The bond market, however, is a different matter. The specter of inflation drove yields up and prices way down this week.

It appears to me now that the best timing exit out of bonds was a month or two ago—before all the central bankers started openly discussing something we already knew, which is that inflation is out of control, and interest rates will have to rise.

In any case, selling bonds is one half of the Trade of the Generation. Buying gold in the form of bullion or futures contracts is the other half. But, I am not quite ready to do the latter.

Market timer Ian Notley used to compare the market to an avocado. Avocado lovers know exactly what this means.

I suppose the same could be said about grilling fish. With an avocado, timing is best within hours, but standing over a bbq, I like to say “I nailed it; ten seconds or less to perfection!” Of course, perfection to me may be something quite different to the next person.

Speaking of food (or oil), the world is in crisis. The G-8 ministers say they are alarmed. They say they are going to do something about it. We shall see.

Soaring costs and a slowing global economy amounts to Stagflation, something I have warned about. I have also said that stagflation destroys stock and bond prices together. This is the process that is underway in the market presently.

No, it’s not a good time to be long the market, which is why traders have to learn how to be long or short.

It is a good time, however, to close shop and go fishing—something I plan to do in a few minutes. Enjoy the rest of your weekend. Tomorrow we get back at the market. It ought to be an interesting week ahead. Painful for the Bulls, I think.

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Global Economics Review

The macro-economic data continues to worsen, both in America and abroad.

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

US Economic Calendar.

US Pending Home Sales data for April. Econoday reported: “The pending home sales index really snapped back in April, jumping 6.3 percent month-on-month and cutting the year-on-year decline to 13.1 percent to end five months of 20 percent declines. The dollar firmed in immediate reaction to the data which points, at least tentatively, to slowing rates of decline for home sales. Builders will post their monthly index next week.”

US International Trade data for April. Econoday reported: “The US trade balance in April widened sharply primarily due to a run up in oil prices. The overall U.S. trade gap widened to $60.9 billion from a revised $56.5 billion deficit in March and was marginally worse than the consensus forecast for a $59.5 billion deficit. In April, exports rebounded 3.3 percent but imports surged 4.5 percent…Today's report confirms recent trends for higher imported inflation, a slowing in imports outside of oil, and a resumption of exports…The gain in exports for April was broad-based but led by capital goods excluding autos. (A) major part of this was aircraft.”

US Treasury Budget. Econoday reported: “Tax stimulus checks added $48 billion to May's $165.9 billion Treasury deficit, an unwanted record and dwarfing last May's $67.7 billion deficit.” This is called having cake but not eating it too.

US Import and Export Price Report for May. Econoday reported: “Import/export prices have never shown this much pressure in more than 20 years of available data, at year-on-year rates of 17.8 percent for imports in May and 8.0 percent for exports. Month-on-month, import prices have posted several rare 2 and 3 percent jumps over the past half year including a 2.3 percent jump in May. Prices of non-petroleum imports rose 0.5 percent in the month, down from 1.3 and 1.2 percent spikes in prior months but are now at a record year-on-year pace of 6.6 percent.” Yes, the global inflation problem is now recognized and must be dealt with.

US Retail Sales Report for May. Econoday reported: “Consumers are a lot more willing to spend than consumer attitude surveys suggest as retail sales jumped in May - and it was not all higher gasoline prices.” I suppose $48 billion in so-called rebate checks will, for the most part, find its way to a cash register. The problem is that the goods and services acquired in return are not as valuable as they were just a few months ago.

US Consumer Price Inflation for May. Econoday reported: “The May CPI spurted 0.6 percent based on oil-related price increases, following a 0.2 percent increase the month before. The latest number was above the market forecast for a 0.5 percent gain. The core rate also firmed but not as much with a 0.2 percent boost, after a 0.1 percent uptick in April.” This report blames the majority of the problems on high energy costs. But, at times like this, those who have, hoard. Is that not a major problem? How long will hoarding, which is in effect a short squeeze, forcing prices of essential food and fuel stuff to move higher, be allowed to happen before the have-nots start to riot, not just in a few countries, but across the globe?

Weekly International Economic Report .

How is next week’s calendar looking?

US Economic Calendar.

US Pending Home Sales data for April.

US Housing Starts for May.

US Producer Price Index for May. The Consensus is for a growth in PPI M/M of an astounding +1.0%.

US Industrial Production Report for May.

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US Equity Markets Review

DJIA ino.com chart

DJIA stockcharts.com chart

This week was mixed as a late session rally on Friday lifted the indexes and the sector components to small gains on the week.

There were 6 of 10 sectors that lifted in price, but one (XLI) moved up only +0.03%. There were 20 of 30 Dow components that were up on the week, thanks again to Friday afternoon.

The DJIA index was up +0.79% W/W and -7.2% over the past year. The S&P 500 lost -0.05% W/W, and -7.4% over the past year.

The leaders this week were Microsoft (MSFT +5.75) and McDonalds (MCD +5.27%).

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NASDAQ Composite ino.com chart

NASDAQ Composite stockcharts.com chart

Tech ($BKX), including Semi-conductors ($SMH), were principal losers on the week, along with Telecom. The NASAQ Composite dropped -0.81% W/W despite a gain on Friday of +2.1%.

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. If you want, add a couple like SNDK and ADBE:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY

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

This week, there were 6 sectors up and 4 down. On Friday the scoreboard read all 10 sectors up as bids showed up late in the session.

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
XLU	41.29	0.37	0.90%	1.85%	-0.05%	2.00%	-1.90%	7.89%	-6.16%	3.41%
XLY	31.72	0.84	2.72%	1.47%	-1.83%	-5.79%	-1.49%	3.83%	-6.24%	-19.53%
XLB	44.54	1.06	2.44%	0.84%	0.07%	-1.79%	7.85%	7.77%	4.21%	10.00%
XLE	86.60	1.02	1.19%	0.67%	0.70%	0.91%	8.93%	13.90%	11.47%	25.60%
XLP	28.12	0.07	0.25%	0.61%	-1.30%	-1.33%	-0.95%	2.63%	-4.29%	2.03%
XLF	23.38	0.50	2.19%	0.21%	-5.57%	-11.77%	-17.56%	-5.38%	-22.09%	-37.79%
XLI	37.02	0.42	1.15%	0.03%	-4.69%	-5.99%	-3.87%	0.98%	-7.22%	-5.22%
SPY	136.15	1.69	1.26%	-0.10%	-2.99%	-4.48%	-6.06%	3.42%	-8.66%	-10.36%
IYH	62.86	0.72	1.16%	-1.02%	-2.86%	-1.26%	-10.33%	0.21%	-13.15%	-11.20%
XLK	24.46	0.26	1.07%	-1.05%	-3.51%	-3.81%	-6.36%	10.03%	-9.41%	-3.74%
SMH	31.77	1.02	3.32%	-1.06%	-2.70%	-4.16%	1.31%	8.39%	-4.22%	-14.37%
IYZ	25.64	0.40	1.58%	-4.26%	-4.65%	-4.22%	-12.10%	13.10%	-13.79%	-24.32%

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 many ETFs, 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

I use XLK for the Tech sector for a total of ten (10) sectors, but also include Semiconductors (SMH) because it is my bellwether on the economy. I added SPY to see where each sector stands relative the broad market.

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:

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	88.36	1.30	1.49%	1.81%	-0.45%	-3.22%	-5.51%	1.50%	-4.70%	6.01%
RIG	146.00	1.52	1.05%	1.74%	-2.79%	-6.05%	0.03%	4.81%	5.45%	45.30%
CVX	99.40	1.34	1.37%	-0.10%	0.25%	0.92%	6.36%	14.20%	6.79%	22.49%
PBR	67.94	1.43	2.15%	-0.19%	-3.63%	-0.48%	-42.82%	-39.27%	-38.57%	17.99%
ECA	91.06	1.42	1.58%	-1.66%	0.76%	-0.82%	30.81%	15.40%	34.72%	44.47%
CEO	167.70	-1.91	-1.13%	-2.09%	-5.41%	-13.42%	0.17%	1.48%	3.17%	61.25%
SLB	99.69	0.87	0.88%	-2.21%	-1.42%	-3.63%	-0.88%	17.06%	3.18%	21.63%
STO	37.31	-0.42	-1.11%	-2.91%	-4.70%	-6.42%	19.43%	20.35%	22.49%	35.67%
PTR	129.99	-0.49	-0.38%	-4.40%	-8.81%	-10.58%	-25.14%	-2.37%	-30.69%	-4.24%
IMO	56.77	-0.03	-0.05%	-4.67%	-2.20%	-0.21%	3.37%	1.39%	9.96%	22.01%
TOT	80.44	-0.63	-0.78%	-4.77%	-7.82%	-5.68%	-3.41%	6.04%	-1.23%	7.17%
SU	63.93	-0.65	-1.01%	-5.79%	-6.47%	-1.24%	15.96%	18.08%	24.04%	46.97%

Crude Oil ($WTIC -$3.07/bbl -2.22% W/W) pulled back from the prior week’s all-time record close of 138.54 to close Friday at 135.47. Presently there is a war of hype underway between the hedge funds attributing the rally to “Peak Oil” and others who opine that the hedge funds are hoarding oil to squeeze the shorts. Some heads of government like Australia, for instance, opine that the issue is mostly the fault of OPEC.

This week, XLE gained +0.67% to close at 86.60, thanks largely to Friday’s gain of +1.19%.

Except for Big Oil in the US being up, ie, XOM +1.81% (+1.49% on Fri.), most oil stocks suffered a bad week.

A week ago in this space, I had opined “…which makes me believe that if Oil prices hold on Monday morning, then the oil stocks will rally a tad before getting hammered again. Ultimately, oil will be priced off the current supply and demand, not peak oil concepts or industry Talking Heads like Boone Pickens… If the economy stays weak, oil prices will likely drop from here. As I say, in time they will have to because critically important industries like the airlines cannot make profits when the price of oil is over $100, or anywhere close, even when they cut capacity… Suffice to say, this is a serious problem and oil prices will have to come down or we’ll all have to move to a small island. :-)”

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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:

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
DOW	39.05	0.60	1.56%	0.70%	-3.34%	-8.12%	0.77%	4.33%	-12.03%	-13.20%
AA	39.46	1.72	4.56%	0.61%	-2.78%	-7.67%	9.22%	2.57%	8.62%	-2.52%
RTP	462.05	17.60	3.96%	-1.22%	-4.34%	-15.45%	10.09%	3.55%	5.49%	56.53%
NUE	77.06	3.14	4.25%	-1.46%	3.02%	-5.38%	32.93%	6.33%	26.83%	25.34%
BHP	82.28	3.06	3.86%	-1.84%	-2.44%	-11.92%	16.86%	17.53%	10.68%	44.35%
TS	62.57	0.02	0.03%	-3.22%	2.07%	8.10%	40.96%	25.42%	36.23%	32.48%
TCK	46.81	0.34	0.73%	-3.60%	-5.53%	-6.72%	29.17%	7.61%	31.38%	4.32%
GGB	48.58	0.20	0.41%	-3.88%	-2.76%	5.63%	69.27%	45.71%	72.58%	102.50%
PKX	132.56	0.90	0.68%	-4.29%	-2.99%	-7.88%	-9.49%	9.74%	-19.27%	6.82%
MT	95.28	2.12	2.28%	-7.50%	-4.08%	-5.27%	24.71%	21.76%	29.04%	50.78%
RIO	34.57	0.05	0.14%	-7.67%	-13.10%	-18.02%	5.69%	1.14%	2.92%	-22.78%
VCP	31.61	-0.77	-2.38%	-7.98%	-6.09%	-4.65%	6.43%	7.92%	-2.01%	43.29%

Basic Materials (XLB +0.84% closing at 44.54) was a winner this week thanks to Friday’s huge gain of +2.44%.

Dow Chemicals (DOW +0.70%) was a small winner (on the rebound) and so was Alcoa (AA +0.61%), but the rest of my list suffered. VCP -8.0%, RIO -7.7% and MT -7.5% were the worst hit by profit-taking.

Friday was a trap, I feel. Next week, there will be more losses in Basic Materials and Energy stocks as well. The G-8 ministers and central bankers are on the warpath. If commercial and investment banks want to continue to feed at the public trough, they had better march to the G-8 drummers. Ergo: don’t be long the commodity price beneficiaries for a while. That could be painful.

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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
HON	56.49	0.87	1.56%	4.59%	-5.25%	-9.51%	-5.69%	-0.37%	-6.86%	-1.84%
BA	75.12	1.00	1.35%	2.68%	-9.24%	-12.19%	-13.28%	1.27%	-15.17%	-23.71%
FLR	186.18	8.51	4.79%	2.39%	-0.19%	-2.85%	28.93%	32.39%	26.26%	75.34%
UTX	68.56	0.64	0.94%	2.31%	-3.49%	-7.71%	-8.84%	0.07%	-11.66%	-3.07%
CAT	81.50	1.00	1.24%	1.89%	-1.38%	-2.40%	15.39%	7.70%	9.81%	1.96%
MMM	76.12	0.57	0.75%	1.68%	-1.86%	-2.23%	-7.97%	-3.74%	-12.43%	-12.70%
UPS	68.31	0.02	0.03%	-0.41%	-3.82%	-4.27%	-1.23%	-3.42%	-7.59%	-5.31%
TXT	58.18	0.76	1.32%	-1.31%	-6.99%	-9.43%	-12.92%	7.38%	-18.01%	8.87%
GE	29.15	0.10	0.34%	-2.90%	-5.11%	-9.95%	-20.70%	-14.89%	-22.43%	-22.56%
FDX	85.98	-1.46	-1.67%	-3.24%	-6.25%	-5.37%	-0.21%	-1.25%	-11.53%	-20.99%
ERJ	31.55	0.10	0.32%	-5.17%	-15.91%	-24.59%	-30.09%	-24.50%	-32.61%	-36.86%
ABB	29.94	0.27	0.91%	-5.61%	-7.82%	-7.71%	4.54%	14.67%	5.53%	38.16%

The Industrials (XLI +0.03% W/W), which is a gain of a penny, closed at 37.01, thanks to Friday’s gain of +1.15%.

Fedex (FDX -3.24%) gave back the gain from a week ago. GE hit a 52-week low late in the week, but gained a small amount (+0.34% on Friday to close at 29.15, down -2.90% W/W. There is no leadership here anymore it appears.

I could also say that GE’s CEO Jeff Immelt, who sits on the Board of Directors o the New York Fed is probably aware of the stance this central banker has taken. He might even discover the truth from his colleague director, the head of Lehman Brothers. I’d love to be a fly on the wall.

Honeywell (HON +4.6%) was the leader and ABB (ABB) -5.6% was hammered. Next week, HON may dance to a different tune. The stock has support at $54. The low this week was 54.01. It then bounced to 57 after a rally on Thursday and Friday. But the 200day MA is about 58 and dropping, so there will be resistance ahead.

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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:

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
DIS	33.93	0.69	2.08%	2.79%	0.98%	-3.03%	6.56%	8.30%	3.57%	1.59%
JCP	39.47	1.29	3.38%	2.33%	-1.91%	-14.79%	-5.23%	-0.53%	-9.45%	-48.67%
TGT	53.54	1.33	2.55%	1.94%	0.34%	-2.83%	8.14%	5.89%	1.98%	-15.65%
NKE	68.99	2.21	3.31%	1.56%	0.91%	1.43%	9.02%	13.04%	6.20%	29.00%
TM	102.71	1.90	1.88%	0.07%	0.65%	-1.35%	-3.52%	-2.18%	-6.99%	-17.04%
WHR	68.52	2.38	3.60%	-0.32%	-7.00%	-9.71%	-14.22%	-19.37%	-17.88%	-38.90%
CCL	36.99	0.34	0.93%	-0.64%	-7.66%	-8.35%	-15.28%	-5.71%	-17.41%	-25.84%
BBBY	30.03	0.94	3.23%	-1.44%	-5.74%	-13.18%	5.89%	5.18%	-1.09%	-20.26%
BC	13.15	0.07	0.54%	-1.65%	-4.01%	-21.54%	-22.28%	-16.88%	-29.87%	-61.36%
BDK	60.27	0.59	0.99%	-2.96%	-6.85%	-11.86%	-13.81%	-8.99%	-24.78%	-32.54%
EBAY	28.38	0.30	1.07%	-3.01%	-5.43%	-11.12%	-12.65%	6.29%	-16.75%	-9.85%
GOL	12.50	0.28	2.29%	-11.41%	-18.62%	-24.33%	-47.89%	-17.76%	-48.98%	-60.94%

Consumer Cyclicals (XLY +1.47% closing at 31.72) enjoyed a gain of +2.72% on Friday, which made the week for the Bulls. But, remember, the loss on the previous Friday was -3.93%.

Disney (DIS +2.8%) was the leader. JC Penny (JCP +2.3%) was also strong, but then whenever Financials (XLF +0.21% W/W but +2.19% on Fri.) and Goldman Sachs (GS +5.2% W/W and +6.9% on Fri.) are strong, so too is JCP. I figure that Goldman traders must all have accounts there.

The Cara 100 losers were GOL Airlines (-11.4% W/W after losing -8.1% the previous week) and Ebay (EBAY -3.0%).

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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
BUD	61.12	-0.28	-0.46%	6.70%	6.37%	17.97%	18.38%	31.24%	14.26%	13.42%
ABV	68.82	-1.18	-1.69%	3.74%	0.22%	-12.57%	-5.05%	-13.92%	-7.24%	-3.83%
PEP	67.54	-0.41	-0.60%	3.08%	-1.11%	-0.78%	-10.29%	-2.46%	-14.17%	1.73%
SBUX	18.17	0.35	1.96%	2.83%	-0.11%	13.07%	-5.90%	3.06%	-15.49%	-34.57%
WAG	36.26	0.81	2.28%	2.05%	0.67%	-0.82%	-2.89%	-0.74%	-1.06%	-17.59%
PDA	58.76	-0.92	-1.54%	1.66%	-10.56%	-1.33%	22.09%	16.36%	14.45%	68.61%
PG	66.45	-0.01	-0.02%	1.65%	0.61%	0.14%	-8.10%	-1.35%	-10.69%	6.54%
WMT	59.18	0.07	0.12%	1.39%	2.49%	3.61%	26.18%	16.96%	22.45%	19.56%
KR	27.60	0.09	0.33%	1.10%	-0.14%	2.26%	7.52%	10.40%	5.30%	-8.12%
KO	55.42	-1.72	-3.01%	-0.68%	-3.21%	-2.79%	-9.28%	-5.96%	-13.53%	7.90%
DEO	76.27	1.25	1.67%	-1.54%	-2.99%	-4.47%	-10.33%	-7.60%	-11.84%	-9.64%
WFMI	27.16	0.42	1.57%	-4.70%	-6.34%	-6.73%	-31.69%	-14.81%	-34.55%	-30.36%

Consumer Staples (XLP +0.61% W/W) closed at 28.12.

The InBev (ABV +3.7%) and Anheuser-Busch (BUD +6.4%) were strong on the potential marriage between Stella and Bud. Amazing how most of this action started a few years ago with the takeover of Canada’s Labatts.

As for me, I like the occasional Becks, Guinness and Kalik.

Whole Foods Market (WFMI -4.7%) had a tough week.

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

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

IYH Monthly data:

IYH Weekly data:

IYH Daily data:

Table 7: Senior healthcare 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
MDT	51.54	0.71	1.40%	2.32%	1.72%	9.50%	4.12%	7.29%	2.87%	-0.75%
JNJ	66.27	0.58	0.88%	0.78%	-0.70%	-0.61%	0.55%	5.51%	-2.36%	6.58%
PFE	17.99	0.26	1.47%	0.17%	-7.08%	-10.41%	-21.48%	-15.18%	-23.90%	-31.73%
DNA	73.77	-0.03	-0.04%	0.11%	4.09%	7.18%	9.45%	-9.41%	5.78%	-3.42%
AMGN	43.97	0.75	1.74%	-0.61%	-0.14%	4.57%	-5.64%	-6.80%	-11.03%	-24.37%
GSK	42.04	0.44	1.06%	-0.69%	-5.59%	-4.43%	-16.20%	1.45%	-22.05%	-19.73%
WLP	53.81	1.35	2.57%	-2.94%	-3.60%	7.88%	-38.15%	13.38%	-37.89%	-33.87%
BMY	20.12	0.45	2.29%	-3.64%	-11.72%	-8.42%	-23.00%	-6.03%	-30.16%	-32.35%
AET	44.50	-0.06	-0.13%	-4.26%	-5.64%	3.95%<