US Dollar and commodity price sensitive Basic Materials (XLB +3.16%), Energy (XLE +1.36%) and Industrials (XLI +1.15%) were the strongest of the market’s ten sectors. The only other one that was positive were the Utilities (XLU +0.53%), which is also a beneficiary of higher energy prices.

The weakest sectors this week were those that are linked to liquidity issues that have become extreme in the present credit market crisis: Telco (IYZ -3.94%), Healthcare (IYH -2.69%), owing to trader concerns over financial aspects of the health providers and insurers like Wellpoint (WLP -29.8%), United Health (UNH -17.7%) and Aetna (-6.9%), and the Financials (XLF -1.44%), which were crunched -3% on Friday.

But even the Commodity producers were flashing warning signs this week. The 800-pound gorillas among various nations like China (Petro-China PTR -5.0%), Canada (Imperial Oil IMO -3.3%) and Brazil (Petro-Brazil PBR -3.1%) were under pressure from rising production and refining costs and higher taxes.

Capital markets are operating in a stagflationary environment, similar to the 1970’s. The combined impact of slowing or receding economies and rising costs is that equity prices, which are based on inflation-adjusted corporate revenue, cash flow and earnings growth, are under pressure. Should inflation worsen, interest rates will rise, with further damage to economic growth and corporate earnings and net cash flow.

The problem has been caused by the massive increase in debt on the one hand without a counter-balance increase in economically-based sustainable asset prices. Phony asset prices, which had been used to support the debt bubble, were discovered as banks tried to rein in credit that had been expanding at rates that were out of control. In the typical credit contraction cycle, the parties that suffer most are business corporations and real estate developers that are over-leveraged, which did not happen in this cycle. This time, it was the banks and brokers that were over-leveraged on the basis of these phony assets they carried on their books. A proper write-down of those assets to economic reality means that many of the financial institutions have capital reserves below the ratios permitted by regulators. In fact, there are concerns that should all banks write off these dubious assets, the result would be insolvency, which is to say a complete elimination of equity, and worse.

So, the big picture is looking bleak, and it is not one that can be fixed overnight or even in a month or a quarter. This problem will probably take a few years to resolve.

As the credit contraction cycle works itself through the economy, cash and unencumbered assets will continue to be king. Periodically, there are injections of liquidity by central bankers and by sovereign wealth funds, but these are mostly based on new debt, which is like pouring fuel onto the fire, stealing from the children and grandchildren of the future, and the elderly and others who are presently or soon to be in need of social assistance, all done with the intent that vested interests among bankers can be protected today.

At the heart of today’s economic and capital market woes is the unnecessary Iraq War. Nobel laureate economist Joseph Stiglitz, and his associate, sums up the issues in their book, The Three Trillion Dollar War. Others are saying this war will cost five trillion. The architects of this war attempted to pay for it, not in the normal course with an increase in taxes, but by a lowering of taxes and a huge push to base economic growth, and revenue from taxation from real estate construction, largely fueled by speculators and others who did not have the savings or incomes to afford it, and so who turned to easy credit that was made available by bankers who securitized these dubious loans.

As long as there was a conspiracy among bankers to price these real estate assets on fiction, backed by so-called insurance programs that work only as long as the credit ring remains intact, the beneficiaries of a strong US Dollar, and low interest rates, such as the bankers, telcos and regulated utilities were able to lead equity market indexes higher. But as the real estate market peaked and headed south, and higher inflation set in, the US Dollar started to plunge. Capital markets remained stable only as long as bankers could continue to sell their fiction-based assets, and the available excess capital went into bonds.

That process started to come to a conclusion in June 2007, and the big capital pools started to switch from equities to the most risk-free bonds, the US Treasuries.

Now, even that safety valve has come to the end as the yields have collapsed on short-dated US Treasuries to the point where in just four weeks, the yield on 2-year T-Notes has plunged from 1.90% to 1.48% and on the 3-month T-Bills from 2.17% to 1.06%. The excessive negativity moniker among bloggers doesn't hold water. The fact is that traders are simply prepared to earn little to nothing if their capital base is preserved at this point, and the T-Bill rate proves just how negative is the market reality..

These yields are massively under the inflation rate, so wealth is rapidly being destroyed. As soon as the commodity price bubble bursts (and it will since record high oil and precious metal prices are economically unsustainable and will crack, just like real estate prices cracked in the summer of 2005), there will be a huge deflationary wave engulf the world.

Writing his syndicated column Global Issues today, David Crane points to the red flags waving when the International Monetary Fund warns that governments need to “think the unthinkable.” He opines, “Indeed, we could be headed for the worst financial crisis since the 1929 stock market crash and the Great Depression of the 1930’s.” Negative I might be, but not nearly that much so.

Where I see the credit crunch has hit home the most – the banks and telcos – traders have been selling to raise cash. In fact over the past six and twelve months the price performance in these sectors is the worst across the broad market: down over 3, 6 and 12 months -18.7%, -29.2%, and -31.3% for Financials (XLF) and -24.6%, -32.0%, and -26.6% for Telcos (IYZ), respectively. How can anybody be positive with such a disaster.

A week ago I asked rhetorically, “As a trader you have to ask yourself if conditions are likely to change in the next three to six months to where Mom & Pop start getting ahead financially, start spending again, and start saving and buying equities. You want to ask how the Telcos (and other financial income sources) are going to pay out high returns on capital without it being a return of capital. In addition, you want to know how the Banks can recapitalize their balance sheets without traders somewhere in the world taking on huge debt. Debt inspired by greed, after all, is the cause of the problems today.”

I am asked every day what my recommendation would be to defend against a financial Armageddon, and I will sum it up here:

(1) Go temporarily to a combination of cash, in the form of US Dollars held with the most secure financial institutions (preferably a Swiss bank outside UBS and Credit Suisse, which are international investment banks), and 3-month T-Bills, regardless of how low the yield is. (The minimum account size for private banking with Swiss banks is about $250,000 for those who are interested.) In the meantime, maintain small loans at various financial institutions -- if the interest rate is low -- because your continued payment of the principal and interest will put you into the most valued client category when the global financial crisis is ended and banks are seeking to issue new loans.
(2) Then wait for the crack in the precious metals market, which will come as most of these record high commodity prices are futures contracts based, which will fall apart when the credit ring snaps and counter-parties are unable to pay off. I’m now looking at $780-$800 gold, possibly lower, for example, in the months ahead. Yes, gold prices may go higher than Friday’s high of $1009 for $GOLD because the market is adrenalin driven at the moment, but if you are not a day-trader with your finger on the buy/sell button, it’s best you stay away.
(3) When precious metal prices, after the peak, spike down on the extreme sell-off days that I see upcoming, use that low price to buy physical bullion bars and coins for safekeeping, preferably in a private Swiss bank. For those who want the least exposure to the current financial crisis, I would not hesitate to put 90% of the cash into a variety of precious metals bullion holdings in safekeeping because even during the Depression era of the 1930’s, physical gold was the best performing asset class.
(4) After the global bankers appear to be resolving their crisis, and real estate prices and equity market prices have sunk to ultra long-term lows, which may take six months to two or three years to unfold, I would begin a program of selectively selling the precious metals and buying real property with rock-solid mortgages, probably in Emerging Markets, plus the stocks of Cara 100 companies that managed to survive the difficult economic period ahead. With that in mind, I would start to narrow the Cara Global 100 down to one in each sector, like: XOM, GG, ABB, TM, DEO, GSK, IBN, GOOG, NOK and EXC, as examples. That list would give a global balance of very strong companies, and I would probably weight the holdings on average with the S&P Global 1200 sector weightings at the point of entry.

These are tough times. It will pay to keep cool. The publishing world today – both hardcopy and electronic – has stooped to a new low of vacillating from “cut and paste” to the shouting of idiots who managed to get themselves a piece of the entertainment media. There is very little rigorous analysis being done today. It’s mostly synthesis (ie, storytelling) by people who really don’t know from nothing. The trouble is that transparency in the global financial system isn’t what those in control crack it up to be, and now that those persons are in deep financial trouble themselves the public is being left even further in the dark.

As I wrote this week, the global liquidity crisis was brought on by bankers and the public ought to protect themselves by pulling their capital out of the market, which would send the system into crisis, forcing these bankers to sort out their various conflicts of interest and return us a legitimate capital market that is not controlled by debt market dependent financial services companies.

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Global Economics Review

Other than the upcoming March 18th FOMC decision on monetary policy, last week’s US economic data reports was the biggest of the month and the results were mostly negative.

NEWS ALERT: THE FED TONIGHT CUT THE DISCOUNT RATE AND ANNOUNCED A NEW BORROWING FACILITY.

I believe the US is now clearly in recession, which I have been saying for many weeks. The weight of the evidence, ie, the economic data, has been piling up and can no longer be denied.

Here are the key US economic reports and the Econoday analysis from last week.

US International Trade data for January

US Treasury Budget for February

US Retail Sales for February

US Import and Export Prices for February

US Business Inventories-to-Sales Ratio for January.

US Consumer Price Inflation for February.

U of Michigan Survey of US Households to assess confidence in the US economy in March.

So much for last week. Let’s look ahead.

New York Fed Empire State Manufacturing Survey for March

US Industrial Production for February

US Housing Starts for February

US Producer Price Index for February

FOMC decision to cut the Fed Funds Rate by possibly -75bp

US Leading Economic Indicators for February

Philadelphia Fed Business Outlook Survey for March

The economies of Europe and Japan are almost as bad off as the US and are worsening week by week. I fully expect these economies to go into recession as well, which means that significantly more than 50 pct of the global economy will be in recession at the same time.

The bad news gets worse because, as strong as the growth is in the emerging BRIC economies (Brazil, Russia, India and China), these markets cannot be unaffected by the others. I expect serious declines in the BRIC economic growth rates this year.

Weekly International Economic Report.

As I say, positive news is now infrequent, and the same is happening around the world.

Of greatest concern is that the tools of the Fed being used reportedly to solve the inflation problem are the same ones that caused it, which is excessive credit spurred by interest rates that are too low. In fact, the Fed has not embarked on this course to solve inflation, as they say, but to try to save the US banking industry. But the problem is the carry trade; capital that is created in the US banking system no longer stays (for the most part) in the US, but flees to other countries in search of higher returns. Moreover, the Treasury Dept’s so-called “solution”, which is a cash giveaway to American families to encourage them to spend more is another failure because most of the cash will be used to pay off debts and to make deposits into bank accounts that ultimately be lent to wealthy customers of the banks who will invest a large part of it abroad.

Rather than just letting the economy cycle through a normal credit tightening period, with the usual Bear market damage to stock and bond prices, these interventionists (the Fed and Treasury) are trying to suck and blow simultaneously. They are making the situation worse. Moreover, they are appealing to Sovereign Wealth Funds, which also have objectives that too often are counter to the owners of private capital.

This era of political intervention in capital markets is by far the worst I have seen in 40 years, and I’ll leave it at that.

Here is next week’s economic calendar:

US Economic Calendar.

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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 2 GREEN industries (energy, and mining) and 14 RED’s, compared to last week's 2 green and 24 Red.

This week’s “market tenor” was, thus, 12 net RED versus 22 last week.

We can see that banking and financial services (although weak) have NOT been the consistently worst industries since the start of the year. That title goes to drugs and health services. We can also see that the consistently strongest have been energy and mining.

The DJIA, Nasdaq and NDX stayed NEUTRAL, while the SP-500 stayed RED. The Bombay and Shanghai Composites were RED, Brazil’s Bovespa stayed NEUTRAL, Russian RSX Index fund switched from RED to GREEN.

The US$ index stayed RED, seeing an all-time low, while the CRB index stayed GREEN, again reaching (though not closing at) an all-time high.

GOLD and SILVER stocks stayed GREEN. In fact, Media General’s gold stock index once again saw all-time highs (data extends back to 1989).

BOTTOM LINE: Despite Friday’s drama and pain, 10 industries recovered from RED to NEUTRAL.

Ticker	Name	Score -5wks	Score -4wks	Score -3wks	Score -2wks	Score -1wks	Score -0wks
ABB	ABB Ltd.	-2	-2	+0	+0	+2	+2
ABV	COMP DE BEBA AM ADS	+2	+2	+2	+2	+0	+0
ABX	Barrick Gold Corp.	+0	+0	+0	+2	+0	+2
ADBE	Adobe Systems Inc.	-2	+0	+0	+0	+0	+0
AET	Aetna Inc.	-2	-2	-2	-2	-2	-2
AMAT	Applied Materials Inc.	+0	+2	+2	+2	+2	+2
ATVI	Activision Inc.	+0	+0	+0	+0	+0	+0
BA	Boeing Co.	+0	+0	+0	+0	-2	-2
BBBY	Bed Bath & Beyond Inc.	+0	+0	-2	-2	-2	+0
BBD	Banco Bradesco S.A.	-2	+0	+2	+2	+2	+2
BC	Brunswick Corp.	+0	+0	-2	-2	-2	-2
BDK	Black & Decker Corp.	+0	+0	+0	+0	-2	+0
BHP	BHP Billiton Ltd.	+0	+0	+2	+2	+2	+2
BMY	Bristol-Myers Squibb Co.	-2	+0	+0	+0	+0	-2
CCJ	Cameco Corp.	-2	+0	+0	+2	+0	+2
CCL	Carnival Corp.	-2	+0	+0	-2	-2	-2
CEO	CNOOC Ltd.	-2	+0	+2	+2	+0	+0
CHA	China Telecom Corp. Ltd.	-2	+2	+2	-2	-2	-2
CHL	China Mobile Limited	-2	-2	+0	+0	-2	-2
CHRW	CH Robinson Worldwide Inc.	+2	+2	+0	-2	+0	+2
COST	Costco Wholesale Corp.	-2	-2	+2	-2	-2	-2
CSCO	Cisco Systems, Inc.	-2	+0	+0	+0	+0	+0
CTSH	Cognizant Technology Solutions Corp.	+0	+2	+2	+0	-2	-2
CVX	Chevron Corp.	-2	+0	+0	+2	+0	+0
DB	Deutsche Bank AG	-2	-2	+0	+0	-2	+0
DELL	Dell Inc.	-2	+0	+0	+0	+0	+0
DEO	Diageo plc	-2	+2	+0	+0	+0	+0
DIS	Walt Disney Co.	+2	+2	+2	+2	-2	-2
DOW	Dow Chemical Co.	+0	+0	+0	+0	-2	+0
DNA	Genentech Inc.	+0	+2	+2	+2	+2	+2
ECA	EnCana Corp.	-2	+2	+2	+2	+2	+2
ERJ	EMBRAER - Empresa Brasileira de Aeron�utica S.A.	-2	+2	+2	+0	-2	-2
ERTS	Electronic Arts Inc.	-2	+0	+0	+0	+0	+0
EXC	Exelon Corp.	-2	+0	+2	-2	+0	+2
GE	General Electric Co.	-2	+0	+0	+0	-2	+0
GFI	Gold Fields Ltd.	-2	-2	+0	+0	+2	+2
GG	Goldcorp Inc.	+0	+0	+2	+2	+2	+2
GGB	Gerdau S.A.	-2	+2	+2	+2	+2	+2
GOL	GOL Linhas A�reas Inteligentes S.A.	-2	+0	-2	-2	-2	-2
GOOG	Google Inc.	-2	-2	-2	-2	-2	+0
GRMN	Garmin Ltd.	+0	+0	+0	+0	+0	+0
GS	Goldman Sachs Group Inc.	-2	-2	-2	-2	-2	-2
GSK	Glaxosmithkline plc	-2	-2	+0	+0	-2	-2
HBC	HSBC HLDGS PLC ADS	-2	+0	+0	+0	+0	+0
HDB	HDFC Bank Ltd.	-2	-2	-2	-2	-2	-2
IBKR	Interactive Brokers Group, Inc.	+0	+0	+0	-2	-2	-2
IBN	ICICI Bank Ltd.	-2	-2	-2	-2	-2	-2
IMO	Imperial Oil Ltd.	-2	+2	+2	+2	+2	+0
INFY	Infosys Technologies Ltd.	+0	+0	+0	-2	-2	-2
INTC	Intel Corp.	-2	+0	+0	+0	+0	+0
JCP	J. C. Penney Company, Inc	+2	+0	+2	+0	-2	-2
JNJ	Johnson & Johnson	-2	-2	+0	-2	-2	+0
KB	Kookmin Bank	-2	-2	+0	+0	-2	-2
KO	Coca-Cola Co.	-2	-2	-2	-2	+0	-2
KSS	Kohl's Corp.	+0	+0	+0	+0	-2	-2
LEH	Lehman Brothers Holdings Inc.	-2	-2	-2	-2	-2	-2
LLTC	Linear Technology Corp.	-2	+0	+0	+0	+2	+2
MBT	Mobile Telesystems OJSC	-2	-2	+0	-2	-2	-2
MFC	Manulife Financial Corporation	-2	+0	+0	+2	+0	-2
MICC	Millicom International Cellular SA	-2	+2	+2	+2	+0	-2
NKE	Nike Inc.	+0	+2	+0	-2	-2	+0
NOK	Nokia Corp.	-2	+0	+2	+0	-2	-2
NTES	Netease.com Inc.	-2	-2	+2	+2	+2	+0
NUE	Nucor Corp.	+2	+2	+2	+2	+2	+2
ORCL	Oracle Corp.	-2	-2	-2	-2	+0	+0
OXPS	optionsXpress Holdings, Inc.	-2	-2	-2	-2	-2	-2
PAYX	Paychex Inc.	+0	+0	+0	+0	-2	+0
PBR	PETROLEO BRASILEIRO	+0	+2	+2	+0	+0	-2
PDA	Perdigao S.A.	+0	+2	+2	+2	+2	+2
PG	Procter & Gamble Co.	-2	+0	+0	+0	+0	+0
PTR	PetroChina Co. Ltd.	-2	+0	+0	+0	-2	-2
QCOM	QUALCOMM Inc.	+2	+2	+2	+2	-2	-2
RIO	COMPANHIA VALE ADS	+0	+2	+2	+2	+2	+2
RIMM	Research In Motion Ltd.	-2	+0	+2	+2	+0	+2
RY	Royal Bank of Canada	+2	+0	+0	+0	-2	-2
SBUX	Starbucks Corp.	+0	+0	+0	+0	-2	+0
SLW	Silver Wheaton Corp.	-2	-2	+2	+2	+2	+2
SNDK	SanDisk Corp.	+0	+0	+0	+0	+0	+0
STO	StatoilHydro ASA	-2	+0	+2	+2	+2	+2
SU	Suncor Energy Inc.	-2	+0	+0	+2	+2	+2
SWK	Stanley Works	+0	+2	+2	+0	-2	-2
TCK	Teck Cominco Ltd.	+0	+0	+2	+2	+2	+2
TEF	Telefonica SA	-2	-2	-2	+0	+0	+0
TGP	Teekay LNG Partners LP.	+2	+2	+2	+0	-2	-2
TGT	Target Corp.	+0	+0	+0	+0	+0	-2
TM	Toyota Motor Corp.	+2	+2	+2	+2	-2	-2
TOT	Total SA	-2	-2	+0	+0	+0	+0
TS	Tenaris SA	-2	+0	+0	+2	+2	+2
TT	Trane Inc	+0	+0	+0	+0	+0	+0
UBS	UBS AG	-2	-2	-2	-2	-2	-2
UTX	United Technologies Corp.	-2	+0	+0	-2	-2	-2
VCP	Votorantim Celulose e Papel S.A.	+0	+2	+2	+2	+0	-2
VIP	Vimpel-Communications	-2	+0	+2	-2	-2	-2
WAG	Walgreen Co.	+0	+0	+2	+2	+0	+0
WBK	Westpac Banking Corp.	-2	-2	-2	+0	-2	+0
WFMI	Whole Foods Market Inc.	+0	+2	-2	-2	-2	-2
WHR	Whirlpool Corp.	+2	+2	+2	+0	-2	-2
WMT	Wal-Mart Stores Inc.	+0	+0	+0	+0	+0	+0
XOM	Exxon Mobil Corp.	-2	+0	+2	+0	-2	+0
YHOO	Yahoo! Inc.	+2	+2	+2	+2	+2	+0
Summary:	(+2/-2/other)	11/58/31	26/24/50	38/16/46	31/26/43	21/47/32	23/42/35
Net:	(+2)-(-2)	-47	+2	+22	+5	-26	-19

Answer to last week’s gold question: it cracked 1000, closed the week in New York just below, but at this writing sits at 1003.

To provide MORE perspective (and comic relief?) here again is Nixon’s 1971 speech taking the US$ off the gold standard (credit to themessthatgreenspanmade.com). (It was “just a temporary measure”, until a better international system could be arranged!)

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

This coming week will be a short one in North America because of the Easter Good Friday holiday.

For this past week, for the Dow 30 stocks: 16 were up, 14 down. The huge volatility occurred in spikes – up at the open on Tuesday, down at the open on Thursday and down shortly after the opening on Friday, followed a week ending spike higher near the close, which put the DJIA higher by +58 points and more than 50% of the Dow stocks up on the week.

Traders are struggling to learn the quick step as this dance is making them nervous.

The biggest losers this week again were those stocks that have a strong financial component, like the regulated health insurers, telcos, banks and broker-dealers.

In the Dow 30, stocks like General Motors (GM -12.5%), Citigroup (C -5.4%) and AIG (AIG) -4.0%) were dumped, although the last two suffered less of a loss than the previous week.

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NASDAQ Composite ino.com chart

NASDAQ Composite stockcharts.com chart

The Nasdaq Composite stayed flat at 2212.5 this week. There have been some shining stars like Bed, Bath & Beyond (BBBY +6.7%) this week, but Friday’s action took many of the week’s stronger performers down. For example RIMM dropped -3.8% on Friday, which pulled the week’s gain down to +3.7 %.

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.

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

Three weeks ago, I added charts for the S&P 500 ETF (SPY) as well as put SPY into the expanded sector performance tables so that you can see how each sector is doing relative to the industry benchmark. I also added XLK for Technology, while keeping SMH (Semi-conductors) in the list.

This week SPY futures dropped marginally from 129.71 to 129.61. The S&P 500 dropped from 1293.4 to 1288.14.

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

SPY Monthly data:

SPY Weekly data:

SPY Daily data:

The tables I now show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.

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
XLB	40.84	-0.49	-1.19%	3.16%	-0.34%	0.59%	-1.11%	-2.23%	3.21%	11.13%
XLE	74.76	-1.27	-1.67%	1.36%	-1.70%	2.81%	-5.96%	-2.59%	2.79%	30.70%
XLI	36.02	-0.64	-1.75%	1.15%	-1.10%	-2.65%	-6.47%	-8.72%	-8.90%	2.45%
XLU	37.90	-0.37	-0.97%	0.53%	0.45%	-4.05%	-9.95%	-12.23%	-4.53%	-0.94%
SMH	28.68	-0.63	-2.15%	0.17%	0.46%	-0.90%	-8.55%	-12.21%	-22.78%	-16.31%
SPY	129.61	-2.04	-1.55%	-0.08%	-3.10%	-4.07%	-10.57%	-11.93%	-12.95%	-6.94%
XLY	30.04	-0.51	-1.67%	-0.40%	-3.59%	-6.30%	-6.71%	-9.84%	-18.26%	-19.72%
XLP	26.96	-0.44	-1.61%	-0.41%	-0.70%	-0.99%	-5.04%	-7.10%	-1.53%	4.50%
XLK	21.92	-0.31	-1.39%	-0.45%	-1.92%	-3.86%	-16.08%	-18.18%	-15.53%	-4.61%
XLF	23.97	-0.74	-2.99%	-1.44%	-7.38%	-9.95%	-15.48%	-18.66%	-29.23%	-31.28%
IYH	61.76	-0.97	-1.55%	-2.69%	-5.94%	-7.06%	-11.90%	-13.88%	-11.33%	-6.25%
IYZ	22.19	-0.48	-2.12%	-3.94%	-6.09%	-12.95%	-23.93%	-24.60%	-32.00%	-26.55%

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. SPY XLE XLB XLI XLY XLP IYH XLF XLK 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

This week, there were 4 sectors (5 ETF’s) above SPY and 6 below. The worst performers were IYZ, IYH and XLF. The best were XLB, XLE and XLI.

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) was the second best performing sector this week, which was not surprising as the past two weeks XLE went against the grain of the rising Crude Oil price, but couldn’t do it a third week in a row as $WTIC jumped +3.59/bbl to a close of 108.74.

I am going out on a limb when I say that the $USD, which is extended on the downside, will weaken through this week’s FOMC decision (further large Fed Rate cut), but then start to strengthen as the month-end appears. March is the fiscal year-end of governments, and I think the Japanese govt will want to square the books, which may further strengthen the Yen only until month-end, following which we may see a weak Yen again and a stronger USD. Just a possibility to consider.

I also continue to believe that traders are worried that recession will create demand issues that will soon pull the price of oil down. That situation will further depress the price of the oil stocks.

Exxon Mobil (XOM) is the company and stock that Value Line has reported on this week. As you know, I didn’t like (Cara 100) XON at 94-95, and have profited on the slide to the low 80’s, which happens to be a massive loss of capitalization, meaning of course a hit to the customer accounts and also the marginability of customer accounts. So I’m not surprised to see a pop of +4.5% to the XOM share price this week following the massive Fed injection (over $200 billion). XOM is now up to 85.91, although it did drop -1.3% on Friday.

My outlook is starting to change however, which I will disclose later in this report. After the next down-dip into the 70’s, I will be recommending that traders consider starting to accumulate XOM. Because of the inflation cycle, I doubt the 30-level for the Monthly or Weekly RSI-7 will be reached. I think there will be support found around the 40-level.

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
XOM	85.91	-1.14	-1.31%	4.15%	-1.26%	0.42%	-8.13%	-5.78%	-3.11%	20.97%
ECA	79.59	0.68	0.86%	3.48%	4.44%	12.43%	14.34%	17.70%	28.91%	69.23%
TOT	74.82	-1.04	-1.37%	1.57%	-0.76%	2.51%	-10.16%	-6.02%	-3.99%	14.67%
RIG	137.55	-1.75	-1.26%	0.91%	-2.11%	6.08%	-5.76%	1.14%	29.57%	80.06%
CVX	85.34	-1.70	-1.95%	0.09%	-1.52%	2.97%	-8.69%	-7.26%	-5.86%	24.91%
STO	29.96	-1.04	-3.35%	0.07%	-1.90%	7.11%	-4.10%	0.84%	-5.96%	20.08%
CEO	156.15	-9.10	-5.51%	-0.26%	-5.80%	3.50%	-6.73%	-2.16%	17.72%	92.68%
SU	105.86	-2.42	-2.23%	-0.86%	2.58%	8.54%	-4.00%	2.52%	9.90%	53.18%
SLB	83.90	-1.26	-1.48%	-2.00%	-2.95%	-0.25%	-16.58%	-11.28%	-16.41%	29.22%
PBR	108.22	-3.65	-3.26%	-3.09%	-7.77%	-6.08%	-8.91%	0.83%	61.26%	145.51%
IMO	54.22	-1.77	-3.16%	-3.33%	-4.19%	0.00%	-1.27%	3.95%	14.15%	56.98%
PTR	127.36	-5.78	-4.34%	-4.95%	-13.25%	-13.51%	-26.66%	-29.95%	-14.11%	14.43%

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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:

Basic Materials (XLB +3.16% W/W) was lifted higher as this was a week where higher commodity prices and the lower $USD were highlights.

GGB (+7.0%), NUE (+6.8%) and MT (+5.6%), all huge steelmakers out-performed this week. There is hope that if the Fed and the other major central banks continue to inject liquidity into the system, the economy might work itself into a growth mode. I don’t agree – at least not without a considerable lag time.

Brazil’s GGB had been down -5.7% a week earlier, so the recovery over two weeks is not much. And South Korea’s Posco (PKX), the world’s biggest steelmaker, which had been down -5.0% a week earlier, this week was crushed -13.2%, including a loss on Friday of -7.7%. The reports from Korea indicate that the worry there is the US economy, but really this stock (of a highly admired industrial leader) has been selling off for six months now.

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
GGB	33.08	-0.26	-0.78%	6.99%	0.95%	15.42%	15.26%	19.68%	42.83%	97.61%
NUE	71.20	-1.27	-1.75%	6.84%	10.27%	14.54%	22.82%	18.81%	24.76%	12.44%
MT	78.97	0.72	0.92%	5.63%	3.88%	12.41%	3.36%	10.79%	15.71%	56.16%
TS	49.10	-0.79	-1.58%	5.03%	10.46%	29.76%	10.61%	10.21%	6.12%	15.94%
AA	38.39	-0.08	-0.21%	4.89%	3.37%	8.57%	6.26%	9.09%	8.20%	15.22%
TCK	43.20	-0.30	-0.69%	2.91%	8.11%	29.19%	19.21%	22.55%	0.82%	-34.85%
DOW	37.00	-0.43	-1.15%	2.27%	-1.83%	-4.02%	-4.52%	-14.17%	-11.86%	-14.71%
RIO	33.82	-0.36	-1.05%	2.05%	-2.93%	5.00%	3.39%	2.80%	24.11%	-3.59%
RTP	448.75	2.55	0.57%	0.73%	-1.25%	3.44%	6.92%	6.21%	50.16%	118.85%
BHP	70.61	0.60	0.86%	-0.38%	-3.51%	2.20%	0.28%	-0.65%	7.08%	65.83%
VCP	28.93	-0.36	-1.23%	-6.62%	-8.04%	-5.73%	-2.59%	-7.13%	11.35%	63.17%
PKX	111.50	-9.29	-7.69%	-13.22%	-17.59%	-16.55%	-23.87%	-28.41%	-32.16%	11.32%

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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
CAT	74.79	-0.88	-1.16%	7.09%	3.40%	5.65%	5.89%	1.91%	2.23%	17.52%
GE	33.82	-0.43	-1.26%	4.93%	2.05%	-1.66%	-8.00%	-8.37%	-16.18%	-1.43%
MMM	77.53	-1.55	-1.96%	1.33%	-1.11%	-3.44%	-6.26%	-9.78%	-12.91%	2.28%
UTX	67.71	-0.80	-1.17%	0.33%	-3.97%	-6.80%	-9.97%	-11.71%	-11.07%	4.57%
ABB	25.48	-0.63	-2.41%	0.28%	1.76%	10.78%	-11.03%	-7.95%	7.06%	53.49%
ERJ	42.14	0.35	0.84%	-0.26%	-4.92%	-5.75%	-6.63%	-10.72%	0.79%	-7.49%
BA	76.23	2.05	2.76%	-0.48%	-7.92%	-10.55%	-11.99%	-13.79%	-23.27%	-15.28%
HON	56.13	-0.57	-1.01%	-0.76%	-2.45%	-2.40%	-6.29%	-6.42%	-0.55%	19.68%
FLR	136.54	-4.09	-2.91%	-1.42%	-1.95%	12.60%	-5.44%	-5.20%	1.48%	55.57%
FDX	84.80	-2.27	-2.61%	-2.19%	-3.78%	-3.65%	-1.58%	-11.59%	-22.33%	-24.70%
TXT	52.86	-1.32	-2.44%	-3.24%	-2.42%	-8.37%	-20.88%	-25.71%	-6.46%	18.39%
UPS	69.61	-1.12	-1.58%	-3.27%	-0.90%	-3.77%	0.65%	-4.13%	-6.41%	-0.88%

XLI (Industrials) gained +1.15% (they lost -2.22% the week earlier), closing at 36.02. XLI dropped -1.75% this Friday and they had dropped -1.44% the previous Friday.

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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) had a bad week on Friday, losing -0.67% on Friday to take the ETF down -0.40% W/W. The earlier gain was welcomed by some as XLY had been crushed -3.21% the prior week and -2.99% on the previous Friday. Ouch.

The only Cara 100 winner was BBBY, which was up +6.65% W/W including a gain of +1.09 pct on Friday when the overall market was down sharply.

The price of Crude Oil set another record this week, including over $4.00/gallon in the parts of the country I guess the President doesn’t get to much.

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
BBBY	28.86	0.31	1.09%	6.65%	1.83%	-3.51%	1.76%	-2.20%	-13.67%	-25.85%
NKE	59.96	-1.07	-1.75%	2.95%	-0.40%	-3.76%	-5.25%	-6.78%	4.77%	14.41%
EBAY	26.25	-0.45	-1.69%	1.82%	-0.42%	-5.95%	-19.21%	-19.72%	-30.57%	-15.70%
BDK	64.59	-1.63	-2.46%	0.26%