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May 14, 2006
Week #19 (2006-05-13) in Review
"The American people are fair; but they can only be pushed so far." Yes, I believe that; I wrote it last week. And at the end of this week I wrote that the U.S. equity market looks tired, not frightened. That may not be a fundamental belief, but it is rapidly becoming part of my conscious thinking.
This weekend, I'm here to tell you that within days I believe you are going to become frightened. I just hope that ‘in extremis' doesn't prevent you from taking action.
You see, as well as 2000-2002 I remember 1969, 1974, 1981, 1987, 1990, and 1994.
To me, 1974 was the worst because it dragged on so long, and 2000 was bad too. The most traumatic " 1987 " thankfully was over quickly.
I can't really say of course, not having been there, but, if I ever have to face an executioner, I'd want a swift ending.
In Spain, it is called 'estacada'. The Death of the Bull. I think we're going through that process now. Pray that the Bear is ruthless and fast.
Global Market Summary
International Equities: Technically speaking, the Japanese and Canadian equity markets broke down on Friday.
U.S. Equities : Ten of 10 ETF's and 25 of the Dow 30 were down. A week ago we had just two good days " Thurs and Fri. This week it was the opposite. But this time is different.
Dow 30 : 5 up -- 25 down. It would have been 27 of 30 down if JNJ and UTX were not up a penny or so on the week. Disney and Coca-Cola were ok, but who, other than private equity, would buy GM, which was the Dow leader this week? The rest were awful.
U.S. Sector ETFs: Zero up and 10 down (XLY the best, but down -1.5 pct)
First segment: most influenced by commodities, forex and capex spending
10: Energy (XLE): #9 (-3.6 pct); soft economy ahead, or profit taking?
15: Basic Materials (XLB): #6 (-2.4 pct); likely some profit taking
20: Industrials (XLI): #4 (-2.1 pct); likely some profit taking
Second segment: most influenced by consumer spending and economic growth
25: Cons. Discretionary (XLY): #1 (-1.5 pct); DIS was +2.8 pct, but little else
30: Cons. Staples (XLP): #2 (-1.6 pct); KO was up +1.1 pct, but little else
35: Healthcare (IYH): #3 (-1.7 pct); w/ Big Pharma choose your poison
Third segment: most influenced by interest rates and general economic health
40: Financial (XLF): #8 (-2.8 pct); one good day in 2 weeks
45: Tech (SMH chips): #10 (-5.7 pct); inventory not moving
50: Telecom Services (IYZ): #5 (-2.3 pct); burdened by debt
55: Utilities (XLU): #7 (-2.8 pct); burdened by debt
Bonds: Bonds kept falling. Same old, same old. Traders are finally starting to believe that inflation and paper money may become a problem due to excess money printing in the U.S. and Japan. All eyes are on metals, gold and the USD, which is probably a time to switch to bonds " the shortest term possible
Commodities: Speculators can only make so many unrealized gains before they actually want to realize some of them before they disappear
Oil & Gas: Crude oil remains strong (for now), but the oilers are weak
Gold: A $33 moon shoot this week (following +$29 a week ago). However, I believe a short-term pull-back may have begun, with spot GOLD down -$9.50 on Friday. (But, the long-term bull remains intact.) Clearly, due to the extreme sell-off in USD, speculation in the metals is rampant and there is now a disconnect between the metals and the miners. If this gets worse, just remember that with margin calls, everything gets pitched
Goldminers: A week ago I wrote: "I stood in front of a speeding train (of my making); and got ran over. If I didn't have so many Little People to protect, I'd still be alive. XGD (Toronto miners) up +4.3 pct; $XAU (Philly miners) up +2.4 pct." As usual, I was early. This week the two goldminer indexes were down -1.5 pct and -1.7 pct even though $GOLD was up +$32.93 (+4.8 pct). I think the miners drop down more next week
Forex: With $USD down -1.51 pct to 83.88, the Daily data chart looks spectacular. The nuk-u-lar meltdown started the morning of April 17. Can I tell you why? The Riksbank (central bank of Sweden) revealed later in the week (after the fact) that it had cut the proportion of USD in its reserves from 37 to 20 pct, as well as selling off all its Yen holdings, which had been 8 pct of its reserves. That kick started the Euro. (Check the charts.) The Gnomes of course knew this, and paid the media to give you a smokescreen. But it all started in Hong Kong (their Monday " our Sunday night) when gold and silver took off like a rocket. The next day, I wrote that U.S. Dollars, Bonds & Real Estate stocks were all getting hammered. Sweden was just the start, however. It had to be somebody. The question now is, can the Fed stop the run on the bank? If not, do you recall those wooden nickels I have been writing about?
Sector ETF:
A week ago I wrote: "How many times on Friday did I hear from CNBC that this was a Financials-led rally? NOT. The Financials rallied Friday, but there was a reason for that. The rest of the week, they tanked. If these CNBC "personalities" keep talking like they work for the Administration, they should just move the cameras to Washington."
Drum roll please; The Financials (XLF) were down -2.81 pct this week.
Pisani, stop reading the cue cards. It's unbecoming of a reporter.
For the U.S. equity market, as you know, I study it top down by sector. Here is the weekly performance of my favorite ten Sector Index Funds. The table is sorted by price performance Week over Week (W/W), i.e. 1W%N.
Table 1: Cara ETF List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into your browser and then clicking on the link for Performance. XLE XLB XLI XLY XLP IYH XLF SMH IYZ XLU
I just smell it when the manure is being pitch-forked against the CNBCTV audience.
A week ago Friday, it was about as bad as it gets. And look at the results this week: 10 out of 10 ETF's are down, and not just by a little bit.
10 (energy: XLE)

15 (basic materials: XLB)
20 (industrial: XLI)

25 (consumer discretionary: XLY)

30 (consumer staples: XLP)

35 (healthcare: IYH)

40 (financial: XLF)

45 (technology, semiconductor: SMH)

50 (telecom: IYZ)

55 (utilities: XLU)

Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
This week, XLE was down -3.60 pct to 56.74, in spite of Crude Oil being up +3.65 pct. Didn't I tell you the rally that started a week ago mid-day Thursday was a phony one?
Didn't I say, "Still, I continue to move from being over-weighted to being market-weighted in energy " but I'll be back soon to being over-weighted (Iraq, Nigeria, Venezuela, Bolivia, driving season, hurricane season, and the ?? possibility of doing Iran)"?
I'll be back, but not before oiler share prices settle back a lot.
Here's the XLE Weekly, Daily and Hourly data charts:
XLE Weekly data:

XLE Daily data:

XLE Hourly data:

Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
I see traders loved my Baby XOM (Imperial Oil IMO) story. IMO was up +2.1 pct this week, while most others got trashed. How about Norway's Statoil (STO) down -10.1 pct, or China's CNOOC (CEO) down -5.7 pct, or Petroleo Brasileiro S.A. (PBR) down -4.3 pct?
That's what happens after the Norwegian's and the Brazilian's ran up against Chavez, Morales and more than a few tanks and missile launchers at what they thought was property they owned. This situation is called ‘country risk'.
As for the Chinese, they're still waiting to see if they can buy California. Actually they now understand that the other deal died in Washington, so they've decided to drill the Florida Straits with Castro. I think Bush and Kudlow told their friends to sell their CNOOC holdings because the Chinese President is not being invited back for a long time. With all that screaming going on, he wasn't here for a good time.
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
The Basic Materials sector ETF (XLB) was down -2.42 pct W/W to close at 33.80.
Here's the XLB Weekly, Daily and Hourly data charts:
XLB Weekly data:

XLB Daily data:

XLB Hourly data:

Table 3: Senior metals and steel equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
For the golds, Glamis (GLG) was down -3.4 pct, Barrick (ABX) down -1.7 pct and Goldcorp (GG, G in Canada) down -1.5 pct. That led the way south, despite $GOLD being up +$32.93 (+4.82 pct) on the week.
For the steels, Nucor (NUE) was off almost -5 pct.
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
The ETF for the Industrials and Transport sector, aka capital goods producers, (XLI) was down 2.10 pct W/W to close at 34.93, #4 out of 10.
Here's the XLI Weekly, Daily and Hourly data charts:
XLI Weekly data:

XLI Daily data:

XLI Hourly data:

Table 4: Senior capital goods makers and transportation
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
UTX, MMM and BA hung in, but Tyco dropped -4.3 pct W/W and Brazil's Embraer (a Cara 100) has dropped almost -7 pct in two weeks. The latter is not so surprising because a cheap USD makes it easier for Boeing to compete against them. Watch the counter-move when the USD rallies.
Sector 25 (consumer discretionary: XLY, IYC and VCR)
The Consumer Discretionary sector ETF (XLY) was my ETF #1. Wow! XLY was down -1.47 pct W/W to close Friday at 34.40.
Traders liked the wage increase part of the U.S. Jobs Report of a week ago, I guess.
They love Disney (DIS), up almost +7.0 pct in two weeks. But do you think the Little People could spare $4 for a latte? NOT.
Here's the XLY Weekly, Daily and Hourly data charts:
XLY Weekly data:

XLY Daily data:

XLY Hourly data:

Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Starbucks (SBUX) was down -10.0 pct this week. It's still on the Cara 100 though.
Toyota (TM) fell -9.5 pct, but that's just like Brazil's Embraer. If you are a manufacturer of planes trains or automobiles in these countries, you feel sick too when the USD catches pneumonia.
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
The Consumer Staples sector ETF (XLP) was down -1.62 pct W/W to close Friday at 23.67.
You see, the President stopped dancing a week ago Friday.
Here's the XLP Weekly, Daily and Hourly data charts:
XLP Weekly data:

XLP Daily data:

XLP Hourly data:

Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
But the President's friends must have been enjoying a whisky and coke (KO) or a Bud (BUD) or Guinness (DEO). While, apparently he doesn't drink any more, he's just driving the rest of us to drink.
Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)
The healthcare ETF (IYH) was down -1.69 pct W/W to close at 60.43.
A week ago I wrote: "If Pfizer's (NYSE: PFE) Hank McKinnell can get an annual pay package of $83 million or $100 million, then why would the Little People want to support him? McKinnell deserves that kind of money the day his chauffeur gets paid a million."
I forgot to remove PFE from the Cara 100, but that happens Sunday or Monday.
Here's the IYH Weekly, Daily and Hourly data charts:
IYH Weekly data:

IYH Daily data:

IYH Hourly data:

Table 7: Senior healthcare equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Big Pharma got hammered this week. Pfizer (PFE) was down -3.5 pct, and Bristol Myers (BMY) was down -3.9 pct W/W.
Aetna had a great week, up +4.3 pct. I mentioned in the blog recently that I like the company, and that it's in the Cara 100. Maybe the Saudi prince jumped all over it?
Cara 100 GICS 35 Aetna Inc. (AET) (AET) Financials
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
The Financial sector ETF (XLF) was down this week -2.81 pct to 33.20. But you figured that would happen, right?
A week ago I ranted, "XLF dropped from 33.96 to 33.68 early in the week. Unfortunately, the week didn't end Thursday. So just to give Kudlow and Pisani something more to lie about, the President and the ‘Snow'man danced their way through Friday. Ergo: XLF ended at 34.16. I should never, never, have introduced those guys to Lee Ann Womack. Bonds are crashing. US. Dollars are falling from helicopters. Gold's on a moon shot. And bank stocks are going up? I don't get it, man. Anyway, just to settle a score, Pisani. XLF was rally leader #8 out of ten. And was down on hands and knee(pad)s until the White House did their thing."
I'm telling you, with Kudlow and George, it's all Texas One-Step. As hard as they try, they don't get too far on the dance floor.
Here's the XLF Weekly, Daily and Hourly data charts:
XLF Weekly data:

XLF Daily data:

XLF Hourly data:

Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Remember a couple weeks ago when I wrote that these Wall Streeters were like rats jumping ship? Maybe they didn't like me saying it, but they ought to know I'm the Rat Catcher.
More jumping off the Titanic decks this week. Morgan Stanley (MS) down -3.42 pct, Merrill Lynch (MER) down -4.88 pct, JP Morgan (JPM) down -4.99 pct, Goldman Sachs (GS) down -5.04 pct AND Lehman Bros (LEH) down -7.24 pct.
Elaine, I hope you got your money out! :-)
Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)
The semi-conductor ETF (SMH) was down -5.65 pct W/W to 35.91. That's quite a "W".
In fact the whole tech board was a mess.
Here's the SMH Weekly, Daily and Hourly data charts:
SMH Weekly data:

SMH Daily data:

SMH Hourly data:

Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
