Mr. Market seems to be of the opinion that the sector winners were (i) the Financials, where costs of capital have been lowered AND where Mom & Pop are going to get enough fiscal relief to be able to pay down debt and possibly avoid foreclosure, (ii) the Consumer Discretionary, where Mom & Pop may have enough left over to buy a small boat, washing machine, clothing at JC Penny, and a Caribbean cruise, and (iii) the Basic Materials, whose prices go up as the $USD falls.

On the other hand, if Bankers like Société Générale Corporate and Investment Banking (SG CIB) can at the same time win the industry award for Best Equity Derivatives Bank and blow up $7.14 billion capital in equity derivatives at the same time, then traders are probably justified in panicking as they did, fleeing to cash this week.

Does the left hand at SocGen, or any other bank for that matter, really know what the right hand is doing? Isn’t that the problem?

As quoted in Risk Magazine, having won the award for Equity Derivatives House of 2008, Arnaud Sarfati, head of equity-linked structured products at SG CIB, had this to say: "At the end of the day, you have much more flexibility than a traditional asset manager because both can use a traditional asset, but you can also get exposure to hidden assets on an actively managed basis. You have much more tools at your disposal than a traditional asset manager.”

As the article states, these services contributed to a sharp rise in the assets under management of Lyxor Asset Management, the asset management arm of SG CIB, from EUR61 billion at the beginning of last year to EUR73 billion as of end of October.

Can anybody say at this point that some of that EUR14 billion gain in AUM didn’t come from trading losses within SocGen itself. In other words, did the bank move US$7.14 billion from the P&L to the balance sheet in order to meet reserve requirements? Where is Inspector Clouseau when you need him anyway?

The truth is I haven’t much of a clue about these exotic derivative products. Somebody wrote me this weekend to ask about a derivatives strategy used by a Santa Monica-based fund manager who happens to be setting performance records in this area. I think when a Fund has +1000 pct performance; it’s probably a record of some kind.

Anyway I begged off. I told the gentleman that maybe one of the Caraistas could explain what he was asking.

Bill, Do you have any thoughts about investing in a fund (Short Credit Fund) such as the one discussed in the attached newsletter. The investment approach relies on buying CDS's on the debt of rock solid companies with the expectation that the credit contraction and an emerging recession will eventually affect the rock solid companies, too. The strategy is doesn't require that the rock solid companies fail or even default, but rather a widening of their spreads on Swaps.

The irony of this strategy is that a worsening recession and credit contraction may cause the spreads to widen while also increase the likelihood that the counterparties themselves will fail or default. This particular fund manager indicates that he is aware of that risk and is managing the funds in a way to minimize that risk.

Any thoughts on investing in this manner in light of the risks and opportunities that are out there?

/J

This linked attachment was sent to me by “J”. It is a report from Andrew Lahde, CFA, of Lahde Capital Management.

The thought just occurred to me: “Lessons from the Caraistas” could be the title of my next book. If I start on it right away, maybe it’ll be published ahead of the other one. (Not LOL)

Back to the market, is it time to buy the Banks? If not, why not?

Well, in the past three weeks, which is the period of the greatest losses in equity prices, I ran some numbers for sector performance. I discovered that the Big Winners had been the sectors traders were short the most (Financials and Consumer Discretionary, both down -4.161 pct over 3 weeks) while the Big Losers had been the biggest winners up until that point (eg, Telecom and Energy, which have been down -14.364 pct and -13.585 pct respectively over 3 weeks).

What’s my take? Well, HB&B is desperate to save its bacon and the Interventionists are doing all they can to help, but now solvency and the need to re-build reserves is the issue, which means share dilution. In other words, you are hearing the good stuff now; the downside will follow. We need to wait to get the whole picture.

Could the Energy and Telecom come back soon? I don’t think so.

The West Texas Intermediate price is falling in the US. Similarly, the Brent price is falling in Europe. That happens when economies slow down. I don’t see an immediate reversal of fortunes, but I do think that traders will continue to sell off the oil stocks as crude oil prices fall and cost inflation rises.

OPEC leaders are happy, they say, with $75 oil, and I think that’s what they are going to get. The shareholders of Big Oil will not be so happy.

As to Telecom, wasn’t this mostly a dividend income play? With the yield of US Treasuries now down to 2.17-2.18 pct for the T-Bills through to the 2-year Notes, which is less than the true US inflation rate by a mile, wealth is being lost. The obvious alternative would be high-yielding Telecom and Utilities, and yet Telecom is the worst sector performer over 3 weeks and Utilities (-9.313 pct over that span) is 4th worst, barely edged out by Semi-conductors (my proxy for Technology).

So traders are worried about the economy here too. Clearly, they are paying attention to the 1Q guidance from companies like AT&T and Verizon, and what does a high dividend mean if your Total Return (including price appreciation or loss) is a negative?

This week is likely to be another interesting one with the President’s State of the Union Address coming on Tuesday evening as he addresses both Houses of Congress for the final time.

Do you think we could write his speech?

First off, he is going to get right into the need for bipartisan support of his $150 billion economic stimulus package. The keywords will be “quick”, “temporary”… I know, you heard all this before. But those are the words that will bring applause from both sides of the House, which is what a desperate President needs. He’d like to say that his tax cuts of the past seven years should be made permanent, but that would not be roundly applauded, and in his speech this year, especially, the President needs to stay on a roll, so he may just refer to that in some roundabout way.

Next, he will salute the military personnel present, including the ones recently home from Iraq and Afghanistan who will be sitting with the First Lady. He’ll say there is huge progress being made in recent months in the Middle East, with references given, as well as a need to bring home the young men and women asap because the latter point will get another cheer from both sides of the House. The cameras, of course, will not be directed to the frowning Vice President at that moment. (LOL)

Finally, he will say that his legacy ought to be seen as a President who fought against the evils of global warming and America's dependence on foreign oil, and for alternative energy, during which he’ll announce his billion dollar contribution to General Electric windpower. (LOL) Nothing he will say on this topic will have meaning, but the President will take comfort in the amount of bipartisan cheering at that point in his speech.

How do I think this will play on Wall Street? HB&B will clearly support the stimulus plan and the work of their “inside man” Treasury Secretary Paulson because they are the major beneficiary. I don’t think Financial Entertainment TV would be able to find an unhappy banker to interview or one, like the President, who will not state that this stimulus is intended to help the Little Guy.

So Wednesday (ie, the next morning) ought to be more pump and dump.

At the end of the day, speeches mean little. Actions speak louder than words. Politicians can say what they want about the strength of the economy, but the people know how they are being affected. The truth is that this President has been good for a small slice of American society. The rich and powerful have managed to become more so, while the rest have been floundering. The polls point to their discontent and that is a fact that mere words will not reverse.

As I say, back to the market.

The Bears are in control. The probabilities are close to 50:50 whether, at this point, they decide to run south-east like 2000-2002 or due south like 1987. That’s another way of saying I don’t see signs of a return of the Bull.

A look at the recent performance of the Bond market will show that traders are engaged in a continuing flight to safety. A week ago I noted that the 2-year US Treasury Note had W/W “dropped -24 basis points to an extremely low 2.32 pct yield”. This week, the yield plunged again to 2.18 pct, a loss of a further -14 basis points.

But the 3-month T-Bill yield really illustrates my point. Two weeks ago, the yield dropped -10bp from 3.09 to 2.99 pct. One week ago there was a drop of -31bp to 2.68 pct. Then this week the yield plunged -51bp to just 2.17 pct, which is almost the same as the 2-year Note yield.

Wealth is being destroyed in the billions of dollars because inflation is growing at a faster clip. Moreover, traders do not yet see adequate signs of economic reversal to commit their cash funds to equities. They are still concerned about solvency issues in the banking system.

Why I say the last point is true is because after the FOMC emergency rate cut, and the President’s huge econ stimulus package were announced early in the week, the Financials really popped. But on Friday, having given further thought to the SocGen debacle, XLF nose-dived -2.62 pct on the day, and were not looking good at the close, falling from 27.50 to about 27.13 in 20 minutes before closing at 27.17.

Maybe this was re-loading ammo for Monday morning, but I think traders were worried that the weekend might also bring news of another SocGen, or even that the so-called “rogue trader” at SocGen was located and he was going to tell the truth that perhaps the loss of -$7.14 billion dollars was not entirely hidden from management.

This is where “Better dead than red” takes on a whole new meaning. I wouldn’t want to be in the shoes of that 31 year old trader, for sure.

As I wrote last week:

Government leaders and central bankers clearly have the power to move markets in the short term, but in the total picture the world economy is so huge and the capital base of the buy-side so large that normal (ie, long term) economic relationships will continue to dominate. The present sophistication of independent traders backed by the power of advanced computer and telecommunications technology ensure that capital will flow from one asset class to another and from industry to industry, sector to sector and country to country, faster that any ability of market interventionists to dominate. Yes, for the cost of a penny or two a minute, we now conference on a global scale. The news in say Santiago Chile is instantly known in San Francisco, Shanghai, Sydney and Stockholm. What was once called “hot” money is now just called money. The world can see that governments are printing and spending money three and four times faster than economic wealth is being created. That fact will become the biggest story of the next several years in the capital markets. Oil and gold will continue in the long-term bull phases until the major country governments come to an agreement to balance budgets and the finance ministers and central bankers hold them to it. I don’t see that happening in the foreseeable future, but I do see a time, following a deep Bear market in equities, where the economy will right itself, at least temporarily.

I still hold the opinion that the equity market Bear trend exists and that rallies are counter-trend. I feel that, despite several trillion dollars of lost wealth in the equity market since October, the Bear is just half over. There are too many Bulls and too much hope for the condition referred to as capitulation to exist.

Using the DJIA as a measuring device, the cycle top was 14200 and my target for the low is 10,000. We are now watching Dow=12207. Despite the +107 point gain in the Dow 30 this week, the market has erased 2000 of the 4200 points I was expecting.

Due to the continuing issues facing the housing and credit markets, solvency issues at HB&B, and inflation and budget deficits in the US, as well as global economic slowing, there is a lot more to come, both in terms of points off the DJIA (ie, liquidity issues) as well as rate cuts from the Fed and other central bankers and econ stimuli from government, both in the US and abroad.

It takes time for monetary and fiscal stimuli to kick in. Time is of the essence. But, due to the magnitude of the issues, and the need for HB&B to clear away the junk and rebuild its reserves, time can not be made to move quicker. A clock is what it is.

A week ago, I opined [with this week’s results inserted],

If the DJIA is going to drop that much further, I believe the Financials (C, JPM, AXP, AIG, and GE [has a huge financial component]) will not be the problem. The damage there is already three quarters done, or more. [This week XLF was the big winner.]

I expect the largest losses will be in the Energy, Basic Materials, Consumer Cyclicals and Staples, Telecom and Technology.

My belief is that (i) commodity-based equities like oil and gold are the leading late-cycle performers on the downside as well as the upside, and (ii) I anticipate declines in the related share indexes of -25 to -27 pct, still, whereas I believe the DJIA, for example, may have a further -17 pct to drop.

If there is a place to hide, relatively speaking, it is in XLF, the giant Financials ETF, which has dropped from 36 in mid-October to 27.18 on Friday (-24.5 pct loss). There may be another -15 pct loss in XLF remaining in this cycle before the bottom is reached.

Following a brief attempt to rally from Tuesday morning’s short-term oversold condition, helped largely by traders closing short positions, rather than initiating new Buy programs, I anticipate more losses.

Prudent traders ought to consider selling their risky positions into the strength of rallies, and gather the ammunition in cash or near-cash to be ready and able to buy the stocks of the best quality companies at or near the long-term cycle bottom.

Remember, traders need to keep some distance between their bigger picture market and economic perspective and their eye on the short-term technical picture, ie, the price series of the securities they are trading. A Bear market means a series of lower highs and lower lows, which means that counter-trend rallies do occur and you must be vigilant not to be trapped or whip-sawed.

Extreme volatility as the US equity market has shown this week [XLF, XLB and XLY up +5.6 pct, +4.1 pct and +4.1 pct vs IYZ, XLU and IYH down –5.5 pct, -6.0 pct and -6.4 pct] presents challenges to the average trader and significant opportunities to the most nimble ones.

It is a great time for learning.

To wrap this up, I’d like to repeat something I wrote a week ago.

One final point is that oil and gold, should they pull back to their 200d MA’s, or a bit lower, would still be considered to remain in long-term Bull markets. Within a couple years I believe new cycle highs will be reached, particularly for gold, which has become, with the strength of the emerging BRIC economies, and the decline in relative importance of the $USD, the new reserve currency of the world.

Given the reluctance of finance ministers and central bankers of the economically powerful G-20 nations to revert to a gold standard that hinders their domestic political and monetary policy freedoms, I think that traders now are generally in agreement that gold is the standard.

If gold is, in fact, the standard, after a pull-back, caused perhaps by increased margin requirements on commodity exchanges, I believe the gold price (along with silver and platinum) will rise to very high levels well above $2000 per troy ounce within five years.

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Global Economics Review

Econoday International Report (Jan 25).

US Economic Calendar for next week.

It is important to review the following reports published this week on the US economy that continues to worsen.

US Comparable Sales for Retail Chain Stores weekly report.

The US Existing Home Sales report for December.

On Monday, the New Homes Sales data will be published.

The US New Home Sales report for December.

On Tuesday morning, the US Durable Goods Report will set the tone for the day. But, the FOMC starts to meet, so market volatility is likely to calm down.

The US Durable Goods Orders report for December.

On Wednesday afternoon at 2:15pm ET, the Fed reports on further policy changes, following last week’s emergency announcement of an interim report of -75 basis point cut in the Fed Rate.

The FOMC decision on monetary policy.

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Industry and Cara 100 “Impulse” Review

Applied weekly to major industry groups, the “impulse system”, based on the excellent work of Dr. Alex Elder, gives a sense of market internals.

“Jock” reports:

THIS WEEK closed with zero GREEN industry and 25 RED, compared to last week’s 0 green, 29 Red. Tobacco and Health Services fell from neutral to RED, while several rose from RED to neutral: Banking, Real Estate, Leisure, Retail, Speciality Retail, and Transportation.

Ticker	Name	Score -5wks	Score -4wks	Score -3wks	Score -2wks	Score -1wks	Score -0wks
ABB	ABB Ltd.	-2	+2	+0	-2	-2	-2
ABV	COMP DE BEBA AM ADS	-2	+2	+2	+2	-2	-2
ABX	Barrick Gold Corp.	-2	+0	+2	+2	+0	+2
ADBE	Adobe Systems Inc.	-2	+0	-2	-2	-2	-2
AET	Aetna Inc.	+2	+2	+0	+2	+0	-2
AMAT	Applied Materials Inc.	+0	+0	-2	-2	+0	+0
ATVI	Activision Inc.	+2	+2	+0	+0	+0	+0
BA	Boeing Co.	-2	+0	+0	-2	-2	-2
BBBY	Bed Bath & Beyond Inc.	-2	-2	-2	-2	-2	+0
BBD	Banco Bradesco S.A.	+0	+2	-2	+0	-2	-2
BC	Brunswick Corp.	-2	+0	-2	-2	-2	+0
BDK	Black & Decker Corp.	-2	-2	-2	-2	-2	+0
BHP	BHP Billiton Ltd.	-2	-2	-2	-2	-2	-2
BMY	Bristol-Myers Squibb Co.	-2	-2	-2	+0	-2	-2
CCJ	Cameco Corp.	-2	+0	+2	+0	-2	-2
CCL	Carnival Corp.	+0	+2	-2	-2	-2	+0
CEO	CNOOC Ltd.	-2	+0	+0	+2	-2	-2
CHA	China Telecom Corp. Ltd.	+0	+0	+2	+2	+0	-2
CHL	China Mobile Limited	+0	+0	+0	+0	-2	-2
CHRW	CH Robinson Worldwide Inc.	+2	+2	+0	-2	-2	+0
COST	Costco Wholesale Corp.	+0	+2	+0	+0	-2	-2
CSCO	Cisco Systems, Inc.	+0	+0	-2	-2	-2	-2
CTSH	Cognizant Technology Solutions Corp.	+0	+2	+0	-2	-2	-2
CVX	Chevron Corp.	+2	+2	+2	+0	-2	-2
DB	Deutsche Bank AG	+0	+2	+2	-2	-2	-2
DELL	Dell Inc.	-2	+0	-2	-2	-2	-2
DEO	Diageo plc	-2	-2	-2	-2	-2	-2
DIS	Walt Disney Co.	+2	+2	-2	-2	-2	-2
DOW	Dow Chemical Co.	+0	+0	-2	-2	-2	+0
DNA	Genentech Inc.	-2	-2	-2	+0	+0	-2
ECA	EnCana Corp.	+2	+2	+2	+0	-2	-2
ERJ	EMBRAER - Empresa Brasileira de Aeron�utica S.A.	-2	+2	+2	+2	-2	-2
ERTS	Electronic Arts Inc.	+2	+2	-2	-2	-2	-2
EXC	Exelon Corp.	+2	+0	+0	+2	-2	-2
GE	General Electric Co.	-2	+0	+0	-2	-2	-2
GFI	Gold Fields Ltd.	-2	-2	+0	+2	+0	-2
GG	Goldcorp Inc.	-2	+2	+2	+2	+0	+2
GGB	Gerdau S.A.	-2	+2	+2	+2	-2	-2
GOL	GOL Linhas A�reas Inteligentes S.A.	-2	+2	-2	-2	-2	-2
GOOG	Google Inc.	+0	+2	+0	-2	-2	-2
GRMN	Garmin Ltd.	-2	+2	-2	-2	-2	-2
GS	Goldman Sachs Group Inc.	-2	+2	-2	-2	-2	-2
GSK	Glaxosmithkline plc	-2	-2	-2	+2	-2	-2
HBC	HSBC HLDGS PLC ADS	+0	+0	-2	-2	-2	-2
HDB	HDFC Bank Ltd.	+0	+0	+0	+0	-2	-2
IBKR	Interactive Brokers Group, Inc.
IBN	ICICI Bank Ltd.	+0	+2	+0	+2	+0	+0
IMO	Imperial Oil Ltd.	+2	+2	+2	+0	-2	-2
INFY	Infosys Technologies Ltd.	+0	+2	+0	+0	-2	-2
INTC	Intel Corp.	+0	+2	-2	-2	-2	-2
JCP	J. C. Penney Company, Inc	+0	+0	+0	-2	+0	+0
JNJ	Johnson & Johnson	+0	+0	-2	+0	+0	-2
KB	Kookmin Bank	+0	+2	-2	-2	-2	-2
KO	Coca-Cola Co.	+0	+0	+0	+2	+0	-2
KSS	Kohl's Corp.	+0	-2	-2	-2	-2	+0
LEH	Lehman Brothers Holdings Inc.	+2	+2	-2	-2	-2	-2
LLTC	Linear Technology Corp.	+0	+2	+0	-2	-2	-2
MBT	Mobile Telesystems OJSC	+0	+2	+2	+0	-2	-2
MFC	Manulife Financial Corporation	-2	-2	-2	-2	-2	-2
MICC	Millicom International Cellular SA	+0	+2	+0	-2	-2	-2
NKE	Nike Inc.	+0	+2	-2	-2	-2	-2
NOK	Nokia Corp.	-2	+0	+0	-2	-2	-2
NTES	Netease.com Inc.	+0	-2	-2	-2	-2	-2
NUE	Nucor Corp.	+2	+2	+0	-2	-2	+0
ORCL	Oracle Corp.	+2	+2	+2	+0	-2	-2
OXPS	optionsXpress Holdings, Inc.	+2	+2	+2	+0	-2	-2
PAYX	Paychex Inc.	-2	-2	-2	-2	-2	+0
PBR	PETROLEO BRASILEIRO	+0	+2	+2	+0	-2	+0
PDA	Perdigao S.A.	+0	+0	+0	+2	-2	-2
PG	Procter & Gamble Co.	+0	+0	+0	+0	-2	-2
PTR	PetroChina Co. Ltd.	-2	-2	-2	+0	-2	-2
QCOM	QUALCOMM Inc.	-2	+2	-2	-2	+0	+2
RIO	COMPANHIA VALE ADS	-2	+0	+0	-2	-2	-2
RIMM	Research In Motion Ltd.	-2	+2	+2	-2	-2	-2
RY	Royal Bank of Canada	-2	-2	-2	-2	-2	+0
SBUX	Starbucks Corp.	-2	+0	-2	+0	+0	+0
SLW	Silver Wheaton Corp.	-2	+2	+2	+0	-2	+0
SNDK	SanDisk Corp.	+0	+0	+0	-2	-2	-2
STO	StatoilHydro ASA	-2	-2	+2	-2	-2	-2
SU	Suncor Energy Inc.	+2	+2	+2	+0	-2	-2
SWK	Stanley Works	-2	+0	-2	+0	+0	+0
TCK	Teck Cominco Ltd.	-2	+0	+0	+0	-2	+0
TEF	Telefonica SA	+0	+0	+0	+2	-2	-2
TGP	Teekay LNG Partners LP.	+0	+0	+0	+2	+0	-2
TGT	Target Corp.	-2	-2	-2	+0	+0	+0
TM	Toyota Motor Corp.	-2	+0	-2	-2	-2	+0
TOT	Total SA	-2	+2	+2	+2	-2	-2
TS	Tenaris SA	-2	+0	+0	-2	-2	-2
TT	Trane Inc	+2	+2	+2	+0	+0	+0
UBS	UBS AG	+0	-2	+0	+0	-2	-2
UTX	United Technologies Corp.	+2	+2	+2	-2	-2	+0
VCP	Votorantim Celulose e Papel S.A.	+0	+0	+0	-2	-2	-2
VIP	Vimpel-Communications	+2	+2	+2	+0	-2	-2
WAG	Walgreen Co.	+0	+0	-2	-2	-2	+0
WBK	Westpac Banking Corp.	+0	-2	-2	-2	-2	-2
WFMI	Whole Foods Market Inc.	-2	+0	-2	-2	-2	+0
WHR	Whirlpool Corp.	+0	+0	+0	-2	-2	+0
WMT	Wal-Mart Stores Inc.	+2	+2	-2	+2	+0	+0
XOM	Exxon Mobil Corp.	+2	+2	+2	+0	-2	-2
YHOO	Yahoo! Inc.	-2	-2	-2	+0	-2	-2
Summary:	(+2/-2/other)	19/43/37	45/19/35	24/42/33	18/51/30	0/80/19	3/69/27
Net:	(+2)-(-2)	-24	+26	-18	-33	-80	-66

1 Cara100 was GREEN (Qualcomm) and 69 were RED.

­Among the major indices, NONE were GREEN; only the US$ index, the CRB, and Bombay were neutral.

All the major US stock indices were RED – the exact same reading as the last weeks. (This week, I’m not able to provide the breakdown of index components, due to time commitments on the Junior Miners project.)

GOLD stocks rose to GREEN, while SILVER stocks stayed neutral.

BOTTOM LINE: Some improvement in previously weakest sectors. Is it just a bounce?

Jock
______________________________________________________________
NOTE: Alex Elder’s “impulse system” considers both the “inertia” in prices (where prices stand vs. their 26 wk. moving average) and their “momentum” (the rate their 13wk. and 26wk. moving averages are converging or diverging).

When both indicators (EMA and MACD-H) tick up, the reading is “green”; when both decline, it’s “red”. Applied weekly to major industry groups, indices, and their components, a sense of market internals emerges.

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US Equity Markets Review

DJIA ino.com chart

DJIA stockcharts.com chart

DJIA=12207, up from12099 in this shortened trading week. On Friday, however, the DJIA dropped -1.39 pct.

Over the past five sessions, including Friday of the prior week, for the Dow 30 stocks, 18 were up and 12 down.

Traders are nervous. The Interventionists are pumping hard to put life back into a dead Bull. The Bear lives.

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NASDAQ Composite ino.com chart

NASDAQ Composite stockcharts.com chart

Nasdaq=2326 is down from 2340 over the past four days in this holiday shortened week.

Traders are nervous. The worst sector perform on Friday was semi-conductors (my proxy for Tech), which dropped -3.01 pct on the day.

Several weeks ago I wrote in this space, “Here is the list of the ten highest-weighted non-financial stocks in the Nasdaq Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY” I said that the Techs would lead the market one way or the other, and you know which way I was indicating.

Daily RSI-7 for the Nasdaq 100 Big-10

Weekly RSI-7 for the Nasdaq 100 Big-10

Monthly RSI-7 for the Nasdaq 100 Big-10

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The US equity market Sector ETF Summary

The tables I show are for ten (GICS) Sector Index Funds (ETF’s) only, but they cover the full spectrum of the US equity market.

This week (the past five sessions including the prior Friday), the scoreboard reads five up and five down. Over four days, it was also the same five up and five down.

The best performer was Financials and the worst, Healthcare.

Presently there are 3 of the Cara 100 in the Accumulation Zone (GOL, BMY and SNDK) and there have been 14 recent Buy Alerts (with mixed success after the knock-down on Friday) and 3 Sell Alerts.

Volatility means traders must use prudence as in a Bear market, there are many confounding whip-saws. Still, if there is to be a rally, the AZ/BA is the place to look.

Sophisticated traders will wait for the Buy signals in Bear markets to sell positions into strength. All traders have to learn this tactic.

In any case, a technology feature I hope to implement will be a table that tracks the gains and losses of this simple RSI-7 system. It is an unsophisticated system that I can easily flesh out into something very valuable.

Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
XLF	27.18	-0.73	-2.62%	5.35%	-0.73%	-8.21%	-4.16%	-16.88%	-21.67%	-26.08%
XLB	38.44	-0.10	-0.26%	4.09%	-4.83%	-9.93%	-6.92%	-9.55%	-6.70%	6.48%
XLY	30.86	-0.65	-2.06%	4.05%	-0.45%	-7.60%	-4.16%	-14.59%	-20.40%	-20.91%
XLI	35.80	-0.16	-0.44%	3.02%	-3.40%	-10.14%	-7.04%	-11.10%	-12.04%	1.27%
SMH	28.02	-0.87	-3.01%	1.78%	-2.78%	-15.96%	-10.65%	-17.22%	-28.41%	-16.48%
XLE	68.70	-1.00	-1.43%	-0.07%	-10.23%	-14.55%	-13.58%	-9.52%	-6.28%	21.14%
XLP	26.70	-0.37	-1.37%	-3.09%	-7.36%	-8.56%	-5.95%	-5.15%	-1.84%	0.53%
IYZ	24.98	-0.22	-0.87%	-5.49%	-11.20%	-18.07%	-14.36%	-22.30%	-28.01%	-17.20%
XLU	38.18	-0.42	-1.09%	-6.03%	-12.31%	-11.19%	-9.29%	-6.83%	-3.59%	5.06%
IYH	65.97	-1.01	-1.51%	-6.44%	-9.36%	-8.76%	-5.89%	-7.46%	-5.50%	-2.94%

You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance. XLE XLB XLI XLY XLP IYH XLF SMH IYZ XLU . You can also add more ETF’s – up to 30 in total.

For a list of components to any ETF, go to the AMEX.com web site, and click on ETF’s.

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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)

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Individual Sector ETF Review

Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)

Here’s the XLE Monthly, Weekly and Daily data charts:

XLE Monthly data:

XLE Weekly data:

XLE Daily data:

The Energy sector ETF (XLE), in four days, dropped marginally from 68.90 to 68.70.

The 200-day Moving Average of $WTIC is up to 78.81 from 78.30, which continues to rise. The 50-day MA is now at 92.69, down from 93.21, and falling.

Over the past five days, XOM (-0.04 pct) is flat, but on Friday dropped -2.40 pct.

PBR was up +13.0 pct this past 5 sessions, on news of a major discovery. TOT dropped -5.8 pct.

Table 2: Senior oil & gas equities

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
PBR	104.62	2.19	2.14%	13.03%	-8.29%	-10.51%	-11.94%	19.18%	51.80%	116.65%
ECA	63.22	-0.30	-0.47%	2.58%	-6.93%	-8.60%	-9.18%	-5.06%	1.87%	35.06%
IMO	48.85	0.45	0.93%	1.03%	-7.83%	-10.96%	-11.05%	-3.11%	0.10%	42.75%
XOM	83.94	-2.06	-2.40%	0.04%	-8.42%	-11.47%	-10.23%	-8.33%	-9.54%	14.17%
STO	25.77	-0.93	-3.48%	0.00%	-13.84%	-13.84%	-17.51%	-23.35%	-16.76%	1.42%
SU	89.37	-0.44	-0.49%	-0.15%	-15.27%	-17.26%	-18.95%	-15.81%	-4.44%	21.72%
CVX	81.82	-1.85	-2.21%	-1.12%	-10.97%	-13.73%	-12.45%	-10.31%	-10.14%	14.40%
CEO	145.50	0.62	0.43%	-1.28%	-20.65%	-14.14%	-13.09%	-24.58%	20.75%	70.08%
TOT	72.72	-1.36	-1.84%	-5.82%	-15.11%	-11.14%	-12.68%	-6.73%	-9.43%	8.86%

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Integrated Oil & Gas - Canada

Oil & Gas Exploration & Production -Canada

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

Here’s the XLB Monthly, Weekly and Daily data charts:

XLB Monthly data:

XLB Weekly data:

XLB Daily data:

XLB (Basic Materials) was firm, moving from 37.35 to 38.44. There was a small loss on Friday.

Over the past 5 sessions, the winners were NUE +9.3 pct, RTP +7.6 pct, TCK +6.9 pct and AA +6.6 pct. Among the golds, the winners were AEM +17.2 pct, ABX +12.2 pct and GG +11.6 pct. GFI dropped -7.1 pct with a huge loss of -9.3 pct on Friday.

Table 3: Senior metals and steel equities:

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
NUE	54.97	-1.19	-2.12%	9.28%	-1.26%	-10.99%	-5.18%	-11.72%	-1.72%	-12.26%
RTP	369.69	15.68	4.43%	7.62%	-8.83%	-15.69%	-11.92%	5.17%	24.62%	73.22%
TCK	32.51	1.44	4.63%	6.91%	-5.90%	-12.77%	-10.29%	-33.77%	-31.47%	-55.03%
AA	30.69	-0.12	-0.39%	6.60%	-2.39%	-17.96%	-15.06%	-20.06%	-24.98%	-2.48%
BHP	63.42	1.13	1.81%	4.52%	-9.95%	-12.37%	-9.93%	-23.03%	-5.10%	57.21%
TS	37.98	-0.42	-1.09%	3.88%	-5.85%	-15.34%	-14.44%	-26.21%	-21.28%	-18.41%
MT	62.98	-0.82	-1.29%	2.94%	-7.99%	-16.53%	-17.57%	-20.22%	-2.88%	38.57%
PKX	131.52	-1.31	-0.99%	1.40%	-9.15%	-14.49%	-10.20%	-24.75%	-13.44%	53.25%
RIO	27.71	-0.61	-2.15%	-2.05%	-14.90%	-19.12%	-15.29%	-17.26%	-44.60%	-15.34%
GGB	24.67	-0.58	-2.30%	-3.03%	-16.15%	-17.52%	-14.04%	-15.37%	-8.22%	50.52%

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

Here’s the XLI Monthly, Weekly and Daily data charts:

XLI Monthly data:

XLI Weekly data:

XLI Daily data:

Table 4: Senior capital goods makers and transportation:

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
FDX	89.96	1.45	1.64%	8.67%	5.81%	-3.18%	4.41%	-12.91%	-20.35%	-18.63%
UTX	72.75	0.19	0.26%	6.84%	0.50%	-6.52%	-3.27%	-3.92%	-3.25%	9.88%
CAT	65.93	0.68	1.04%	5.54%	-2.20%	-10.53%	-6.65%	-11.70%	-18.10%	10.57%
HON	58.25	2.05	3.65%	4.82%	0.74%	-5.70%	-2.75%	-1.49%	-4.32%	31.79%
ABB	24.25	-0.30	-1.22%	3.19%	-7.37%	-15.68%	-15.33%	-16.49%	4.26%	37.47%
GE	34.00	-0.65	-1.88%	2.38%	-5.35%	-9.45%	-7.51%	-15.34%	-15.88%	-6.44%
MMM	75.51	-0.22	-0.29%	0.73%	-5.86%	-12.27%	-8.71%	-12.29%	-15.74%	-4.43%
BA	77.03	-0.59	-0.76%	-3.13%	-6.47%	-14.41%	-11.07%	-19.76%	-28.16%	-10.60%
ERJ	40.98	-1.11	-2.64%	-3.28%	-14.64%	-13.84%	-9.20%	-14.63%	-11.09%	1.34%

XLI (Industrials) lifted from 34.68 to 35.80.

The winners were FDX +8.7 pct, UTX +6.8 pct, and CAT +5.5 pct. UTX and CAT were reviewed Friday by Value Line.

Re Fedex, a week ago I wrote, “FDX (-0.04 pct) held up, for once. I guess the people flying Fedex are happy with the President’s $150 billion stimulus package. We’ll see because FDX moves on reality, not hope. Also, as I have said in the past, there is linkage between FDX and the monthly Industrial Production report, which excluding large aircraft manufacturing (Boeing and all), was not too bad, giving some inspiration to FDX traders.”

The loser was ERJ -3.3 pct W/W.

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Sector 25 (consumer discretionary: XLY, IYC and VCR)

Here’s the XLY Monthly, Weekly and Daily data charts:

XLY Monthly data:

XLY Weekly data:

XLY Daily data:

Consumer Discretionary (XLY) lifted from 29.52 to 30.86. As I wrote a week ago in this space, “Traders must have been listening to the President’s $150 billion stimulus package speech. Besides oil prices are on the downswing.”

I wrote two weeks ago in the WIR, “I can’t see US shoppers returning to the stores and malls until the gasoline price drops at the fuel pump. Right now, they are tapped out according to the credit card companies.”

Over the past 5 sessions, the winners were BC +15.0 pct, WHR +11.4 pct, JCP +8.9 pct and CCL +8.6 pct, prompting me to suggest (LOL) off the top that with the $150 billion in hand, consumers would likely be shopping for boats, washing machines, clothes and Caribbean cruises.

Table 5: Senior consumer discretionary equities

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
BC	17.10	-0.07	-0.41%	15.00%	7.95%	-4.47%	1.06%	-15.35%	-41.96%	-48.73%
WHR	77.78	-1.11	-1.41%	11.43%	3.91%	-6.55%	-2.63%	-7.35%	-29.16%	-12.00%
JCP	42.48	-1.15	-2.64%	8.87%	13.13%	-4.43%	1.99%	-23.22%	-39.91%	-48.11%
CCL	41.41	-1.40	-3.27%	8.60%	2.35%	-8.81%	-5.15%	-12.69%	-9.33%	-19.87%
TM	102.00	2.30	2.31%	3.45%	-2.28%	-6.31%	-4.19%	-3.55%	-16.59%	-22.55%
SBUX	19.66	-0.79	-3.86%	3.20%	-3.20%	-5.57%	1.81%	-24.88%	-29.69%	-42.09%
NKE	56.00	-1.41	-2.46%	0.04%	-10.46%	-15.25%	-11.50%	-12.28%	-3.16%	16.86%
DIS	28.68	-0.55	-1.88%	-0.31%	-6.49%	-12.61%	-9.92%	-16.75%	-17.89%	-17.92%
EBAY	26.83	-0.35	-1.29%	-4.59%	-11.63%	-22.21%	-17.42%	-23.89%	-20.05%	-17.32%

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Sector 30 (consumer staples: XLP, VDC, RTH and IYK)

Here's the XLP Monthly, Weekly and Daily data charts:

XLP Monthly data:

XLP Weekly data:

XLP Daily data:

Table 6: Senior consumer staples equities

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
WFMI	37.55	-1.17	-3.02%	6.49%	3.53%	-11.38%	-5.56%	-21.13%	0.05%	-12.76%
ABV	66.92	-1.66	-2.42%	3.83%	-12.97%	-8.95%	-7.67%	-13.48%	-9.32%	31.60%
WAG	34.28	-0.71	-2.03%	2.82%	-0.70%	-11.24%	-8.19%	-14.26%	-24.86%	-24.06%
DEO	78.85