After a two-year hiatus from credit cycle tightening, the European Central Bank raised rates four months ago to 2.25 pct. Today, the ECB raised again, to 2.50 pct. And in June, they will most likely raise again to 2.75 pct. In fact, the raising process in Europe has just begun.

In the past week, the Governor of the Bank of Japan has indicated a policy shift there will likely happen soon. That means rising rates in that part of the world too.

And in case you haven't noticed, the rates in the U.S. have risen considerably in the past week. The following Yahoo Finance table of Treasury yields is clear proof of that. I believe that Fed Chairman Bernanke will be forced to raise again in order to protect the USD from falling hard as Europe and Japan central bankers raise their rates.

The implications of globally rising rates are obviously negative for bondholders. But, higher rates are also negative for shareholders too, and for holders of mortgages that are renewable in 2006.

Interest rates have to rise for one of two reasons: (i) higher inflation due to excessive liquidity (which is definitely the case), and (ii) an over-heating economy (which is debatable, particularly in Europe or the U.S.).

These are the seeds of the 2006 Bear Market. The recent rally in the oil market gave equity traders an opportunity to sell into strength. I am not bearish on the energy sector; but scaling back positions is prudent at this point.

Yesterday's kick-start to an attempted rally in some of the tech sector industries (particularly chips) is another opportunity to sell into strength. Please look at the interactive charts of the Tech sector from my article last evening.

Credit tightening is a time to batten down the hatches. Storm season has arrived.