Stock Market: momentum near zero for the past 2 months.

The market appears to have stalled out moderately above the low of November 21st.

Sentiment remains Bearish, and the market has been oversold by normal standards.

Some see this choppy sideways price movement as base building leading to an upside reversal.

Others see it as consolidation leading to another big down leg.

Both are possible, but I think consolidation leading to another down leg is more likely.

There is no change in my conclusion. The Bearish Primary Tide Trend dominates the stock market. With the business conditions outlook deteriorating alarmingly, with tight credit conditions, with the possibility of further financial risks, with probable unintended consequences of government bailouts, and with massive fund redemptions and liquidations likely, prudent investors may continue to focus on capital preservation.

On Tuesday, major stock price indexes opened lower, recovered, but then fell again into the red. Stocks stabilized in the final 90 minutes but still closed below the open, below the previous close, below the midpoint of the day’s range, and below the low of the previous day. The Standard & Poor’s 500 cash index (888.67) closed down 21.03 points, or 2.31%. Total NYSE volume fell 13%, suggesting falling demand for stocks.

CATS Sold Short the SPY at 90.37 at the Open on Tuesday, 12/9/08. Year-to-date, from 12/31/07 to 12/9/08, CATS’ Simulated Performance (see Disclaimer) Cumulative Equity rose by 115.61% to a new all-time high. The 32-year Compound Annual Growth Rate is 38.98%. All figures are based on computer simulation on historical data, not on actual trades. This simulation assumes 50% margin, that is, 2 to 1 leverage. Fees and transaction costs are not included.

CATS is the Colby Algorithmic Timing System.

According to CFTC Rule 4.41, hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under- or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

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
4.31% , SMH , Semiconductor H, SMH
4.53% , IGW , Semiconductor iS GS, IGW
6.88% , AZO , AUTOZONE
5.63% , ALTR , ALTERA
6.92% , EP , EL PASO
15.38% , UIS , UNISYS
5.10% , JNPR , Juniper Networks Inc
0.61% , EWD , Sweden Index, EWD
4.00% , A , AGILENT TECH

Bearish Stocks: Falling Price and Rising Volume
% Price Change, Symbol, Name
-14.48% , FDX , FEDEX
-2.37% , PTE , Telecommunications & Wireless, PTE
-1.55% , IAH , Internet Architecture H, IAH
-0.42% , IGN , Networking, IGN
-1.80% , EWK , Belgium Index, EWK
-1.58% , PZJ , SmallCap PS Zacks, PZJ
-3.54% , DGT , Global Titans, DGT
-2.71% , VCR , Consumer D. VIPERs, VCR
-2.73% , DSV , Value Small Cap DJ, DSV
-3.94% , JKL , Value SmallCap iS M, JKL
-6.74% , KR , KROGER
-2.42% , VXF , Extended Mkt VIPERs, VXF
-6.51% , PNC , PNC FINL SVC
-8.67% , VNQ , REIT VIPERs, VNQ
-3.58% , PGJ , China LargeCap Growth G D H USX PS, PGJ
-7.18% , IYR , Real Estate US DJ, IYR
-1.18% , JKH , MidCap Growth iS M, JKH
-2.24% , ISI , LargeCap Blend S&P 1500 iS, ISI
-4.69% , RTH , Retail H, RTH
-3.58% , IJS , Value SmallCap S&P 600 B, IJS
-5.71% , IYT , Transportation Av DJ, IYT
-9.29% , RWR , REIT Wilshire, RWR
-2.04% , XLG , LargeCap Rydex Rus Top 50, XLG
-1.50% , RFG , Growth MidCap S&P 400, RFG
-9.38% , ICF , Realty Cohen & Steers, ICF
-2.02% , PIV , Value Line Timeliness MidCap Gr, PIV
-2.72% , IJT , Growth BARRA Small Cap 600, IJT
-2.76% , JKJ , SmallCap Core iS M, JKJ
-0.74% , EWL , Switzerland Index, EWL
-1.35% , PWP , Value MidCap Dynamic PS, PWP
-2.96% , PZI , Micro Cap Zachs, PZI
-1.75% , PWT , Growth SmallCap Dynamic PS, PWT
-0.99% , PUI , Utilities, PUI
-3.20% , IXG , Financials Global LargeCap Value, IXG
-2.07% , UTH , Utilities H, UTH
-4.20% , DHR , DANAHER

9 Major U.S. Stock Sectors
Ranked on Latest One-Day Price Change
% Price Change, Sector ETF, Symbol
1.00% Energy SPDR, XLE
-0.64% Technology SPDR, XLK
-1.06% Materials SPDR, XLB
-1.42% Utilities SPDR, XLU
-1.58% Health Care SPDR, XLV
-1.76% Industrial SPDR, XLI
-1.93% Consumer Staples SPDR, XLP
-2.01% Consumer Discretionary SPDR, XLY
-4.02% Financial SPDR, XLF

Primary Tide Trends for the 9 major sectors can 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):

Consumer Staples (XLP) Neutral, Market Weight. On 11/20/08, XLP/SPY Relative Strength Ratio rose to a new 10-year high. All 9 sectors have lost in 2008, but XLP has lost least.

Health Care (XLV) Neutral, Market Weight. On 11/20/08, XLV/SPY Relative Strength Ratio rose to a new 4-year high.

Utilities (XLU) Neutral, Market Weight. On 11/21/08, the XLU/SPY Relative Strength Ratio rose to a new 10-year high.

Consumer Discretionary (XLY) Bearish, Underweight. On 11/21/08, XLY absolute price fell to its lowest level in 10 years. The Relative Strength Ratio (XLY/SPY) has been trending down since 1/5/05 and fell to a new 7-year low on 11/19/08.

Technology (XLK) Bearish, Underweight. On 11/21/08, the XLK absolute price fell to a new 5-year low.

Industrial (XLI) Bearish, Underweight. On 11/21/08, the XLI absolute price fell to a new 5-year low.

Energy (XLE) Bearish, Underweight. On 10/10/08, the XLE absolute price hit another new 18-month intraday low.

Materials (XLB) Bearish, Underweight. On 11/20/08, the XLB absolute price fell to a new 5-year low.

Financial (XLF) Bearish, Underweight. On 11/21/08, the XLF absolute price hit another new 10-year low. In addition, the XLF long-term trend of Relative Strength Ratio (XLF/SPY) has been trending down since 2/20/07 and fell to a new 10-year low on 11/21/08.

The relative performance measurements of the 9 major sectors have indicated for many months a clear preference for defensive stocks that are insulated to a degree from economic downturns.

Foreign stock index EFA Relative Strength Ratio has sharply underperformed the S&P 500 since 11/27/07. EFA absolute price fell to a new 5-year low on 11/20/08 and has been in a falling trend since 10/31/07. EFA is the ETF representing the EAFE, the international developed country stock markets, ex the U.S. and Canada.

NASDAQ Composite remains Bearish. Relative Strength has been underperforming the S&P 500 since 8/14/08. On 11/21/08, the absolute price made another new 5-year low, reconfirming absolute long-term trend weakness.

Growth Stock/Value Stock Relative Strength Ratio fell to a new 10-month low on 12/8/08. The ratio has been trending down since it peaked on 7/15/08.

The Small Cap/Large Cap Relative Strength Ratio has been trending down since it peaked on 9/19/08.

Crude Oil January futures contract turned down again. On Friday, oil fell a new 3-year low at 40.50. Oil traded at 147.27 on July 11, 2008. The main trend remains Bearish. 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 outperformed Crude Oil since 10/9/08.

Gold futures contract price consolidated with an Inside Day (lower high and higher low). On Friday, Gold broke down below the lows of the previous 9 trading days, thereby confirming Bearish trend for the short-term. In addition, Gold remains in an intermediate-term downtrend since the peak of 1,033.90 on 3/17/08.

Gold Mining stocks continue to underperform Gold futures on a major trend basis.

U.S. Treasury Bond futures contract price rose to challenge its high. On Friday, Bonds made a new high to reconfirm a Bullish trend for the Long term. Money has been fleeing to safety, and that trend has accelerated.

iShares iBoxx $ Invest Grade Corp Bond (LQD) ETF relative to 20+ Years US Treasury Bonds (that is, the LQD/TLT Relative Strength Ratio) fell to multi-year new lows on 12/4/08. Bond investors appear to be seriously concerned about the economic outlook.

iShares Lehman TIPS Bond (TIP) ETF Relative Strength Ratio (TIP/TLT) signals deflation. On 11/24/08, the Ratio fell to a new 5-year low and has been in a persistent major downtrend since 7/3/08.

The U.S. dollar price recovered fractionally. On Monday, it broke down below the lows of the previous 5 trading days. The U.S. dollar lost all upside momentum since 10/27/08 and, therefore, could be turning from Bull to Bear.

The Art of Contrary Thinking: Traders need to be extremely nimble to keep up with rapid changes in the mass mood. The business and financial news has flipped from fear to hope and back again this year, creating record high levels of volatility. Investors might be wise to focus on risk control.

Sentiment/Contrary Opinion: There were 23.1% Bulls versus 49.5% Bears as of 12/3/08, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear ratio was 0.47, down from 0.66 the previous week. This indicates extreme pessimism. The ratio’s 38-year range is 0.28 to 17.51, and the median is 1.47. Contrary Opinion must be tempered with other timing tools, of course.

VIX Fear Index, now at 58.91, rose slightly. Its 18-year high was 80.86 set on 11/20/08. Its 18-year 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 56.59, fell slightly. Its 7-year high was 80.64 set on 11/20/08. Its record high was 114.23 on 10/8/98. Its record 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 0.75, which indicates Bearish sentiment. Its 4-year mean and median are 0.62, and its 4-year range is 0.35 to 1.28.

ISEE Call/Put Ratio is 1.15, which indicates Bearish sentiment. The ratio’s 4-year mean is 1.50, 4-year median is 1.47, and 4-year range is 0.51 to 3.16.

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 credit market crisis has derailed that engine. Economic statistics and corporate earnings have been weakening and seem likely to weaken further over the next several quarters.

The Dow Theory last reconfirmed a Primary Tide Bear Market on 11/20/08, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their previous lowest closing prices of 2005-2008. These two Averages originally signaled a Primary Tide Bear Market on 11/21/07, when both closed below their closing price lows of August, 2007.

The breadth of the market has been in a Bearish trend long term since June 2007. The number of New Lows has exceeded the number of New Highs most days for more than a year, since July 2007, and that is one sign of a Bear Market. On 11/20/08, the Cumulative Daily Advance-Decline Lines for the NYSE and for the NASDAQ both fell to new 2-year lows, reconfirming that the major breadth trends remain Bearish.

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 (888.67):

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 5/19/2008
1,406.32, high of 5/29/2008
1,366.59, high of 6/17/2008
1,335.63, high of 6/25/2008
1,313.15, high of 8/11/2008
1,274.42, high of 9/8/2008
1,255.09, high of 9/12/2008
1,238.807, Fibonacci 78.6% of 1,576.09 high
1,220.03, high of 9/25/2008
1,077.08, Fibonacci 61.8% of 2002-2007 upmove
1,044.31, high of 10/14/2008
1,007.51, high of 11/4/2008
918.57, high of 12/8/2008

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 (888.67):

Potential Support
741.02, low of 11/21/2008
602.07, Fibonacci 38.2% of 1,576.09 high

Daily Rankings of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol

4.88% Semiconductor SPDR, XSD
4.53% Semiconductor iS GS, IGW
4.48% Short 200% MidCap 400 PS, MZZ
4.31% Semiconductor H, SMH
4.28% Short 200% Dow 30 PS, DXD
3.73% Semiconductors, PSI
3.48% Short 200% S&P 500 PS, SDS
2.65% India Earnings WTree, EPI
2.22% Short 100% Dow 30, DOG
2.17% Short 100% MidCap 400, MYY
2.10% Oil Services H, OIH
1.98% Bond, 20+ Years Treasury, TLT
1.89% Short 100% S&P 500, SH
1.32% Oil & Gas, PXJ
1.00% Energy SPDR, XLE
0.94% Bond, Aggregate, AGG
0.91% Energy Global, IXC
0.85% Bond, 10 Year Treasury, IEF
0.68% Bond, Corp, LQD
0.61% Sweden Index, EWD
0.59% Bond, TIPS, TIP
0.51% Brazil Index, EWZ
0.51% IPOs, First Tr IPOX-100, FPX
0.46% Natural Resource iS GS, IGE
0.40% Japan LargeCap Blend TOPIX 150, ITF
0.39% Energy Exploration & Prod, PXE
0.31% Short 200% QQQ PS, QID
0.31% Bond, 1-3 Year Treasury, SHY
0.18% Gold Shares S.T., GLD
0.17% Short 100% QQQ, PSQ
0.14% Energy VIPERs, VDE
0.11% Energy DJ, IYE
0.06% Technology DJ US, IYW
0.03% Internet H, HHH
0.00% Info Tech VIPERs, VGT
0.00% Germany Index, EWG
-0.06% Technology GS, IGM
-0.07% Software H, SWH
-0.10% France Index, EWQ
-0.13% Technology MS sT, MTK
-0.17% South Africa Index, EZA
-0.22% Netherlands Index, EWN
-0.23% Growth LargeCap NASDAQ 100, QQQQ
-0.25% Broadband H, BDH
-0.26% Italy Index, EWI
-0.29% European VIPERs, VGK
-0.38% Emerging 50 BLDRS, ADRE
-0.39% EMU Europe Index, EZU
-0.42% Networking, IGN
-0.51% Euro STOXX 50, FEZ
-0.52% Pacific ex-Japan, EPP
-0.55% Europe 350 S&P Index, IEV
-0.56% Lg Cap Growth PSD, PWB
-0.58% Singapore Index, EWS
-0.60% Emerging VIPERs, VWO
-0.64% Technology SPDR, XLK
-0.67% Dividend International, PID
-0.69% Japan Index, EWJ
-0.70% Metals & Mining SPDR, XME
-0.71% Basic Materials DJ US, IYM
-0.74% Switzerland Index, EWL
-0.77% Value 40 Large Low P/E FT DB, FDV
-0.77% Taiwan Index, EWT
-0.79% Materials VIPERs, VAW
-0.79% Ultra QQQ Double, QLD
-0.82% United Kingdom Index, EWU
-0.83% Aerospace & Defense, PPA
-0.86% Networking, PXQ
-0.90% Insurance, PIC
-0.91% South Korea Index, EWY
-0.93% EAFE Index, EFA
-0.93% Value EAFE MSCI, EFV
-0.99% Utilities, PUI
-1.02% Software, PSJ
-1.04% Value MidCap S&P 400, RFV
-1.04% Biotech H, BBH
-1.06% Materials SPDR, XLB
-1.09% Developed 100 BLDRS, ADRD
-1.12% Healthcare Global, IXJ
-1.14% Technology Global, IXN
-1.15% Nanotech Lux, PXN
-1.17% Value LargeCap Euro STOXX 50 DJ, FEU
-1.17% Growth SmallCap iS M, JKK
-1.18% MidCap Growth iS M, JKH
-1.20% Growth S&P 500/BARRA, IVW
-1.20% Growth Mid Cap Dynamic PS, PWJ
-1.22% Europe 100 BLDRS, ADRU
-1.23% Utilities DJ, IDU
-1.24% Global 100, IOO
-1.24% Growth EAFE MSCI, EFG
-1.24% LargeCap Blend S&P=Weight R, RSP
-1.28% Austria Index, EWO
-1.30% Pacific VIPERs, VPL
-1.30% Growth LargeCap NASDAQ Fidelity, ONEQ
-1.31% Water Resources, PHO
-1.35% Value MidCap Dynamic PS, PWP
-1.35% Spain Index, EWP
-1.38% Emerging Markets, EEM
-1.38% Software, IGV
-1.40% LargeCap Blend Dynamic PS, PWC
-1.42% Utilities SPDR, XLU
-1.45% MidCap VIPERs, VO
-1.50% Growth MidCap S&P 400, RFG
-1.53% Growth 1000 Russell, IWF
-1.54% Mexico Index, EWW
-1.54% Growth LargeCap Russell 3000, IWZ
-1.55% Internet Architecture H, IAH
-1.58% Health Care SPDR, XLV
-1.58% SmallCap PS Zacks, PZJ
-1.59% Canada Index, EWC
-1.60% Internet Infrastructure H, IIH
-1.63% Asia 50 BLDRS, ADRA
-1.64% LargeCap Blend NYSE Composite iS, NYC
-1.65% Dividend SPDR, SDY
-1.65% S&P 500 SPDRs LargeCap Blend, SPY
-1.67% Growth LargeCap iS M, JKE
-1.69% Biotech & Genome, PBE
-1.71% Utilities VIPERs, VPU
-1.73% Growth Large Cap, ELG
-1.73% Telecom DJ US, IYZ
-1.73% Latin Am 40, ILF
-1.74% Growth VIPERs, VUG
-1.75% Growth SmallCap Dynamic PS, PWT
-1.76% MidCap Russell, IWR
-1.76% Industrial SPDR, XLI
-1.79% OTC Dynamic PS, PWO
-1.80% Growth MidCap 400 B, IJK
-1.80% Healthcare DJ, IYH
-1.80% Belgium Index, EWK
-1.83% Blend Total Market VIPERs, VTI
-1.84% LargeCap Blend Total Market DJ, IYY
-1.84% S&P 500 iS LargeCap Blend, IVV
-1.85% Value SmallCap Dynamic PS, PWY
-1.88% Growth Small Cap DJ, DSG
-1.90% Growth S&P 500, RPG
-1.92% LargeCap 1000 R, IWB
-1.92% Silver Trust iS, SLV
-1.93% Consumer Staples SPDR, XLP
-1.96% LargeCap Blend Russell 3000, IWV
-1.99% Health Care VIPERs, VHT
-1.99% Growth SmallCap R 2000, IWO
-2.00% Building & Construction, PKB
-2.01% Consumer Discretionary SPDR, XLY
-2.02% Value Line Timeliness MidCap Gr, PIV
-2.03% Wilshire 5000 ST TM, TMW
-2.04% LargeCap Rydex Rus Top 50, XLG
-2.05% MidCap Blend Core iS M, JKG
-2.05% LargeCap Blend S&P 100, OEF
-2.07% Utilities H, UTH
-2.08% Dividend Growth PS, PHJ
-2.09% Pharmaceuticals, PJP
-2.18% Commodity Tracking, DBC
-2.19% Malaysia Index, EWM
-2.20% Value LargeCap Dynamic PS, PWV
-2.20% Telecom H, TTH
-2.22% Value LargeCap Fundamental RAFI 1000, PRF
-2.23% Hong Kong Index, EWH
-2.24% LargeCap Blend S&P 1500 iS, ISI
-2.25% Value MidCap iS M, JKI
-2.29% LargeCap Blend Core iS M, JKD
-2.29% Growth SmallCap VIPERs, VBK
-2.31% Consumer Staples VIPERs, VDC
-2.32% Value LargeCap iS M, JKF
-2.32% LargeCap Blend Socially Responsible iS, KLD
-2.33% Value Large Cap DJ, ELV
-2.34% MidCap S&P 400 iS, IJH
-2.35% LargeCap VIPERs, VV
-2.37% Telecommunications & Wireless, PTE
-2.39% Telecommunications Global, IXP
-2.42% Dividend Appreciation Vipers, VIG
-2.42% Extended Mkt VIPERs, VXF
-2.52% Value LargeCap NYSE 100 iS, NY
-2.54% Value MidCap Russell, IWS
-2.55% Leisure & Entertainment, PEJ
-2.55% Value LargeCap Russell 3000, IWW
-2.60% Value VIPERs, VTV
-2.62% Value 1000 Russell, IWD
-2.64% Dividend Achievers PS, PFM
-2.66% SmallCap S&P 600, IJR
-2.66% Industrial LargeCap Blend DJ US, IYJ
-2.71% Consumer D. VIPERs, VCR
-2.72% Growth BARRA Small Cap 600, IJT
-2.73% Value Small Cap DJ, DSV
-2.74% Value S&P 500 B, IVE
-2.74% Food & Beverage, PBJ
-2.76% SmallCap Core iS M, JKJ
-2.77% Small Cap VIPERs, VB
-2.81% Telecom Services VIPERs, VOX
-2.85% Consumer Cyclical DJ, IYC
-2.91% Microcap Russell, IWC
-2.95% MidCap S&P 400 SPDRs, MDY
-2.96% Micro Cap Zachs, PZI
-2.97% Value MidCap S&P 400 B, IJJ
-2.98% Pharmaceutical H, PPH
-3.08% Dividend Leaders, FDL
-3.09% Biotech SPDR, XBI
-3.10% SmallCap Russell 2000, IWM
-3.17% Consumer Non-Cyclical, IYK
-3.18% Value SmallCap VIPERS, VBR
-3.20% Industrials VIPERs, VIS
-3.20% Financials Global LargeCap Value, IXG
-3.35% Capital Markets KWB ST, KCE
-3.37% Dividend DJ Select, DVY
-3.44% Value S&P 500, RPV
-3.54% Global Titans, DGT
-3.58% Value SmallCap S&P 600 B, IJS
-3.58% China LargeCap Growth G D H USX PS, PGJ
-3.69% Ultra S&P500 Double, SSO
-3.69% Retail, PMR
-3.92% Value SmallCap Russell 2000, IWN
-3.94% Value SmallCap iS M, JKL
-3.95% Growth MidCap Russell, IWP
-3.98% Financials VIPERs, VFH
-4.02% Financial SPDR, XLF
-4.03% China 25 iS, FXI
-4.28% Value SmallCap S&P 600, RZV
-4.34% Ultra Dow30 Double, DDM
-4.45% Financial DJ US, IYF
-4.51% Homebuilders SPDR, XHB
-4.52% Financial Services DJ, IYG
-4.60% Dividend High Yield Equity PS, PEY
-4.62% Oil, Crude, U.S. Oil Fund, USO
-4.69% Retail H, RTH
-4.78% Ultra MidCap400 Double, MVV
-5.13% Australia Index, EWA
-5.71% Transportation Av DJ, IYT
-5.82% Bank Regional H, RKH
-5.94% WilderHill Clean Energy PS, PBW
-7.18% Real Estate US DJ, IYR
-9.29% REIT Wilshire, RWR
-9.38% Internet B2B H, BHH
-9.38% Realty Cohen & Steers, ICF