Oh, it was painful and I’m not just referring to the fact we caught only two fish on Sunday and then I fell down while running at the Hash on Monday, spraining elbow and knee, which is still an issue. Yes, the market also fell and the Bear ate more than one snapper and one grouper.

The DJIA, S&P 500 and NASDAQ Composite dropped -3.8%, -3.1% and -2.0%, respectively, this past week. Of the international equity indexes, the Sensex 30 of India was in worse shape, falling -4.1%. Only the closely located Hong Kong, Singapore and Philippines were up, although minimally.

This week, it appears that a selling wave has gained sufficient momentum to overwhelm the Interventionists aka the Plunge Protection Team (PPT). If the DJIA breaks below the narrow 11,700-11,750 range, and I think it will this week, there could a rapid drop to 11,000. That would likely be the end of the second major selling wave. A couple months later, the third and possibly last one could take the DJIA down to 10,000, which is what I predicted a couple years ago as the market was in the process of finding a cycle peak.

That peak, by the way, was extended by the man I call Mr. Moral Hazard, who pumped up equity prices after taking an interim job as US Treasury Secretary -- prior to his return as leader of Humungous Bank & Broker (HB&B).

This coming week we get to look at the plummeting US Consumer Confidence index. Check the chart and you’ll see that the month following the hiring of Secretary Henry Paulson in May-June 2006, the US retail sales index started to plunge, and a year later the Consumer Confidence index started to crash.

You have heard this from me before, but I say the People won’t be happy until he’s removed, which will be a day of considerable disappointment for his banker friends. You see, Mr. Paulson wants to set up all banks and brokers as a self regulatory organization under the Federal Reserve Bank of the US. I am confident in saying that the rest of the world’s regulators and governments have different ideas.

While I may have pulled his leg a bit, I’ve never said negative things about Prof. Bernanke, who rules the roost at the Fed and who will report on monetary policy this Wednesday at the usual 2:15pm time. At least you and I can understand what this Fed Head is saying, even if I don’t always agree. Besides, I love to watch the grilling he gets in Congress from Rep Dr. Ron Paul. You can tell the truth hurts by the expression on Bernanke’s face, and that’s the way it should be.

The Fed meets on Tuesday and reports on monetary policy on Wednesday. There is something like less than a 10 percent chance that the Fed will raise rates after their meeting, and if that do-nothing approach comes true, I suspect (after the FOMC traders try to make it look good) that the $USD will tumble a bit more, which ought to help gold. But here is where I think the precious metal boosters may get to be disappointed because there could be changes forthcoming in the margin requirements on global futures exchanges.

I don’t know this of course, but I can feel it in my injured knee.

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Global Economics Review

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

Weekly International Economic Report .

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

US Economic Calendar.

US Pending Home Sales data for April. Per Econoday, “The pending home sales index really snapped back in April, jumping 6.3% month-on-month and cutting the year-on-year decline to 13.1% to end five months of 20% declines.” These are sales contracts and not closings. If the market continues to weaken and/or mortgage money gets cheaper this month and next, I suspect many deals will not close.

US Housing Starts for May. Econoday reports, “Housing starts in May resumed a downward slide. Starts fell 3.3%, following a 2.0% rebound in April. The May pace of 0.975 million units annualized was down 32.1% year-on-year and was a little worse than the consensus forecast for 0.985 million units. The May decline was led by an 8.0% drop in multifamily starts as single-family starts fell another 1.0%.” The biggest weakness was in the mid-west.

US Producer Price Index for May. The Consensus is for a growth in PPI M/M of an astounding +1.0%. Econoday reports, “Producer price inflation in May surged at the headline level while the core rate remained moderate. The overall PPI jumped a red hot 1.4%, following a modest 0.2% rise in April. The May spike was well above the market projection for a 1.0% surge in the overall PPI.” The high price is a cost that will work itself through the manufacturing and shipping industries, and be soon passed along to consumers, which will zip the CPI.

US Industrial Production Report for May. Econoday reports, “Industrial production in May unexpectedly fell but the decline was primarily due to a drop in utilities output. But the bottom line still is that the manufacturing sector is flat.” It’s getting worse for industries like autos. This business cycle (aka the inventory cycle) has a way to go, I think, before the bottom is reached. Blame it on the banks, and for that you can blame it on the head honcho at the banks during the period of excessive and ridiculous credit expansion, the current Treasury Secretary himself, the man who wants the US Treasury to pay for the indiscretions of his colleagues and for the chief fox to rule the henhouse of all financial services companies. With leadership like this, US industrial production may go the way of the buggy whip. Come to think of it, with fuel costs rising to the extent they have under this Treasury Secretary’s watch, we may soon go back to use of horses and buggy whips!

How is next week’s calendar looking?

US Economic Calendar. In addition to the US Consumer Confidence index and the Fed monetary policy decision being reported on Wednesday, there are some other key reports.

US Durable Goods data for May. The US auto industry is in tatters, which likely means the expensive household machines are not selling well either. While I’m not keen on buying the shares of any US auto manufacturer, I am looking closely at Whirlpool (WHR). $60 is a target, but even at the current $66, the stock’s PE is under 8.5 and the dividend yield above 2.6%. I happen to think Whirlpool is, if not the world’s best durable goods manufacturer, one of the best.

US New Home Sales for May. The consensus is for an annual rate of 515,000 units. Let’s check out the average selling price. BTW, if I’m interested in buying the shares of a US homebuilder, and I’m not, I would be looking only at the ones that didn’t self-finance their sales at the cycle peak. That problem is just like the banks’ problem, which is an explanation for why a year ago or more the bank analysts were telling us they loved the homebuilders group and we all laughed. So, unless you know with certainty the extent of a company’s liabilities, real and contingent, you ought to stay away! There are too many viable alternatives to get potentially stuck with (more) pain.

US Existing Home Sales for May. The consensus is for an annual rate of 5 million units, which if true would be a good bump. Let’s check out the average selling price here too.

US Personal Income and Spending for May. Let’s see if the big spenders in April have spent their so-called tax rebates.

U of Michigan’s Consumer Sentiment Index for June. The question is how low will the index fall before bottoming.

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US Equity Markets Review

DJIA ino.com chart

DJIA stockcharts.com chart

This week was a bad one for the Bulls.

There were 10 of 10 sectors that dropped in price. There were 28 of 30 Dow components that were down.

Even without the big losses on Friday, only two of the ten sector ETF’s would have been up (XLE and XLU).

The DJIA index was down -3.8% W/W and -10.7% over the past year. The S&P 500 lost -3.1% W/W, and -10.2% over the past year.

Only Boeing (BA +0.95%) and United Technologies (UTX +0.35%) gained.

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NASDAQ Composite ino.com chart

NASDAQ Composite stockcharts.com chart

The NASAQ Composite dropped -2.0% W/W.

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 no sectors up and all 10 down. On Friday the scoreboard also read all 10 sectors down. Volume increased.

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
XLE	85.75	-0.88	-1.02%	-0.98%	-0.31%	-2.28%	7.86%	21.10%	10.65%	24.15%
XLU	40.72	-0.91	-2.19%	-1.38%	0.44%	-2.16%	-3.25%	8.73%	-5.83%	3.85%
SMH	31.10	-0.58	-1.83%	-2.11%	-3.15%	-3.72%	-0.83%	6.91%	-5.24%	-17.68%
IYH	61.47	-0.83	-1.33%	-2.21%	-3.21%	-3.89%	-12.31%	-2.57%	-13.98%	-12.44%
XLB	43.25	-1.20	-2.70%	-2.90%	-2.08%	-2.77%	4.72%	12.92%	4.04%	6.06%
XLI	35.92	-0.76	-2.07%	-2.97%	-2.95%	-6.24%	-6.73%	-1.94%	-8.02%	-8.60%
XLK	23.65	-0.60	-2.47%	-3.31%	-4.33%	-3.59%	-9.46%	5.63%	-11.62%	-7.94%
SPY	131.58	-2.85	-2.12%	-3.36%	-3.46%	-5.68%	-9.21%	-0.38%	-10.37%	-12.94%
XLP	27.03	-0.47	-1.71%	-3.88%	-3.29%	-4.22%	-4.79%	-2.14%	-6.66%	-0.33%
IYZ	24.49	-0.71	-2.82%	-4.49%	-8.55%	-6.81%	-16.04%	6.29%	-17.35%	-27.72%
XLY	29.88	-1.12	-3.61%	-5.80%	-4.41%	-7.35%	-7.20%	-4.38%	-9.86%	-24.77%
XLF	21.95	-0.79	-3.47%	-6.12%	-5.92%	-12.34%	-22.60%	-16.35%	-24.41%	-40.58%

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

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
SLB	104.10	-0.73	-0.70%	4.42%	2.12%	1.59%	3.50%	29.09%	14.67%	22.82%
PTR	133.48	-7.01	-4.99%	2.68%	-1.83%	-6.43%	-23.13%	8.92%	-23.29%	-9.26%
RIG	148.81	0.72	0.49%	1.92%	3.70%	-4.06%	1.96%	13.47%	8.71%	43.90%
TOT	80.23	0.41	0.51%	-0.26%	-5.02%	-10.40%	-3.66%	12.04%	0.96%	2.09%
STO	37.10	-0.47	-1.25%	-0.56%	-3.46%	-12.15%	18.76%	31.93%	28.86%	27.71%
ECA	89.19	-1.51	-1.66%	-2.05%	-3.68%	-5.43%	28.13%	24.13%	32.09%	37.94%
CVX	96.62	-0.24	-0.25%	-2.80%	-2.89%	-5.19%	3.38%	16.12%	4.96%	19.33%
IMO	55.05	-0.47	-0.85%	-3.03%	-7.56%	-8.90%	0.24%	9.40%	5.34%	17.73%
XOM	84.91	-0.88	-1.03%	-3.90%	-2.17%	-8.22%	-9.20%	-0.11%	-7.84%	2.52%
PBR	65.27	-1.38	-2.07%	-3.93%	-4.11%	-9.37%	-45.06%	-31.90%	-39.56%	8.03%
SU	60.94	-0.64	-1.04%	-4.68%	-10.20%	-15.16%	10.54%	30.19%	16.56%	36.91%
CEO	158.75	-4.45	-2.73%	-5.34%	-7.32%	-19.90%	-5.18%	17.81%	0.77%	37.15%

Crude Oil ($WTIC -$0.11/bbl W/W to 135.36) stayed close to the all-time record close of 138.54 that was set two weeks ago. Hedge fund speculators like Mr. Boone Pickens are trying to make a point! As I wrote here a week ago, the hedge funds are attributing the rally to “Peak Oil” and others are saying that the hedge funds are hoarding oil to squeeze the shorts. There is only so much fight in that dog.

This week, XLE lost -0.98%, thanks entirely to Friday’s loss of -1.02%.

Big Oil in the US, ie, XOM -3.90% W/W to $84.91 is sliding. When it was 94-95, I opined that XOM would sink, possibly to the high 70’s. That’s only $5.00 away.

Two weeks ago in this space, I 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. :-)”

Same old, same old. But let’s use common sense when reading the hype that comes from the world’s biggest political lobby group. And this bit about saving America, saving the world, from high oil prices by drilling in its most pristine shoreline regions is just such a crock. Remember the Exxon Valdez? How quickly people forget.

SLB and PTR were strong this week, and they were the only ones (in my list) that were up through Thursday, before Friday’s killer of a session. Most of the oils, drillers and oil service companies were soft all week, which goes to show that traders don’t think the high oil and gas prices we have today are going to stick.

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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
TS	67.83	-0.55	-0.80%	8.41%	4.92%	10.80%	52.80%	50.47%	55.64%	42.05%
MT	100.35	-1.34	-1.32%	5.32%	-2.58%	1.56%	31.35%	35.44%	40.55%	52.95%
RTP	479.00	-0.50	-0.10%	3.67%	2.40%	-8.84%	14.13%	23.61%	18.37%	57.59%
BHP	83.62	-3.15	-3.63%	1.63%	-0.24%	-9.40%	18.76%	33.13%	22.07%	43.55%
RIO	34.81	-1.27	-3.52%	0.69%	-7.02%	-16.00%	6.42%	12.91%	7.24%	-22.64%
TCK	46.94	-1.60	-3.30%	0.28%	-3.34%	-6.68%	29.53%	24.97%	38.88%	4.66%
NUE	75.56	-1.75	-2.26%	-1.95%	-3.38%	1.44%	30.34%	9.57%	27.89%	22.74%
PKX	129.73	-6.07	-4.47%	-2.13%	-6.33%	-3.01%	-11.42%	15.94%	-11.99%	3.03%
DOW	37.58	-0.71	-1.85%	-3.76%	-3.09%	-9.71%	-3.02%	3.02%	-8.36%	-16.77%
AA	37.34	-1.78	-4.55%	-5.37%	-4.79%	-8.48%	3.35%	7.67%	5.51%	-7.23%
VCP	28.41	-0.90	-3.07%	-10.12%	-17.29%	-10.44%	-4.34%	1.46%	-7.46%	22.40%
GGB	24.22	-27.32	-53.01%	-50.14%	-52.08%	-51.38%	-15.61%	-20.67%	-14.36%	-1.58%

Basic Materials (XLB -2.90% closing at 43.25) was a loser this week thanks largely to Friday’s loss of -2.70%.

But then you knew it would be a tough week after the previous week’s big gain on Friday and I opined in the WIR that “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.”

Strictly speaking, the Oils were the strongest this week on a relative basis, but they also lost -1%. Let’s see what next week brings. Boone Pickens and his oil hedgie friends don’t have pockets deep enough to hold up the oil market forever. Once the oil price goes down, so too will the basic materials and many other commodities.

The economy is a great leveler.

In this sector, TS and MT had strong weeks, but VCP and AA did not. As you can see in my table, the source data for GGB does not recognize the share split.

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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
FLR	191.55	1.68	0.88%	2.88%	5.35%	1.49%	32.65%	46.08%	36.33%	80.35%
ABB	30.38	-0.68	-2.19%	1.47%	-4.22%	-7.80%	6.08%	25.49%	12.48%	36.91%
BA	75.83	-1.12	-1.46%	0.95%	3.65%	-6.85%	-12.46%	1.38%	-13.03%	-21.08%
UTX	68.80	-0.02	-0.03%	0.35%	2.67%	-4.23%	-8.52%	-0.30%	-9.95%	-4.22%
UPS	66.37	-0.47	-0.70%	-2.84%	-3.24%	-4.30%	-4.03%	-7.38%	-7.30%	-8.97%
CAT	79.08	-0.40	-0.50%	-2.97%	-1.14%	-3.82%	11.96%	7.07%	10.59%	-2.83%
ERJ	30.50	0.65	2.18%	-3.33%	-8.33%	-20.01%	-32.42%	-23.75%	-33.62%	-38.90%
HON	54.20	-1.15	-2.08%	-4.05%	0.35%	-8.71%	-9.52%	-0.17%	-10.69%	-4.16%
MMM	73.02	-1.10	-1.48%	-4.07%	-2.46%	-4.72%	-11.72%	-6.36%	-13.58%	-16.15%
GE	27.38	-0.53	-1.90%	-6.07%	-8.79%	-11.71%	-25.52%	-26.97%	-25.03%	-29.92%
FDX	80.54	-1.19	-1.46%	-6.33%	-9.36%	-9.33%	-6.52%	-7.44%	-13.98%	-26.65%
TXT	51.66	-1.08	-2.05%	-11.21%	-12.37%	-16.03%	-22.68%	-3.55%	-25.09%	-7.62%

The Industrials (XLI -2.97% W/W) had a tough week, largely due to the loss (-2.07%) on Friday. The close was 35.92.

FLR and ABB were strong but TXT, FDX and GE were not.

Interesting comparison between the styles of the FDX and GE CEO’s. The Fedex guy says business is terrible and not looking good for the foreseeable period, while Jeff Immelt at GE is always saying things are coming up roses. His stock, however, dropped -6.1% and is down -25.5% YTD and -29.9% over the past year. Yes, I think the company is better managed since Jack Welch retired, and it’s financially stronger and better positioned in the marketplace, but losing -30% in a year (and the Bear has just begun) is not going to endear Immelt to his Board.

For the most part, the Value Line report of April 11 on GE was a time and money waster. Shortly after publishing the report, calling GE a market outperformer at $38.43, the stock plummeted to 30 and is now down to 27.38, and falling. That’s what happens to companies with substantial financial operations, and a CEO who will only look on the bright side. The rest of the company looks healthy.

Nevertheless, the data shows that GE is sound overall and should be a core holding when entering new positions at or close to the broad market cycle bottom.

General Electric [GICS 20, Dow 30, Cara 100]
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Apr. 11: next one is due Jul. 11)

Like GE, I think that CEOs ought to be paid to hype their company. They’re leaders and leadership requires positive thinking and talking. It’s why I believe that corporate CFOs should be the only ones that deliver financial results.

Fedex (FDX) lost -6.3% this week and -3.24% a week ago. That’s a signal that the Industrial Production data coming this week is likely to be severe.

A week ago in this space I wrote, “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.”

This week, HON dropped -4.1% to $54.20. The support at $54 held for now.

And ABB was up +1.5%.

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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
GOL	12.79	-0.72	-5.33%	2.32%	-9.36%	-13.23%	-46.69%	-20.71%	-48.39%	-62.39%
EBAY	28.17	-1.00	-3.43%	-0.74%	-3.73%	-7.79%	-13.30%	-1.50%	-15.58%	-9.48%
BDK	58.50	-1.16	-1.94%	-2.94%	-5.81%	-8.42%	-16.34%	-12.91%	-16.93%	-34.08%
NKE	66.73	-1.11	-1.64%	-3.28%	-1.77%	2.65%	5.45%	-0.80%	1.09%	24.43%
WHR	66.00	-0.90	-1.35%	-3.68%	-3.99%	-8.83%	-17.38%	-25.63%	-19.07%	-42.41%
BBBY	28.81	-0.87	-2.93%	-4.06%	-5.45%	-8.42%	1.59%	-7.54%	-1.13%	-23.13%
CCL	35.47	-1.37	-3.72%	-4.11%	-4.73%	-6.53%	-18.76%	-13.26%	-19.40%	-28.18%
TM	97.71	-4.44	-4.35%	-4.87%	-4.80%	-2.76%	-8.22%	-5.28%	-7.70%	-21.01%
DIS	31.94	-0.95	-2.89%	-5.87%	-3.24%	-4.97%	0.31%	0.13%	-1.21%	-6.58%
JCP	36.88	-0.37	-0.99%	-6.56%	-4.38%	-8.96%	-11.45%	-12.44%	-15.22%	-50.24%
TGT	49.98	-1.82	-3.51%	-6.65%	-4.84%	-5.72%	0.95%	-4.53%	-0.46%	-22.21%
BC	11.87	-0.58	-4.66%	-9.73%	-11.22%	-21.08%	-29.85%	-31.82%	-33.46%	-64.68%

Consumer Cyclicals (XLY -5.80% closing at 29.88) was next to Financials (XLF -6.1%) the worst sector performer. The loss on Friday was -3.61%.

The big Cara 100 loser here was Brunswick (BC -9.73% W/W and -4.7% on Friday). At the close Friday, Brunswick was removed from the S&P 500 index due to its small capital size now. BC was added to the S&P SmallCap 600.

The US Retailers had a bad day Friday. I suspect they will have more days like that before the Bear hibernates. A check of my Retailer monitor shows a list of those that dropped -4% or more on Friday. Here is the closing price, $ change on Friday, % change:

Pacific Sunwear of California [PSUN] 9.18 -0.69 (-6.99%)
The Dress Barn, Inc. [DBRN] 14.52 -1.03 (-6.62%)
Coldwater Creek Inc. [CWTR] 5.71 -0.38 (-6.24%)
Dollar Tree, Inc. [DLTR] 35.25 -1.83 (-4.94%)
Dillard's, Inc. [DDS] 13.10 -0.65 (-4.73%)
Barnes & Noble, Inc. [BKS] 26.00 -1.28 (-4.69%)
RadioShack Corporation [RSH] 13.16 -0.60 (-4.36%)
99 Cents Only Stores [NDN] 7.20 -0.32 (-4.26%)
Starbucks Corporation [SBUX] 17.23 -0.76 (-4.22%)
Cache, Inc. [CACH] 12.55 -0.55 (-4.20%)
Pier 1 Imports, Inc. [PIR] 4.80 -0.21 (-4.19%)
Fred's, Inc. [FRED] 12.19 -0.53 (-4.17%)
Limited Brands, Inc. [LTD] 18.21 -0.76 (-4.01%)
Kohl's Corporation [KSS] 43.39 -1.81 (-4.00%)

As a chart watcher, I like to look at the ones that started their Bear ahead of the others, and look for similar patterns among a group of them. Typically the selling comes from ‘smart hands’ ie, insiders and large, sophisticated traders. What happens is that these traders are locking in profits, but thinking long-term to when they can get back in. Then it’s ‘first in- first out’ again in the next cycle. Most traders think the opposite is happening when they see the stocks of good companies tank ahead of the peer group, but I know better.

Peer group studies are very important in my assessment of the market.

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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	60.67	-0.38	-0.62%	-0.74%	5.92%	15.39%	17.51%	31.83%	14.62%	14.93%
PDA	57.34	-1.71	-2.90%	-2.42%	-0.80%	-2.73%	19.14%	14.61%	15.63%	61.29%
KR	26.90	0.41	1.55%	-2.54%	-1.47%	-1.14%	4.79%	5.91%	1.09%	-10.93%
WFMI	26.32	-0.25	-0.94%	-3.09%	-7.65%	-6.00%	-33.80%	-19.39%	-36.97%	-32.58%
KO	53.66	0.30	0.56%	-3.18%	-3.84%	-7.91%	-12.16%	-12.09%	-13.84%	4.21%
WAG	35.07	-0.37	-1.04%	-3.28%	-1.29%	-1.71%	-6.08%	-4.65%	-3.26%	-19.67%
PEP	65.08	-0.81	-1.23%	-3.64%	-0.67%	-4.83%	-13.56%	-8.58%	-14.92%	-0.67%
DEO	73.20	-0.11	-0.15%	-4.03%	-5.50%	-6.63%	-13.94%	-8.91%	-14.37%	-13.88%
ABV	65.57	-1.49	-2.22%	-4.72%	-1.16%	-10.99%	-9.53%	-14.71%	-8.41%	-8.04%
WMT	56.26	-1.43	-2.48%	-4.93%	-3.61%	0.37%	19.96%	5.69%	17.58%	15.79%
PG	63.16	-1.74	-2.68%	-4.95%	-3.38%	-3.75%	-12.65%	-8.95%	-13.70%	1.97%
SBUX	17.23	-0.76	-4.22%	-5.17%	-2.49%	0.82%	-10.77%	-1.71%	-16.07%	-36.93%

Consumer Staples (XLP -3.88% W/W) closed at 27.03.

Most of the leaders had a tough week: SBUX -5.2%, PG -5.0% and WMT -4.9%. That’s what happens to good companies in Bear markets. Trader have to learn how to sell and sell short, which brings to mind the write-up I did this week for Dr. Alex Elder’s new book. Buy it. Then we’ll discuss it in the Discourse, and Dr. Elder himself might wish to participate for a day. :-) (smiley goes here because I haven’t asked him.) But he did let me publish a brief excerpt, which starts with the timeless notion from the Book of Ecclesiastes. [You’ll find me write about it down under Time Series Analysis at this link.]

Sell & Sell Short
There is a time to grow and a time to decline. A time to plant and a time to reap.

That cute puppy bouncing up and down in your living room will some day become an old decrepit dog whom you will have to drive to the vet’s office to put out of its misery.

That stock you bought with such great hopes and which you enjoyed watching grow has now rolled over and is cutting into your capital instead of increasing it. It is time to shoot the puppy.

This is a book about selling.

Buying is fun. It grows out of hope, great expectations, a chest full of air. Selling is a hard unsmiling business, like driving that poor old dog to the vet for its final injection. But sell you must. And that’s what this book is about.

And once you and I talk about selling – that hard cold reality at the end of almost every trade – we will not stop. We will talk about selling short. Amateurs don’t know how to short and are afraid of it, but professionals love shorting and profit from declines.

Stocks go down much faster than they rise, and a trader who knows how to short doubles his or her opportunities. But before you sell short you must learn to sell and sell well.

So let us take off those rose-colored glasses and learn to sell.

Why Sell

We buy when we feel optimistic – or are afraid of missing a good thing. Perhaps you read a story about a new product or heard rumors of a merger. Maybe you ran a technical scan or found a promising chart pattern on the screen. You had some money in your account and called your broker or went on-line to place a buy order.

You’ve received a confirmation – now you own this stock. That’s when the stress begins.

If the stock stays flat and goes nowhere you feel restless. Did you pick a wrong one again?! Others are going up – should you sell yours?

If your stock begins to rise, it creates a different kind of anxiety. Should you take profits now, add to your position, or do nothing? Doing nothing is hard, especially for men, who are trained from childhood on ‘don’t just stand there, do something!’

When your stock drops, the anxiety becomes mixed with pain –‘I’ll sell as soon as it comes back to even.’

Amazingly, the most psychologically comfortable position for most traders is a slight decline in their stock. It is not sharp enough to be painful, and with the stock near your entry price there is probably not much reason to sell. With no action required, you have a perfect excuse to sit back and do nothing. It feels good not to have to make any decisions! That is how a small loss can gradually become bigger and badder.

If you throw a frog into a pot of hot water, it will jump, but if you heat it slowly, you can cook it alive. Traders with no clear selling plans can end up boiled alive.

The worst time for making any decision, including the one to sell, is when you feel under the gun. This is the reason why I urge you to write down a trading plan, as shown below, before you put on a trade (see How to Document Your Trading Plan). A good plan must outline your reasons for entering a trade, define your entry price, a protective stop, and a profit target. Setting stop and target levels means making a decision to sell. Making those decisions before you enter a trade allows you to use your brain instead of jumping in response to heat like some poor frog.

Psychologists have proven that the quality of decisions we make under stress is lower than those we make in a peaceful and relaxed frame of mind. You are likely to make better decisions, increase your profits, and reduce your losses if you write down your selling plan before you buy that stock.

A written trading plan accomplishes an amazing feat – it increases your profits and reduces losses!

So, why not do it?

Two reasons. First of all, most traders have never been taught what you have just read. Beginners and outsiders simply do not have the knowledge.

The other reason is that people like to dream. A written plan cuts into their sweet day-dreaming business. It feels nice to lean back and drift into a vague fantasy of riches. Sitting up straight on a hard-back chair and writing down your specific goals as well as a contingency plan robs you of that vague day-dream.

We all like to day-dream, but since you have picked up this book I will assume that you have chosen the pleasure of real money over that of day-dreaming. You probably want to learn how to sell, so that you can make more money while risking less.

In that case, we are on the same page. But before you write down your selling plan, let us review some of the key principles of buying. We also need to discuss the two key factors that separate winners from losers – money management and record-keeping. Armed with this knowledge, we will be ready to turn our attention to selling and then to shorting.

The book is from Wiley Trading and is available at Amazon.com.

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