% Growth BARRA Small Cap 600, IJT
-0.16% MidCap S&P 400 SPDRs, MDY
-0.18% Growth SmallCap R 2000, IWO
-0.19% Extended Mkt VIPERs, VXF
-0.21% LargeCap Blend Dynamic PS, PWC
-0.21% Short 100% MidCap 400, MYY
-0.22% Biotech H, BBH
-0.23% Euro STOXX 50, FEZ
-0.25% SmallCap S&P 600, IJR
-0.25% Value MidCap S&P 400 B, IJJ
-0.28% Health Care SPDR, XLV
-0.29% France Index, EWQ
-0.31% Growth SmallCap VIPERs, VBK
-0.31% Growth Small Cap DJ, DSG
-0.32% Water Resources, PHO
-0.33% Value SmallCap S&P 600 B, IJS
-0.34% SmallCap PS Zacks, PZJ
-0.36% Micro Cap Zachs, PZI
-0.37% SmallCap Russell 2000, IWM
-0.39% Spain Index, EWP
-0.40% EMU Europe Index, EZU
-0.42% Food & Beverage, PBJ
-0.42% Growth S&P 500/BARRA, IVW
-0.44% Small Cap VIPERs, VB
-0.44% Biotech & Genome, PBE
-0.46% Value SmallCap Russell 2000, IWN
-0.47% MidCap Russell, IWR
-0.48% MidCap VIPERs, VO
-0.49% Value SmallCap iS M, JKL
-0.50% MidCap Growth iS M, JKH
-0.50% MidCap Blend Core iS M, JKG
-0.51% LargeCap Blend NYSE Composite iS, NYC
-0.51% OTC Dynamic PS, PWO
-0.52% Growth MidCap S&P 400, RFG
-0.54% Pharmaceutical H, PPH
-0.54% Value MidCap Russell, IWS
-0.55% Europe 100 BLDRS, ADRU
-0.55% Insurance, PIC
-0.56% Germany Index, EWG
-0.58% Pharmaceuticals, PJP
-0.58% Value SmallCap VIPERS, VBR
-0.59% Software, PSJ
-0.59% Lg Cap Growth PSD, PWB
-0.60% Growth SmallCap iS M, JKK
-0.63% Growth VIPERs, VUG
-0.63% Value MidCap Dynamic PS, PWP
-0.63% Italy Index, EWI
-0.66% Developed 100 BLDRS, ADRD
-0.68% SmallCap Core iS M, JKJ
-0.68% Europe 350 S&P Index, IEV
-0.69% Growth MidCap Russell, IWP
-0.69% Software H, SWH
-0.69% Dividend International, PID
-0.69% Hardware & Electronics, PHW
-0.70% Growth S&P 500, RPG
-0.70% Growth 1000 Russell, IWF
-0.72% Consumer Staples VIPERs, VDC
-0.72% Software, IGV
-0.73% Telecommunications & Wireless, PTE
-0.74% Growth LargeCap Russell 3000, IWZ
-0.74% LargeCap Blend S&P=Weight R, RSP
-0.75% LargeCap Blend S&P 1500 iS, ISI
-0.76% LargeCap Blend Total Market DJ, IYY
-0.77% Growth LargeCap NASDAQ 100, QQQQ
-0.77% LargeCap Blend Russell 3000, IWV
-0.78% LargeCap Blend Socially Responsible iS, KLD
-0.79% Internet Architecture H, IAH
-0.81% Growth Large Cap, ELG
-0.81% LargeCap 1000 R, IWB
-0.81% Value Small Cap DJ, DSV
-0.81% Transportation Av DJ, IYT
-0.81% Value EAFE MSCI, EFV
-0.81% S&P 500 SPDRs LargeCap Blend, SPY
-0.81% European VIPERs, VGK
-0.82% Wilshire 5000 ST TM, TMW
-0.82% Blend Total Market VIPERs, VTI
-0.82% LargeCap Blend Core iS M, JKD
-0.83% S&P 500 iS LargeCap Blend, IVV
-0.83% Dividend DJ Select, DVY
-0.84% Growth LargeCap iS M, JKE
-0.88% Japan Index, EWJ
-0.89% Internet H, HHH
-0.90% Emerging 50 BLDRS, ADRE
-0.92% EAFE Index, EFA
-0.92% Value 1000 Russell, IWD
-0.92% Growth EAFE MSCI, EFG
-0.93% Retail, PMR
-0.93% Value LargeCap Euro STOXX 50 DJ, FEU
-0.95% WilderHill Clean Energy PS, PBW
-0.96% Dividend Appreciation Vipers, VIG
-0.97% Industrial LargeCap Blend DJ US, IYJ
-0.97% Value MidCap iS M, JKI
-0.97% Japan LargeCap Blend TOPIX 150, ITF
-0.98% Value SmallCap S&P 600, RZV
-0.98% Consumer Non-Cyclical, IYK
-0.98% Value MidCap S&P 400, RFV
-0.98% Value LargeCap Russell 3000, IWW
-0.99% Austria Index, EWO
-0.99% Growth SmallCap Dynamic PS, PWT
-0.99% Industrials VIPERs, VIS
-1.01% Growth LargeCap NASDAQ Fidelity, ONEQ
-1.02% Value LargeCap Dynamic PS, PWV
-1.02% LargeCap VIPERs, VV
-1.03% Value VIPERs, VTV
-1.04% Dividend Achievers PS, PFM
-1.05% Aerospace & Defense, PPA
-1.06% Dividend Growth PS, PHJ
-1.07% Mexico Index, EWW
-1.11% Value Large Cap DJ, ELV
-1.11% Value SmallCap Dynamic PS, PWY
-1.12% Financials Global LargeCap Value, IXG
-1.12% Value LargeCap NYSE 100 iS, NY
-1.13% LargeCap Blend S&P 100, OEF
-1.15% Technology GS, IGM
-1.15% Value LargeCap Fundamental RAFI 1000, PRF
-1.15% Value 40 Large Low P/E FT DB, FDV
-1.16% Global 100, IOO
-1.18% Value LargeCap iS M, JKF
-1.18% Pacific VIPERs, VPL
-1.20% REIT Wilshire, RWR
-1.24% Sweden Index, EWD
-1.25% Info Tech VIPERs, VGT
-1.28% Value S&P 500 B, IVE
-1.29% Dividend SPDR, SDY
-1.29% Networking, PXQ
-1.29% Consumer Cyclical DJ, IYC
-1.32% LargeCap Rydex Rus Top 50, XLG
-1.36% United Kingdom Index, EWU
-1.41% Networking, IGN
-1.44% Consumer D. VIPERs, VCR
-1.46% Australia Index, EWA
-1.46% Telecommunications Global, IXP
-1.47% Technology Global, IXN
-1.49% Realty Cohen & Steers, ICF
-1.49% Technology DJ US, IYW
-1.50% Consumer Staples SPDR, XLP
-1.54% Dividend Leaders, FDL
-1.55% Consumer Discretionary SPDR, XLY
-1.57% Technology SPDR, XLK
-1.57% Ultra S&P500 Double, SSO
-1.58% Retail H, RTH
-1.59% Industrial SPDR, XLI
-1.60% South Africa Index, EZA
-1.62% Technology MS sT, MTK
-1.69% Nanotech Lux, PXN
-1.69% Telecom Services VIPERs, VOX
-1.70% Telecom DJ US, IYZ
-1.73% Emerging Markets, EEM
-1.79% Capital Markets KWB ST, KCE
-1.82% Ultra QQQ Double, QLD
-1.83% Financials VIPERs, VFH
-1.84% Pacific ex-Japan, EPP
-1.85% Internet B2B H, BHH
-1.86% Semiconductor H, SMH
-1.86% Malaysia Index, EWM
-1.89% Dividend High Yield Equity PS, PEY
-1.90% Singapore Index, EWS
-1.90% Leisure & Entertainment, PEJ
-1.90% Financial DJ US, IYF
-2.07% Real Estate US DJ, IYR
-2.09% Semiconductors, PSI
-2.19% Financial Services DJ, IYG
-2.25% Value S&P 500, RPV
-2.33% Bank Regional H, RKH
-2.33% Financial SPDR, XLF
-2.34% Emerging VIPERs, VWO
-2.43% Semiconductor SPDR, XSD
-2.46% Semiconductor iS GS, IGW
-2.52% Asia 50 BLDRS, ADRA
-2.61% Hong Kong Index, EWH
-2.62% Telecom H, TTH
-2.83% Ultra Dow30 Double, DDM
-2.84% China LargeCap Growth G D H USX PS, PGJ
-2.92% Broadband H, BDH
-2.95% South Korea Index, EWY
-3.08% Homebuilders SPDR, XHB
-3.40% Global Titans, DGT
-3.50% Taiwan Index, EWT
-4.12% China 25 iS, FXI