By Robert W. Colby, Senior Analyst TraderPlanet.com

Bearish Doji, But Seasonal is Bullish

Thursday’s Doji is Bearish for the short term, but first nine trading days of July have had a Bullish bias historically. Inflation expectations fell to a 3-week low.

Stocks turned volatile and erratic after the 2:15 p.m. announcement of the FOMC statement, which seemed to indicate no change in the Fed’s monetary policy. Stock indices finished mixed and little changed. Trading volume eased lower, perhaps suggesting some uncertainty and hesitation around the Fed’s announcement.

The Advance-Decline balance was moderately Bullish on the NYSE and less Bullish on the NASDAQ. On 6/26/07, the Cumulative Daily Advance-Decline Line for the NASDAQ fell to its lowest level since the March 2007 low, and NASDAQ remains in a relatively weak trend.

The number of New Highs exceeded the number of New Lows on the NYSE, and that is a healthier sign.

The Japanese Candlestick Chart formation known as the “doji” is a bar (composed of the open, high, low, close price) that has no real body – that is, the open and the close are equal. A doji indicates no net price movement from the first price (open) to the last price (close) recorded during the predefined time interval (the day) that formed the candlestick. A doji indicates a lack of progress, a standoff, and an equal balance between the forces of supply and demand. A doji also implies uncertainty about the trend. The bulls and bears are said to be in a “tug of war” that has reached a standstill. The implication is that whatever trend existed before the doji now has lost momentum and is vulnerable to correction or reversal so it may be either a bullish or bearish candlestick, depending on its location on the chart. Since the previous day was strongly Bullish, this Doji is Bearish for the short term.

On the Bullish side, the first nine trading days of July have had a Bullish bias historically.

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

5.13% , UIS , UNISYS
6.76% , WOR , WORTHINGTON INDS
8.13% , DDS , DILLARD STK A
2.89% , LIZ , LIZ CLAIRBORNE
0.21% , IGM , Technology GS, IGM
4.17% , VRSN , VeriSign Inc
0.24% , TMW , Wilshire 5000 ST TM, TMW
2.97% , D , DOMINION RSCS
2.50% , IIH , Internet Infrastructure H, IIH
1.03% , IGN , Networking, IGN
2.48% , XMSR , XM Satellite R
2.13% , CSCO , CISCO SYSTEMS
1.00% , TTH , Telecom H, TTH
0.47% , PEJ , Leisure & Entertainment, PEJ
1.68% , SIRI , Sirius Satellite
1.59% , IPG , INTERPUBLIC GRP
1.31% , UNM , UNUMPROVIDENT
0.87% , RFG , Growth MidCap S&P 400, RFG
1.59% , CIEN.O , CIENA
2.37% , MBI , MBIA
1.22% , SBUX , STARBUCKS
1.06% , PBW , WilderHill Clean Energy PS, PBW
2.26% , F , FORD MOTOR
0.96% , PTE , Telecommunications & Wireless, PTE
1.59% , MXIM , MAXIM INTEGRATED
1.98% , GM , GENERAL MOTORS
2.50% , PGR , PROGRESSIVE OHIO
1.34% , ALL , ALLSTATE
0.65% , TLAB , TELLABS
1.21% , ERIC.O , LM Ericsson Telephone Company
1.31% , RIMM , RESEARCH IN MOTION LTD
0.35% , XBI , Biotech SPDR, XBI
0.71% , EZU , EMU Europe Index, EZU
0.58% , PHO , Water Resources, PHO
1.75% , DELL , DELL
0.40% , PRF , Value LargeCap Fundamental RAFI 1000, PRF
2.05% , URBN , Urban Outfitters Inc.
1.08% , HBAN , HUNTINGTON
1.88% , Q , QWEST COMMUNICAT
1.90% , T , AT&T Corp., T
0.11% , EFG , Growth EAFE MSCI, EFG
0.17% , FDL , Dividend Leaders, FDL
0.23% , JKF , Value LargeCap iS M, JKF
1.89% , SGP , SCHERING PLOUGH
2.71% , ABK , AMBAC FINL GRP
0.32% , ELV , Value Large Cap DJ, ELV
1.56% , SLV , Silver Trust iS, SLV
0.88% , TJX , TJX
1.64% , ASH , ASHLAND
0.47% , PSQ , Short 100% QQQ, PSQ

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

-11.46% , LSI , LSI LOGIC
-7.52% , RHT , Red Hat Inc.
-3.91% , BBBY , BED BATH BEYOND
-4.06% , NTAP , NETWK APPLIANCE
-3.38% , NVLS , NOVELLUS SYS
-1.16% , AMCC , APPLD MICRO CIRC
-0.94% , IGW , Semiconductor iS GS, IGW
-1.95% , PWER , POWER ONE
-1.98% , GIS , GENERAL MILLS
-2.36% , PAYX , PAYCHEX
-0.24% , IXJ , Healthcare Global, IXJ
-0.96% , SYK , STRYKER
-1.94% , LLL , L-3 COMMS HLDGS
-0.35% , KLD , LargeCap Blend Socially Responsible iS, KLD
-0.82% , IYG , Financial Services DJ, IYG
-1.88% , APD , AIR PRODS & CHEM
-0.16% , JKG , MidCap Blend Core iS M, JKG
-1.80% , FDO , FAMILY DLR STRS
-1.23% , DIS , WALT DISNEY
-0.45% , IWS , Value MidCap Russell, IWS
-1.31% , WEN , WENDYS INTL
-1.63% , LOW , LOWES
-1.62% , EQR , EQUITY RESIDENT BEN INT
-2.31% , S , SPRINT NEXTEL
-2.50% , BRCM , BROADCOM STK A
-0.39% , IWW , Value LargeCap Russell 3000, IWW
-1.97% , MU , MICRON TECH
-2.79% , PTEN , Patterson-UTI Energy Inc
-1.08% , LMT , LOCKHEED MARTIN
-0.55% , IWF , Growth 1000 Russell, IWF
-0.83% , GPS , GAP
-0.33% , IWR , MidCap Russell, IWR
-0.42% , BHH , Internet B2B H, BHH
-0.40% , IWB , LargeCap 1000 R, IWB
-0.81% , FII , FED INVESTORS STK B
-1.23% , WAG , WALGREEN
-0.59% , AW , ALLIED WASTE IND
-1.54% , LRCX , LAM RESEARCH CORP
-0.50% , AXP , AMERICAN EXPRESS
-1.20% , YHOO , YAHOO
-1.23% , SANM , SANMINA
-1.02% , MOLX , MOLEX
-1.19% , APC , ANADARKO PETRO
-0.73% , KG , KING PHARM
-0.81% , CLX , CLOROX
-0.30% , ITF , Japan LargeCap Blend TOPIX 150, ITF
-0.27% , JKD , LargeCap Blend Core iS M, JKD
-0.64% , VFC , VF
-0.13% , SDY , Dividend SPDR, SDY
-0.23% , IYJ , Industrial LargeCap Blend DJ US, IYJ

Sectors: among the nine major U.S. sectors, three rose, five fell, and one ended unchanged.

Major Sectors Ranked for the Day
% Price Change, Sector

0.37% Materials
0.35% Technology
0.08% Health Care
0.00% Energy
-0.03% Utilities
-0.16% Financial
-0.18% Consumer Staples
-0.20% Consumer Discretionary
-0.51% Industrial

Apart from the day’s action:

Energy (XLE) major trend is Bullish. XLE has been relatively strong compared to the S&P since 3/12/03. Overweight.

Materials (XLB) major trend is Bullish. Relative strength made a new high on 6/22/07. XLB has been relatively strong compared to the S&P since 9/27/00. Overweight.

Industrial (XLI) major trend is Bullish. XLI has been relatively strong compared to the S&P since 8/9/06. Overweight.

Technology (XLK) relative strength trend is Bullish since its low on 7/24/06. In the big picture, however, XLK has been relatively weak compared to the S&P since 3/10/00.

Financial (XLF) major trend is Bearish. XLF has been relatively weak compared to the S&P since 3/23/04. Underweight.

Consumer Staples (XLP) major trend is Bearish. XLP has been relatively weak compared to the S&P since 10/9/02. Underweight.

Utilities (XLU) major trend is Bearish. XLU has been relatively weak compared to the S&P since 9/20/01. Underweight.

Health Care (XLV) major trend is Bearish. XLV has been relatively weak compared to the S&P since 10/9/02. Underweight.

Consumer Discretionary (XLY) major trend is Bearish. XLY has been relatively weak compared to the S&P since 1/5/05. Underweight.

Foreign Stocks outperformed strongly since 6/13/07. The EFA’s short-term trend is Bullish. Long term, EFA (the EAFE, international developed country stock markets, ex the U.S. and Canada) outperformed the S&P 500 since 3/19/03.

NASDAQ outperformed; relative strength trends are mixed. The NASDAQ Composite has been relatively strong since 5/17/07 but relatively weak compared to the S&P since 3/10/00.

Growth stocks rose more than Value stocks since 5/16/07. Longer term, the major trend of Growth/Value has been mostly Bearish for seven years.

Small Caps outperformed relative to Large Caps since 5/17/07. Longer term, the trend has been more Bearish than Bullish since the Small-Cap relative strength peak on 4/19/06.

Crude Oil rose to a new 12-week high. That should be Bullish for the short term. From a longer perspective, USO has been chopping up and down in a trading range since February, and it is still stuck in that range. Previous lows at 47.30-47.39 appear to be offering technical support. Watch the April high at 54.22 for resistance. The USO cyclical trend has been Bearish since USO peaked at 73.29 on 7/13/06. The U.S. OIL FUND ETF (AMEX: USO) is a good indicator for the market price of crude oil futures.

Energy Stocks underperformed USO but outperformed SPY. Since 5/30/07, the stocks of the oil companies have been lagging crude oil as a commodity, not every day but most of the time. From 3/2/07 to 5/30/07, the stocks of the oil companies were much stronger than oil as a commodity. In conflicts between short term trends and longer term trends, the longer term trends usually win. XLE is the Energy Select Sector SPDR ETF.

Gold bounced after breaking down to a new 3-month low on 6/26/07. GLD has been weak since 4/20/07. Trading volume is falling on this recovery attempt, suggesting a continuing and significant downside correction. Longer term, StreetTRACKS Gold Trust ETF (NYSE: GLD), which reflects the market price of gold futures, topped out at 70.2 on 5/12/06, and so has been relatively weak for 13 months.

Silver also bounced after breaking down to a new 6-month low on 6/26/07. iShares Silver Trust (AMEX: SLV) still looks Bearish. SLV sharply underperformed Gold since 6/5/07 and has been mostly underperforming since 12/7/06.

The Gold Miners Index (XAU) underperformed again, as usual. XAU underperformed GLD since 5/31/1996, so the big trend is Bearish.

Inflation expectations fell to a 3-week low and are sharply lower since 6/22/07. The ratio of the price of bond TIPS to 10-year U.S. Treasury Notes broke a six-week uptrend line on 6/26/07, and that indicated a downward shift in inflation expectations for the short-term.

Bond prices eased slightly lower. Longer term, TLT hit a new three-year price low on 6/12/07, the lowest since June, 2004. That indicates a very serious major price downtrend and yield uptrend. The main trend is clearly Bearish for iShares Lehman 20+ Year U.S. Treasury Bond ETF (AMEX: TLT).

U.S. dollar recovered slightly but remains in a short-term downtrend. The dollar has been heading down since 6/13/07. It has been mostly heading up since 5/1/07. Longer term, the dollar has been falling most of the time since its peak at 121.29 on 7/5/2001. In cases of such time-frame conflict, the longer-term trend usually wins.

Japanese Yen fell below the previous day’s low. On 6/15/07, it fell to its lowest level in more than four years, confirming a Bearish trend. The yen has been weak since its peak at 12,625 on 4/19/1995.

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

2.02% Airlines
1.42% Australia
1.17% Paper
1.15% Australian Dollar
1.09% Canada
1.03% Canadian Dollar
0.87% Sweden
0.64% Germany
0.62% Mexico
0.54% Network
0.53% France
0.50% Oil
0.44% DOT
0.39% Disk Drives
0.37% Materials
0.35% Technology
0.35% South Korea
0.29% Belgium
0.28% Hospitals
0.25% Commodity Related
0.23% Hong Kong
0.22% Internet
0.20% Biotechs
0.20% Brazil
0.19% Switzerland
0.17% NYSE Composite
0.17% British Pound
0.15% Value Line
0.14% Spain
0.12% Nasdaq Composite
0.11% Computer Tech
0.10% S&P Small Caps
0.09% Insurance
0.09% Euro Index
0.08% Health Care
0.07% Dow Transports
0.07% Russell 2000
0.07% Banks
0.07% Health Care Products
0.05% S&P Mid Caps
0.05% Chemicals
0.05% Austria
0.03% Dow Utilities
0.02% Wilshire 5000
0.01% Dow Composite
0.01% Health Care
0.00% Energy
0.00% Hardware
0.00% Netherlands
-0.01% S&P 100
-0.01% Russell 1000
-0.01% Russell 3000
-0.02% US Dollar Index
-0.03% Utilities
-0.04% Dow Industrial
-0.04% S&P 500
-0.07% Nasdaq 100
-0.08% Broker Dealers
-0.08% United Kingdom
-0.10% Drugs
-0.11% AMEX Composite
-0.13% Gold Mining
-0.14% Retailers
-0.14% Italy
-0.16% Financial
-0.18% Consumer Staples
-0.20% Consumer Discretionary
-0.21% Japan
-0.22% Singapore
-0.23% Swiss Franc
-0.31% Taiwan
-0.32% 30Y T-Bond
-0.51% Industrial
-0.56% Japanese Yen
-0.65% REITs
-0.69% Natural Gas
-0.85% Malaysia
-0.89% Semiconductors
-1.48% Oil Services

To sum up the current position of the U.S. stock market:

Longer term, the U.S. stock market has shown impressive Bullish resilience since the major low on 10/10/02, more than four years ago. Stock prices have been buoyed by abundant global liquidly (following years of fiscal stimulation, rapid money supply growth, and rising corporate profits), M&A, and earnings comparisons above expectations.

Liquidity driven merger and acquisitions news has been helping to keep the old Bull alive. Both U.S. and foreign corporations hold excess cash after several years of rising profits, and so M&A speculation as well as leveraged buyouts and corporate stock buybacks have provided substantial Bullish stimulus to stock prices. In 2007, mergers and acquisitions are running about 60% ahead of 2006’s record pace, driven by rising stock prices and private-equity funds that raised more than $250 billion for takeovers since the start of 2006. Takeovers are on track to surpass 2006’s all-time high of $3.49 trillion, according to data compiled by Bloomberg.

Conservative earnings estimates also have been useful in keeping the old Bull alive. First quarter 2007 corporate earnings reflected a significant growth slowdown. Nevertheless, earnings were ahead of expectations, which had been lowered to very conservative levels in advance of actual reporting. Managements and Wall Street have learned that investors hate disappointments, so they simply don’t give them any–unless absolutely necessary.

Stocks generally are fully valued to over priced by long-term historical standards. Although that alone does not mean that stocks cannot continue to trend higher, nevertheless, it is good to remember that “no tree grows to the sky.” The cyclical nature of stock prices never really changes, although the turning points are not always easy to predict.