That thought ran through my mind watching a CNBC segment on the cost of marina condo homes located immediately under an airport flight path in Los Angeles. I don't think the average Wal-Mart shopper is going to be spending $4.5 million for a 1,500 sq.ft. marina condo in LA, or San Francisco, or a retreat in the Hamptons.

I wonder what price Warren Buffett would have to pay if he finally moved out of the home that cost him $35,000 some years back? $35 million? But, it's only money, right? Then again, maybe the rich are starting to rebel too. I see that former GE chairman Jack Welch has dropped the price of his Connecticut home from $13.5 million to 12-11-10-9. Do I hear $9 million?

Could it really be that inflation has peaked, or that the rich are now starting to be impacted by the same economic issues facing the rest of society?

It appears that the whole Energy-Basic Materials-Industrials complex has hit the wall after super-fast growth in the past year, and now risk-averse equity money is flowing into technology. The object in the path of GICS sectors 10-15-20 is (i) Fed policies, or (ii) People's Bank of China policies -- take your pick.

But, in the fixed income market, at least in the U.S., I don't yet see a risk aversion to corporate bonds, where the yield spread versus government bonds is so tight that it could be signalling either future boom times (where few corporations are likey to default) or deflation (where risk adjusted returns are not worth the bother of investing, so they'll just hold cash).

So we'll look at that as well, if not today, for sure in the next couple days.

2005-05-14 Report

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Bill's Portfolio:

In recent days, I pointed out that in a price-challenged Basic Materials sector, other than the golds, which I like, there were two Cara Global Best 100 Companies, both chemicals, Lyondell (NYSE: LYO) and Dow (NYSE: DOW), that I liked. An explanation is in order.

I like the business prospects for these companies, and both are well managed. The Basic Material sector is a mess, and has been since my March 2 broad market sell recommendation, but readers are NOT going to sell 100 pct of these stocks, and will definitely commit new funds to some stocks. My readers also range from the Intra-Day trader to the Extra-Year trader, so I'm trying to write material that appeals to all.

I thought there was a short-term trade in the chemicals; there wasn't. Well, maybe there was, but, like driving through a town without stoplights, if you blinked, you missed it.

Still, for the longer-term trader, I still feel that a 25 pct commitment to a planned holding in the stock(s) has been a wise one. Nobody knows for certain where prices are going week to week, month to month, so it is prudent to (i) select the best quality companies, and (ii) after a significant price decline, you buy a little stock.

After watching the LYO and DOW sink 20 pct to 33 pct in about six or seven weeks in March and April, while enjoying solid corporate performance, I decided to put my foot in the water. That's all.

I can't tell you today these decisions will turn out to be good ones, but the strategy is a good one.

Next, I have indicated that I see some strength in the Technology sector that has not been evident for some weeks. I'm not referring to a ‘dead cat' bounce caused by shorts that get squeezed either.

Let's have a look at two Tech companies that made it to the Cara Global Best 100 companies list: Sandisk Corp and Linear Technology Corp. Not very exciting maybe " certainly not rocket science technology " but solid, well-managed companies with growing business prospects.

Here are some charts (first for the past week's trading, and then the Weekly data chart) that reflect the bottoming out in their price cycle.

Note how, in the past week, money has been flowing out of the two chemical stocks I like, and into two of the tech stocks I like.

The chemical companies are commodity-price sensitive. Higher commodity prices reflect pricing power (i.e., good demand for immediate use of the commodity vs supply shortages), which in turn leads to higher operating margins. The longer-term stock charts of the chemical companies, shown below, illustrate trader acknowledgement of pricing in the industrial sector where these companies participate.

In recent days, the commodity prices have weakened, which is the reason for the present stock price decline. Concerns of a hard landing in China have a lot to do with that.

On the other hand, these two tech companies are more economically-sensitive, where success or lack of it depends more on the business model and its implementation, as well as the general state of the economy. The long-term charts show that the retail-commercial sector has not been so robust.

With regard to the staid old (analog) chip technology that I think represents good value in the market today in the form of Linear Technology (NDQ: LLTC), why not also look into Maxim Integrated Products (NDQ: MXIM). Both long-term charts look like carbon copies. (Note the reference to old tech?)

Maxim is also on the Cara Global Best 100 Companies because it is a solid, well-managed company with excellent business prospects. The company also announced a stock buy-back this week.

I point out these stocks as being right for the times. Money is flowing into tech. Traders are nervous as they are pulling out of most of the other sectors. As the USD falls (if it does), U.S. exporters of technologies produced by these companies will be in strong demand in foreign markets as well as at home.

The present time remains one of having to be protective of wealth, but it also requires traders to be observant of intra-day trading anomalies. The other day, as LYO took a 7 pct bath, smart traders were buying off the bottom.

When prices are falling, it's a buyer's market. Why don't more of you see that?

When markets have already run to the upside, I hate those times because all there is left to do is to write calls against long positions and wait for imprudent buyers to pick off my stocks at inflated prices, while playing the musical chairs game.

But when prices are falling, the sellers come to you. Each week, the prices get more attractive, and more of the best quality companies fall into my accumulation zone where I can start writing puts, waiting for imprudent traders to give away their best assets at bargain prices.

That is what trading the capital markets is all about. I'll tell you; it is NOT about financial services, or anything to do with the sell-side of Wall Street.

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Sector ETF:

Interesting that a week ago I wrote, "I do acknowledge that the arguments of the bull side strengthened this week, and so too did share prices, and there was a pop in a couple of the sectors as I had expected, but my overall bearish outlook has not changed."

Did your outlook change?

As I did last week, and the week before, let me state: "Before I start into my observations and analysis of the equity market sectors, I want to say that I continue to believe there is more downside to come in equity prices across all sectors. But there may be a trade before the bear continues to sink in its claws..."

This may be the only time in maybe 30 years I can recall that homebuilding growth continues unabated as mortgage rates rose. So for the homebuilders that cater to the very upscale market, there may be some very short-term trades on the long side, putting a smile on Larry Kudlow's face, but historical market correlations cannot be dismissed for long.

So, the homebuilders to the rich can build higher walls to their gated communities, and two golf courses instead of one, and the home prices can go from two million to three, for a while. But not forever, and when the downside hits, it can be a long slide.

Remember that when my Dad's neighbor 15 years ago had increased his mortgage to almost $1 million on a property that he had over-valued at over $1.1 million. The owner at the time was in the process of building a heliport, but mostly he used the refinanced mortgage money to invest in a failing business. Finally, the bank called its loan, with the upshot being that Dad bought that property for $300,000 cash.

Its funny how life can change so materially in six months.

So, for the past week -- Week #19 already -- what happened to the Sector ETFs?

For the ten top sector ETFs I follow in these pages, there were nine down and one up, which is quite a reversal from the previous week when eight were up and two down. I think it shows that the recovery rally is over, that traders are going to sell and sell short again.

For the past two weeks, the interest-sensitive Financial sector led the recovery, but this week was different.

So what did happen this past week?

Here are the ETF charts for sectors 10 (energy: IYE), 15 (basic materials: IYM), 20 (industrial: IYJ), 25 (consumer discretionary: XLY), 30 (consumer staples: XLP), 35 (healthcare: IYH), 40 (financial: IYG), 45 (technology: IGM, IGV and IGW), 50 (telecom: IYZ) and 55 (utilities: IDU).

The hourly data ETF charts in the following interactive links are for the 10 industry sectors. I have taken a screen shot of some of them. Actually this week, due to the importance of the short-term cyclic reversal, I decided to publish both the Hourly and Weekly price data charts.

10 (energy: XLE, IYE, VDE, and IXC)

XLE closed Week #19 at 38.81, which is a long way down from the prior week's close at 41.10. In fact, XLE was down 5.57 pct on the week, including 1.50 pct on Friday, and this was not even the worst ETF on the board.

Here's the XLE chart:

Last week, I pointed out that with a little strength in XLE some traders had jumped off the bear's bandwagon. Too quick my fickle friends.

Read again what I wrote a week ago: "Before I make my usual concluding remarks on the Energy sector, have a look at the opening upside gap to XLE on Thursday and Friday, followed by distribution during the day. In fact on Friday, XLE was down "0.29 pct to 41.10. So, as I have written previously, "You can dream along with certain THs who tell you to buy the oils, but I put my words into writing. And I stand by them."

Week #11 (March 19): "So the Fed is in a difficult spot here. I think they will try to support the falling dollar by making some lame excuse like, ‘It would appear that government leaders have seen the errors of their ways and just maybe they can get the spending/debt issues under control, and (ahem) the economy looks like it's showing signs of coming out of the doledrums (yada yada).' But they sure don't have much ammunition left, so I suggest everybody keep their powder dry. Don't chase the oils, if they start to run. The risk is clearly to the downside."

And how about my call on XOM and the oils in Week #8 (Feb-26)?

I concluded after a thorough discussion, which I urge you to re-read: "Can XOM sustain the $63.26 price? Well, it's trading at a PE of 17.61 (ttm), and I feel it should be trading in the 15.0 range, given the variability in the oil price. That would represent a possible pullback to $54 for XOM."

Well, let's ring the bell big time. On Friday XOM closed $53.70. Exxon has lost in these eleven weeks the stunning total of $66.27 billion off market capitalization.

Do you know how much $66.27 billion is? It represents more that the capitalization of GM, AA, CAT, HON, MCD, DD, BA, UTX, DIS, MMM, HPQ or AXP, take your pick!

No, actually you can group three of the Dow 30: GM, AA, and almost all of either CAT or HON, to find the amount of capital that was removed from XOM in the past 11 weeks.

Those were the weeks that JJ Cramer was urging you to buy the oils, and the time that CNBC was parading the Saudi oil minister, and the Saudi Trader Prince Alwaleed bin Talal bin Abdulaziz Al Saud, and assorted Texas oilmen like Thomas Boone Pickens to get you all excited while the Gnomes were busy pick'n over your portfolio.

Yes, those were the 11 weeks, following my warning, that the Gnomes cut $66.27 billion out of Exxon.

The biggest loser in the past week was the Basic Material ETF, XLB.

This week, all the Basic Material ETF's were a mess.

15 (basic materials: IYM, XLB, and VAW)

Two weeks ago, I wrote an article that pointed out that "although I still see the longer-term price cycle still declining for Basic Materials (except Gold stocks) " I could see a short-term trade for the bulls in the chemicals LYO and DOW;You see, if there is a quick trade that works out, then a sizeable part of my readers list will be happy, but longer-term, although there may (or may not) be further share price declines for LYO and DOW, the total returns going forward a couple years will be satisfactory. Besides, I'll be in there recommending more buying on the pull-backs for these two stocks."

I tried to explain elsewhere in this report. Enough said.

XLB finished the week at 27.01, down 6.22 pct. Friday; XLB was down 1.96 pct, to where it looks oversold on the short-term chart, like the Oils (XLE), which were off 1.50 pct on Friday, which followed a big hit Thursday as well. The prior three weeks had been good ones for the XLB, so you can either interpret this as a normal correction, or like me take it that investors are starting to worry about an economic slowdown in China, which will hurt the Oils and Basic Materials stocks.

20 (industrial: IYJ, XLI, VIS, and IYT)

The Industrials ETF (XLI) was down 1.39 pct on the week to 29.17. XLI was off "0.55 pct on Friday, after a bad Thursday as well, just like the Oils and Basic Materials.

So the commodity-price sensitive sectors all got smashed this week, mostly on Thursday and Friday, right after the U.S. Retail Sales data were released showing a monster month of April, leading to further tightening by the Fed.

Does that tell you something? If May's retail sales data comes in that high, it had better be accompanied with more personal savings, lower PPI/CPI, and lower oil prices, or the Fed will put their foot to the brake pedal, and these stocks will take another punch to the nose.

25 (consumer discretionary: XLY and VCR)

As for Consumer Discretionary Spending stocks, XLY was down 1.26 pct this week, to 31.41.

There was a steady decline all week until Friday, when the XLY was flat.

30 (consumer staples: XLP and VDC)

Consumer Staples (XLP) was down 1.04 pct on the week to close Friday at 22.83. Actually the whole week's loss was made up on Friday, which was "0.95 pct.

35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)

Healthcare (IYH) was off "0.29 pct to 60.86, which follows a couple of fairly good weeks.

IYH was looking good early in the week, but sold down Thursday afternoon and all day Friday. It's a bit oversold right now, but I think longer-term, IYH is still headed south.

40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)

The Financials (XLF) were down "1.91 pct, cutting in half the prior two week's gains. After the retail sales number on Thursday at 8:30am, the Financials sold off hard Thursday and Friday. On Friday, XLF was off 0.88 pct.

Greenspan's Fed (his until December) is still tightening, and this latest economic surprise confirms that he will continue for a while. Fed funds might even go to 4.00 pct, flattening the yield curve unless there is a pickup in capex, and eventually a rise in the longer term bond yields.

With all the talk this week of hedge fund failures and their impact on some of the big banks like Deutsche Bank (NYSE: DB) the Fed will keep a tight rein on money until something big happens like a major bank getting into financial trouble. Since that is just not likely for quite some time at least, I just have to believe that the Fed is not about to change its game plan.

The charts of the XLF show that the long-term bull cycle that began in the 3Q02 is terminating, which is the same for the interest-sensitive Telecom and Utility sectors.

I think it makes sense to review all the high (interest and dividend) yielding securities like junk bonds, REITs and Utility stocks. Locking in profits might be wise.

45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, and MTK)

SMH was up +2.53 pct this week after being up +3.89 pct the prior week. SMH now sits at 32.83. Well, I did have another look, as I said.

These stocks have been side-tracking since September-04; I can't see a break-out yet.

This week's gain was all earned on Friday, which was up 2.47 pct. Without that move, every single one of the ETF's on my monitor would have been DOWN on the week.

It looks to me that the Tech sector, which has been holding up the Nasdaq, cannot move the broad market higher on its own. There is no confirmation among any of the Dow Industrials, Transports or Utilities, which are headed south.

Besides, after a Yuan revaluation upwards, buying tech product from China (as well as from Taiwan, Hong Kong, and South Korea, and maybe from Japan) will get more expensive, so I'd want to review whether the U.S. tech stocks in your portfolio are major importers or exporters.

INTC and the chip stocks did look good.

Elsewhere here I say I am having a new look at LLTC and MXIM, but I have no intentions to go in betting the farm.

50 (telecom: IYZ, VOX and IXP)

The Telecom Services sector (IYZ) came off a bad previous week ("1.31 pct) to go down again "1.72 pct, to close at 22.28. IYZ may have been oversold Friday, down "076 pct on the day, but it was down all week, and the longer-term charts show me there is more downside to come.

IYZ actually looks like it is terminating a bull phase that started back in 3Q02.

55 (utilities: IDU, XLU, and VPU)

Whether or not XLU has put traders through a bear trap or not, let's not get hung up on words. Kudlow has words. Cramer has words. Greenspan has words (doesn't he though). I have words. The only important talk is where the stocks are headed.

I have one word to say about the Utilities (XLU): "TIMBER." These stocks can be labelled Prime Douglas Fir, and marked for cutting.

XLU was off -2.18 pct this week to 29.17. Friday was a bad one, down "1.65 pct, following another bad day Thursday.

Yes traders who hold Utility stocks did not like the sound of Greenspan whispering to his prime interest Andrea after the Retail Sales report came out Thursday morning. The words did not appear to sound like: "Enough already. I'm cutting rates."

Au contraire.

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Bonds:

There was mucho action this week in the bond market. And, I think I heard traders say, "No Mas!"

All across the board, anything to do with fixed income went north. Did you witness the smiles on the faces of the traders in the pits who gapped the opening bond trades on Wednesday and Friday. You see, they have a pipeline to Alan, or Andrea (his successor maybe?) and they heard the words, "I got this market strung up by the cohones and I am really going to squeeze now!"

And the "No Mas!" pleading you heard came from the gold camp. I know; I was there.

From the U.S. Fixed Income (Bonds) Yield Table at Yahoo Finance, the 30-year T-Bond is now yielding just 4.48 pct, which is a far cry ("no mas!) from the prior week's 4.62 pct.

This week the 10-year Treasury notes dropped in yield from 4.26 pct to 4.11 pct. Actually, make that, "plunged".

And the 30-day T-Bill yield dropped to 2.66 pct, down from 2.76 pct three weeks ago, as traders are switching out of long maturities into, basically, cash.

Nervousness abounds, as I pointed out a week ago, and the weeks before that.

In recent weeks, the spread between 30-year T-Bonds and 3-month T-Bills had dropped from 194 basis points, to 181 bp to 177 bp, then made a turn to 191 bp two weeks ago. Now the spread is back down to 182 bp.

The more important indicator, which is the spread between the 10-year and 2-year T-Notes, had fallen from 76 bp, to 65 bp, 57 bp, and 56 bp, in the past month. Last week I wrote: "But that I believe is the bottom. The jobs data indicated too much strength for the yield curve to flatten, or eventually invert, as many believe."

Wrong again. There is a difference between accurately forecasting, and hoping. I missed the boat. This week the 10-year to 2-year spread dropped down to 54 bp.

Another thing regarding yield spreads that concerns me: the spread between the 10-year U.S. Treasurys and the 10-year triple-A Corporates is just 59 basis points. What this is saying to me (at least) is that financially sound corporations have raised a lot of new capital, have cleaned up their balance sheets, have solid cash flow to meet interest and dividend obligations, and so forth.

They are no longer afraid of the Fed's tightening. They have pulled back on capex, and are basically thumbing their collective noses at Greenspan. "Bring it on, baby."

I don't like that. Without businesses borrowing from their bankers, there is enough money left in the bank vaults to lend out to real-estate speculators; and businesses spending, which increases the velocity of money, which in turn overcomes the pressure of short-term Fed tightening, the poor consumer is getting squeezed in the middle.

The big increase in jobs is in part-time work, or temp construction; it's not at high paying plants like GM and the like, and in the export-import dependent sea ports.

A part-time worker doesn't have the disposable income needed to drive down the street to Wal-Mart, unfortunately. In fact, isn't that exactly the reverse of what the PRC authorities are trying to do for their people, i.e., take them out of the rice paddies, and put them to work in the manufacturing plants?

This economic situation is starting to have a deflation odor to it. At the very least, I'm thinking that inflation is no longer the boogyman on the horizon.

The bond traders like it. For now, at least.

Last week I was painting a negative picture for the future of bond yields; today I am not so sure of myself. I think I just might be better off sticking to equities for a couple weeks until feng shui starts to line up my wind and water a little more to my liking.

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Commodities:

Commodity prices fell this week by 2.20 pct, after falling 1.08 pct, and 1.16 pct the previous two weeks. The CRB index now stands (sits?) at 293.85, which is still above the 40-Week Moving Average of 289.24.

Therefore the CRB must be standing because if had fallen below the 40-Week MA, I guess I'd have say it is sitting.

Or standing down.

Until Crude Oil (of the Light Sweet variety) hits the $45 mark, I think it is still worthwhile to watch the Oil sector because (i) these stocks remain market leaders, and (ii) crude oil prices have a major impact on corporate earnings, and market risks, across the board.

Bear in mind of course what I noted earlier about Exxon, and that I called the cycle top for the Oils in my Week #8 in Review " and laughed at the bulls all the way down.

10101010 Oil & Gas Drilling Drilling contractors or owners of drilling rigs that contract their services for drilling wells.

10101020 Oil & Gas Equipment & Services Equipment manufacturers, including drilling rigs and equipment, and providers of supplies and services to companies that drill, evaluate and complete oil & gas wells.

10102010 Integrated Oil & Gas Integrated oil companies engaged in the exploration & production of oil and gas, as well as at least one other significant activity in either refining, marketing and transportation, or chemicals.

10102010 additional list.

10102020 Oil & Gas Exploration & Production Companies engaged in the exploration and production of oil and gas not classified elsewhere.

10102020 additional list.

10102030 Oil & Gas Refining & Marketing Companies engaged in the refining and marketing of oil, gas and/or refined products not classified in the Integrated Oil & Gas or Independent Power Producers & Energy Traders Sub-Industries.

10102040 Oil & Gas Storage & Transport Companies in storage and/or transportation of oil, gas and/or refined products. Includes diversified midstream natural gas companies facing competitive markets, oil and refined product pipelines, coal slurry pipelines and oil & gas shipping companies.

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Gold:

Gold is a topic that will be immediately removed from this Report.

Just kidding. But, if I can't get my bread and butter right, who is to say I'm going to have steak?

My usual discussion that traders had best save a little ammunition for the upside in gold is now running a little thin. Actually, the line disappeared as the USD broke through resistance levels this week.

Clearly I had a tough week, so let's just get through this asap.

This interactive chart shows the negative week for the Gold Bullion index. closing! (exclamation mark added this week; the rest is old news) The StockCharts chart (unfortunately) shows it clearly as well.

GOLD closed down "1.33 pct to 420.42, including Friday's loss of "0.42 pct. I regret to say that GOLD is below the 40-Week MA of 426.63.

The Philly Gold & Silver stock index (XAU) was down "7.80 pct this week (did you see the gold bugs wearing black arm bands?) after being down -2.59 pct the prior week. Friday alone was down "1.67 pct.

XAU hit 78.99 and has almost disappeared from radar for those looking at the 40-Week MA, which is at 96.42.

So, any turn I possibly saw coming in the equities was a sharper turn to the south.

And, after those smart "alec" Canadians took the XGD north a week earlier, this week XGD was down 7.07 pct, including "1.48 pct Friday. Ouch.

I can't wait to say goodbye to Toronto. ;-) Too fickle for my taste.

The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF, which trades under the ticker symbol TSE:XGD was down to 42.46 this week. Was the past couple weeks a false start?

As I wrote a week and two weeks ago: "I still think the USD is headed south for at least one more vacation. So, with fingers and toes crossed, I'm hanging in with gold positions. In fact, it's a good time to pick up goldminer stock call options real cheap as most traders are throwing away their stocks in this sub-industry group; But I have always been a believer that the Basic Materials sector can move in a sideways pattern, based on weak economic data, but the USD be falling because of inflation realities;.The XGD seems to be getting further away from a re-test of the 58 - 62 level this summer, which I have been writing about. Still, I don't quit unless the market gives me a reason to. And right now, the USD action is telling me to hang in. At least, the USD is saying, "Don't throw in the towel on the goldminers just yet."

This week, the USD chart said "Throw in the towel"

But since the trading this week was so extreme on the downside, I think there will be a rebound, of sorts. I'll hang in another week.

Besides, I don't want to sell golds unless and until the USD has weakened. Why should I be selling into my weakness, and not my opponent's weakness?

Here are the interactive charts of the leading goldminers on the board.

List #1

List #2

List #3

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Forex:

The U.S. Dollar strengthened yet again this week. Consternation plus+++.

The strengthening USD (86.11), which is up 1.80 pct from 84.59 a week ago has finally reached broken the resistance line that technical traders use. Last week I wrote, "Something is about to blow, and I hope it's not my capital. I have been hanging in here week after week like a Death Row prisoner waiting for the Governor to call on the very night that my enemies are hoping to see the lights dim. Actually, I do have a choice to stand down. But I refuse to quit."

I hear Minny-Me shouting in my ear, "Quit. Quit. You fool."

The $XEU closed at 126.27, down "1.52 pct on the week. That broke some backs as the resistance of the 40-Week MA of 128.71 was crossed, without any doubt about it.

The week's trading wasn't a change from the previous week, which had the XEU down -1.49 pct in fact. Also, speaking of facts for this week, the Euro crashed all day Wednesday, Thursday AND Friday.

Take heart: I'm staying long gold and short the USD until after Mr Joe speaks.

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International Equities:

Now to a more friendly patch of the capital markets. But first let me say that last week I warned you to pay the rat catcher. I guess you didn't. This week, all the key international markets were DOWN.

Japanese equity market ETF: EWJ

Japan (EWJ) was down 3.82 pct, which just about makes up for the gains of the previous three weeks.

I still like the Japanese market, in relative terms, because it's always better to be geographically close to your biggest purchasing agent, China, especially one whose currency is close to getting a boost.

U.K. equity market ETF: EWU

The EWU was down "2.63 pct this week to 17.75. Maybe the traders there are also voters saddened by the re-election of Tony Blair to another majority government. Anyway, a week ago I warned that the sledding would get tough. This week was five straight down sessions.

Canadian equity market ETF: EWC

The EWC was up an astounding +3.41 pct the previous week, and this week was down an even greater "4.52 pct to 16.49. From Tuesday afternoon, Canadian stocks, which have a strong Oil and Basic Materials factor, were down, down, down.

EWC now looks a bit oversold for the very short-term.

Just as the price improvement the prior week had a lot to do with rallying prices in the Energy and Basic Materials sector, as well I guess with the cooling USD, this week the EWC fell hard as those sectors collapsed.

Let's now have a look at the hourly data charts of the various international equity markets as represented by the U.S.-listed and dollar-denominated ETFs:

(Japan, Taiwan, Hong Kong, Singapore)
(U.K., Germany, France, Italy)
(Canada, Mexico, Brazil, Australia).

Last week I wrote, in this spot, "I suspect most of these markets will be under pressure in the weeks to come." If I had a paint brush, you could call me a Dutch Master.

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U.S. Equities:

Here is the 60-minute data chart of the Dow, S&P 500, Nasdaq Composite, and Russell 2000 (small cap) indexes.

Week #18 (a week ago), the Dow 30 had a great week, with 23 winners and just seven losers. This week the hourglass was turned upside down: 23 down, 1 unchanged, and just 6 winners.

Actually there was just one winner (INTC +2.57 pct) plus 5 floaters (MCD +0.92 pct, PFE +0.91 pct, GM +0.72 pct, DIS +0.41 pct and MSFT +0.32 pct. PG was unchanged. Does it ever? ;-)

The loser board was downright ugly. Ugliest was AA "8.94 pct. How can a $25 billion corporation drop almost 10 pct of its value in five days? Ask Zhou Xiaochuan; he's the executioner. One swing of his ax, which is yet to come, and AA loses its head. Actually, AA was handed its head this week; next is the torso.

You see, Mr. Joe is governor of the People's Bank, and the day he (and the top six on the Beijing Exec Committee) decides to revalue Renminbi to a trade-weighted basket of currencies is the day of the ax comes down on companies that rely on the steady GDP growth in China.

There's this sympathy thing going on between the good people of Pittsburgh and about a billion in China. Alcoa and the steelmakers are really getting hammered as traders sell these stocks in anticipation of the yuan revaluation, which will slow demand in China because manufactured durable goods will be harder to export, and so the best jobs in China will be cut decimated, which tends to hurt domestic savings and consumption as well.

One hard landing to come, possibly.

The other losers this week were: XOM down -6.77 pct, AIG down -3.86 pct, DD down -3.77 pct and WMT down 3.74 pct. The quarter yearly analytical report on WMT is available now. I think everybody ought to read it.

Wal-Mart (NYSE: WMT) is on the Cara Global Best 100 Companies list. I am presuming that after Mr. Joe speaks to us from Beijing, and the forex markets get straightened out, WMT will be a terrific addition to long-term portfolios.

The following table shows the price performance of the Dow 30 stocks, which I sorted by 1-week price change.

You can do this table yourself by copying the following list of the Dow 30 stocks and entering them in the window for "Summaries" at Investertech.com.

AA AIG AXP BA C CAT DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM MO MRK MSFT PFE PG SBC UTX VZ WMT XOM

After you bring up the list, click on the Performance tab. To sort for the relative price performance for any recent period, you just need to click on the column header of the period that interests you.

Here are the Dow charts from Investertech.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)

Last week I noted: "I have noted that on March 2, I wrote that, to me, observing the technical indicators was like watching the market roll over, and I could see a waterfall in my crystal ball. That became apparent to everybody later. I think the economic data is starting to pile up now hat give us a good picture that the economy is not growing as fast as most people would like, and PPI/CPI is growing a little faster than most would like. The real estate bubble is not going away (and won't unless mortgage costs start to escalate, whereupon it bursts), and traders are getting more nervous (as seen by the VIX and VXN indicators)."

Then last week too, I wrote: "How do I see changes in this week's market altering my long-term perspective? Wage rates are growing quickly, so I don't see any relaxing of the PPI/CPI trends. The increase in reported jobs reflects a stronger economy than most people thought, but is in line with my earlier view. Interest rates started to pick up, first with Wednesday's bond yields in the 30-year bonds, and then Friday's pop in the 10-year, 5-year and 2-year maturities. If these yields continue to strengthen at that pace, then the interest-sensitive equities (along with the bonds) will suffer huge losses, quickly. Initially, the USD would stay strong as the bulls try to support it, but then it would come off and stay trending down through the summer. Gold would not move higher until the USD starts to falter. The 132.50 Euro:Dollar cross-rate is an important line to cross in that battle. So, this week I see interest rates and inflation as taking the forefront to economic weakness or growth as being the most crucial factors, and as both inflation/rates are now in a rising trend (as of Wednesday), I think next week will see lower equity and bond prices."

I was half right. Equity prices were mostly down (except the chip stocks on Nasdaq), but the bonds actually got a lot stronger because they are riding the Fed coattails in the need to continue tightening. The economic data that came out this week re Retail Spending spoke loudly as to probable future action by the Fed. The bond market liked it.

I am beginning to think that there is a possibility of deflation in the cards after the present inflation cards are played out in the short to intermediate term.

(AA) (AA) (Here is the Apr. 22 Value Line report on AA: next one is due Jul. 22)

(AIG) (AIG) (Here is the Feb. 25 Value Line report on AIG: next one is due May 27)

(AXP) (AXP) (Here is the Feb. 25 Value Line report on AXP: next one is due May 27)

(BA) (BA) (Here is the Mar. 25 Value Line report on BA: next one is due Jun. 24)

(C) (C) (Here is the Feb. 25 Value Line report on C: next one is due May 27)

(CAT) (CAT) (Here is the Apr. 29 Value Line report on CAT: next one is due Jul. 29)

(DD) (DD) ( Here is the Apr. 22 Value Line report on DD: next one is due Jul. 22)

(DIS) (DIS) (Here is the Feb. 18 Value Line report on DIS: next one is due May 20)

(GE) (GE) (Here is the April 15 Value Line report on GE: next one is due July 15)

(GM) (GM) (Here is the March 4 Value Line report on GM: next one is due Jun. 3)

(HD) (HD) (Here is the Apr. 7 Value Line report on HD: next one is due Jul. 8)

(HON) (HON) (Here is the Apr. 29 Value Line report on HON: next one is due Jul. 29)

(HPQ) (HPQ) ( Here is the April 15 Value Line report on HPQ: next one is due July 15)

(IBM) (IBM) ( Here is the April 15 Value Line report on IBM: next one is due July 15)

(INTC) (INTC) ( Here is the April 15 Value Line report on INTC: next one is due July 15)

(JNJ) (JNJ) (Here is the Mar. 4 Value Line report on JNJ: next one is due Jun. 3)

(JPM) (JPM) (Here is the Feb. 25 Value Line report on JPM: next one is due May 27)

(KO) (KO) (Here is the May 6 Value Line report on KO: next one is due Aug 5)

(MCD) (MCD) (Here is the March 11 Value Line report on MCD: next one is due Jun. 10)

(MMM) (MMM) (Here is the Feb. 18 Value Line report on MMM: next one is due May 20)

(MO) (MO) (Here is the May 6 Value Line report on MO: next one is due Aug 5)

(MRK) (MRK) ( Here is the Apr. 22 Value Line report on MRK: next one is due Jul. 22)

(MSFT) (MSFT) (Here is the Feb. 25 Value Line report on MSFT: next one is due May 27)

(PFE) (PFE) ( Here is the Apr. 22 Value Line report on PFE: next one is due Jul. 22)

(PG) (PG) (Here is the Apr. 7 Value Line report on PG: next one is due Jul. 8)

(SBC) (SBC) (Here is the Apr. 1 Value Line report on SBC: next one is due Jul. 1)

(UTX) (UTX) (Here is the Apr. 29 Value Line report on UTX: next one is due Jul. 29)

(VZ) (VZ) (Here is the Apr. 1 Value Line report on VZ: next one is due Jul. 1)

(WMT) (WMT) (Here is the May 13 Value Line report on WMT: next one is due Aug. 12)

(XOM) (XOM) (Here is the March 18 Value Line report on XOM: next one is due Jun. 17)

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This has been a challenging week on many fronts. However, there is usually a balance of good with the bad. This week Canada's leading financial publications gave the Bill Cara blog and website two thumbs up. One came from Investment Executive, which is Canada's national publication for the 120,000 strong financial services community. The other was from MoneySense.ca, an info service for traders that I always have respected.

So, on that good note, I'll call it a day (and leave any editing of typos etc until tomorrow).

BCara@BillCara.com