Having worked both sell-side and buy-side at a high level, I understand what the market is. By way of explaining it simply, I often say that the market is a game that plays people rather than the other way around. In a similar vein, I say that stocks are sold and not bought. To finish the point, there is a set of negotiations underway between governments and bankers to see who retains control of capital markets, and each side is spinning the public. The bankers, who are the ones who sell the stocks, have stopped all activities. Ergo, prices are dropping and everybody is confused. That is the state of the market today.

In any case, these days I spend much of my time helping educate and inform the people about capital markets in order to facilitate their taking control. My basic message is that the owners of capital need to take control of their wealth and to stay away from debt, which is the only path to financial independence.

Some of you might recall the parody of the movie “Wall Street” I wrote back in 2004 and republished in 2005 for the sole purpose of showing how far off the rails America has been taken by bankers, ie, the sell-side. Here is the link.

Yes, value-add is good. In fact, the new financial system to be developed by the G-7 needs to be built on that principle, along with the following precepts:

• eradication of self-regulation and all possible conflict of interest dealings;

• independent and separate financial services and capital markets regulation as a subset of the federal judiciary, with filings managed by Finance ministers;

• removal of central banks and Government Sponsored Entities (GSE) like Fannie and Freddie as quasi government (public) financial institutions, putting them entirely back in the private sector;

• independent private sector depositories for securities and precious metals;

• independent marked-to-market vs cost basis double accounting;

• transparent and fully-disclosed credit markets and financial services, with the elimination of non-disclosed contingent liabilities and off-balance sheet items;

• required time-stamped, on-line XBRL filing of all public data, including all parts of financial reports, notes, management discussions, speeches, and news releases, from all parts of the public as well as the private sectors in each country;

• capital markets that are operated in the best interests of the owners of capital and not for the capital managers or administrators, and

• the universal (general) agreement on currencies to start as soon as possible, and a system for five-year re-balancing.

Every point here is an absolute requirement to build a foundation for global trade and investment that will best serve the world at large and not the interests of bankers. Hence, bankers will fight this tooth and nail, fearing the public will finally have that level playing field.

I fear it is now or never.

We are indeed reaching to get to the top of the hill whereupon we will be staring at the Himalayas. Should my principles-based plan be defeated at this point by central bankers and their own that have been moved, like Trojan horses, into the home of government, the next crisis – the one over pension benefits, healthcare, state and municipal bankruptcies – will be on us within five years. As Michael Panzner has written in his best-seller, Financial Armageddon, that one will drive the world into a global depression.

As nobody knows until some time later when the equity market complex actually has technically reverted from Bear to Bull – I opined that it has already done so notionally in October. With the events of this week, I ought to be saying the turnaround is happening. The bigger point is that it is.

I am a believer that monetary authorities around the world have the means, and have come to international agreement this week, to work in a coordinated manner to end the crisis with money taken from future budgets, and with a commitment to build a new financial system that will start with a universal agreement on currencies.

But the timing of the turnaround is akin to reversing the direction of a cruise ship versus a speedboat. In a dire emergency, with so many people shouting SOS, it’s a painful thing to watch. I get letters every day from people who have been wiped out. Thankfully I get even more letters from people all over the world whom I have never had the pleasure to meet to thank me for helping them save their wealth from this fiasco, so that they can enjoy the rest of their lives in the manner they want, largely as independent people, and people who will pass to their heirs a substantial sum.

In such depressing times, those ‘thank you’ letters are very much appreciated.

As to the capital market; I am now 45% invested in short puts in the shares of select high-quality Cara 100 companies (see my list of 36) plus 30% long the shares of some of these companies and 25% long gold futures. This is a bullish, but cautious stance. With the historically high extremes of volatility, however, the only chance to be successful is to trade positions on an intra-day basis.

I do empathize with people who cannot do that, whether they have self-directed brokerage accounts, or managed pension, mutual and/or hedge funds, particularly in the latter case where asset managers have been incompetent.

My objective with short puts is, in effect, to put in stink bids expecting that only a few are met with stock that is put to me by traders who are under duress of margin calls or other aspects of emotional or forced selling. That is a double win because (i) the stocks for some are acquired at a very low price and (ii) the remaining short puts expire worthless, which is my income while waiting for this market to become an apparent Bull. With the extreme conditions of the times, the option premiums have soared, making put writing a very profitable business.

Here is the October 1 list of three dozen stocks to consider buying (listed in alpha order). Each of these companies has respectable management, financial strength, operating margins, long-term returns on shareholder capital, industry leadership positions, and good products and services:

Sector 10: Energy
• ECA EnCana
• IMO Imperial Oil
• SU Suncor Energy
• XOM Exxon Mobil

Sector 15: Basic Materials
• Mostly precious metals at this point [25% invested after the $USD reaches a short-term cycle peak in a couple days as the Euro/Pound sinks due to the credit market crisis that monetary authorities there must stabilize].
• ABX Barrick Gold
• DOW Dow Chemical
• GG Goldcorp Inc
• SLW Silver Wheaton

Sector 20: Industrials and Transports
• ABB ABB Limited
• BA Boeing
• GE General Electric

Sector 25: Consumer Discretionary Spending
• None at this point until the credit markets recover
• After an initial rally from an over-sold condition, most of these stocks will likely miss the first leg of the Bull and start to lift say about March 2009

Sector 30: Consumer Staples
• DEO Diageo
• KO Coca-cola
• MCD McDonalds
• PG Procter & Gamble
• WAG Walgreens
• WMT Wal-Mart

Sector 35: Consumer Healthcare
• DNA Genentech
• JNJ Johnson & Johnson

Sector 40: Financial
• Only a few at this point until the credit markets recover
• After an initial rally from an over-sold condition, most of these stocks will likely miss the first leg of the Bull and start to lift say about March 2009
• HBC HSBC Holdings [very strong in the emerging economies]
• IBKR Interactive Brokers [brokers and traders and not dealers]
• OXPS OptionsXpress Holdings [brokers and not dealers]
• RY Royal Bank of Canada [very strong in the emerging economies]

Sector 45: Technology
• CSCO Cisco Systems
• DELL Dell Inc
• GOOG Google
• IBM IBM
• INTC Intel Corp
• ORCL Oracle
• QCOM Qualcomm Inc
• RIMM Research In Motion

Sector 50: Telecom
• MICC Millicom International
• NOK Nokia Corp
• TEF Telefonica SA

Sector 55: Utilities
• CCJ Cameco [not a utility technically speaking but supplies uranium]
• EXC Exelon Corp [uranium utility]

I stated at the time I originally published it, this list is lengthy but not complete. There are many other high quality companies that are trading at attractive prices. I reminded you that cycle bottoms happen in periods of fear (and when we have cash and credit available) just like cycle tops happen in periods of greed (and when we run out of cash and credit).

Late in the session on Friday, as market prices were being hammered beyond all reason, I listed 95 stocks, of which 15 are of Cara 100 companies, some of which were included in my list of 36. The last list was compiled by one of the Cara Trading Advisors associates, Pascal Willain, based on an assessment of extremely low debt to equity, hence independence from their bankers.

ADDENDUM 3:45pm ET

BUY ALERT Friday October 10 3:40pm ET

Here is a list of 15 Cara 100 stocks to BUY:
ADBE
AMAT
BBBY
CHL
CTSH
DELL
GRMN
INFY
INTC
NKE
NOK
NTES
QCOM
WAG
XOM

Here is a list of these 15 plus 80 more that I believe are worthy of buying here into the close.

These companies have very low debt plus good operating metrics. The source is Pascal Willain, who is a colleague I will introduce soon in my new website for clients of Cara Trading Advisors (Bahamas) Limited.

Good luck!

There was the following exchange in the Discourse 13 minutes later:

woah. i dont think i have seen Bill ever do that here.

[Bill Cara note: It's called putting it on the line. Traders have to make decisions. I just made a big one.]

Posted by: NYUgrad at October 10, 2008 3:53 PM [link]

I am not alone. One of the doyens of Wall Street, Muriel Siebert, in a Bloomberg interview on Friday evening, said: “Companies in the market represent value today. At these prices, they say “Buy me!”

I agree with that assessment; but I also think there are tactics like put writing and intra-day trading that one needs in order to seize the opportunity with a tolerable level of risk.

Muriel Siebert, in addition to always being outspoken, has been a pragmatist in her lengthy career. Pragmatism is defined as “a straightforward practical way of thinking about things or dealing with problems, concerned with results rather than with theories and principles.”

You see why I railed this week against the likes of Marty Feinstein and Bob Shiller, from the economic departments of Ivy League schools. When you are in the trenches of the trading wars, down and dirty as we certainly are at this point, you need people like Muriel Siebert at your side. Forty years as a member of the NYSE she has been a leader on the world financial stage.

Politicians, bankers, economists? You won’t find leadership there because they have never fought in the trenches. Those are the people who use our money and their words to their advantage. Sweet talkers; all of them in the same bed.

I am truly apolitical; but I tell you now: we need a Free America; a Free Canada; a Free Europe; personal sovereignty in every country. In many countries, thank God, we the people were given a Constitution that protects our rights and interests. Now that it is threatened, we need to stand up to those who are taking it from us. I have named the enemy: politicians, bankers, and economists.

There are national elections in the next month in the US and Canada. It’s not too late to take action against those political candidates for high office who refuse to protect our sovereign rights and interests.

But this Week In Review ought to be seen as a practical step for individuals to move back into equities. Let’s leave the social equity issues for another day. We have work to do, right now, so let’s get started.

Before we do, let me just take the time to applaud “Si02”, an engineer from Ottawa for his contribution to the viewers of BNN TV on Friday. Well done. Here is the link.

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Global Economics Review

Weekly International Economic Report .

I encourage everybody to read these reports and discuss them in the Discourse, but check the publishing date if you are looking for the latest data. The current issue, when posted, ought to be a good one.

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

US Economic Calendar.

US Pending Home Sales Index for August. Econoday reported, “In rare good news for the housing sector -- that couldn't come at a better time -- pending home sales surged 7.4 percent in August for a year-on-year gain of 8.8 percent. The West, which has been hurt the most, bounced back strongly, up 18.4 percent for a year-on-year gain of 38 percent. The results are a surprise given the credit squeeze but, as evidenced by this morning's mortgage bankers data, loan rates are coming down and are evidently attracting credit-worthy buyers… If pending sales are followed by gains in final sales, we could be seeing the bottoming for the sector whose weakness of course is at the center of the global credit squeeze. But improvement is tentative and in fact uncertain, underscored in a special warning by the National Association of Realtors that ongoing troubles in the credit market could disrupt final closings. Next housing data isn't until next week with Thursday's housing market index from the nation's homebuilders. Markets, focused on today's coordinated global rate cuts, showed no immediate reaction to the report.”

US Import and Export Prices for September. Following the data release, Econoday reported: “Import prices have come falling back steeply the last two months, reflecting lower energy prices but also slowing demand. Import prices fell 3.0 percent in September, the second severe drop in a row. The year-on-year change, though severe in the other direction at +14.5 percent, is still the lowest rate since February. Month-to-month, import prices were down across the board led by a 9.0 percent drop in petroleum products. Excluding petroleum, import prices posted a rare month-to-month dip, down 0.9 percent for a record decline and the first decline in a year-and-a-half. This reading is closely watched and indicates that price pressures are reversing… Export prices fell 1.0 percent in September following a 1.7 percent drop in August for a rare back-to-back dip. Year-on-year, export prices are up 6.8 percent, also the lowest rate since February… Cost pass through appears to have peaked, based on price readings for both exports and imports of both capital and consumers goods where prices, which had been on a steep climb earlier in the year, are beginning to retreat. Markets are not likely to pay too much attention to today's report which however does point away from the risks of inflation and offers support for central bank rate cuts to help the markets.”

US International Trade data for August. Econoday reported: “The U.S. trade deficit in August narrowed notably - primarily due to a drop in oil imports. The overall U.S. trade gap narrowed to $59.1 billion from a revised $61.3 billion shortfall in July and came in slightly wider than the consensus forecast for a $59.0 billion gap. In August, exports dropped 2.0 percent while imports fell 2.4 percent. Meanwhile the nonoil goods deficit worsened to $33.6 billion from $29.3 billion in July. The disconcerting part of this report is the drop in exports. Based on growing weakness abroad, the U.S. is losing what had been a key source of strength. On the news, equities fell and rates rose… The August decline in exports of goods reflected decreases in automotive vehicles; industrial supplies & materials; consumer goods; and foods, feeds, & beverages. Increases were seen in capital goods and the other goods category… Helping to lower the oil deficit was a drop in oil prices. The average price of imported oil declined to $119.99 per barrel in August, easing off from July's record high of $124.66 per barrel… Year-on-year, overall exports were down to up 15.9 percent in August from 20.1 percent in July while imports eased to up 13.4 percent from up 16.3 percent in July… Again, the negative news from a broader perspective is the slowing in exports. For the near term, the numbers indicate that the net exports component of GDP will shrink, offsetting negatives elsewhere to some degree.”

US Treasury Budget for September. After the data release, Econoday stated: “Following a deeper-than-expected $111.9 billion deficit in August, the fiscal year-to-date deficit is up 76 percent from this time last year, at $483.4 billion with two months still left in the government's fiscal year. Receipts are down 1.4 percent led by weakness in corporate taxes and individual taxes. At the same time that receipts are down outlays are up, up 7.0 percent year-to-date and led by an 11 percent jump in defense to a year-to-date $569.4 billion. Net interest expense shows the next largest increase at 4.5 percent… The nation's widening deficit is a major negative for the economic outlook, limiting the ability of government to manage the economy through tax cuts or spending and flooding the credit market with U.S. Treasuries. The monthly Treasury International Capital report, the next due out on Tuesday, is certain to take greater notice, offering data on foreign demand for not only Treasuries but also federal agency debt, a category that now appears to overlap with Treasuries and one that will begin to add new weight to the budget deficit as the Treasury begins to purchase mortgage-backed securities.

I think that most economists would agree that the latest econ data releases are not the reason that equity and commodity markets have been crashing. The crisis stems from a credit problem between banks. These banks no longer trust each other. The credit ring has broken; major banks are failing. That development impacts all lending, which puts all borrowers in a bind. Moreover, as these banks write down more bad assets, and tighten up credit, they are calling loans. Clients are selling securities and commodity market positions, which is driving down prices, forcing brokers to sell out under-margined accounts. This is a death cycle under the present circumstances where one bank doesn’t trust the next one. Until the banks themselves are stabilized, we should expect volatile prices. This is a time, once every generation, where the practice of stink bidding works well. Prices often come down to your lowest bid. If they don't, you keep the premium as your income.

Central banks this week dropped their key lending rates by -50 basis points across the board except for Switzerland where the drop was -25 bp. Like the bail-out plans, nothing is working to stop the crisis because as I stated in a previous report, you cannot force a bank to do something the directors think is counter to the interest of those in control.

The G-7 plus regional country groups are meeting in emergency session this weekend and into the week to come up with a coordinated emergency plan. The plan that Treasury Secretary Paulson wants is to buy non-voting interests (preferred shares) in certain banks. That is a senseless plan that any honest, independent banker would never do. But the man is in control of the Treasury and can do pretty much what he wants at this point.

The crisis, I feel, is more in who’s running the show and that the US Constitution is not being honored. This is a political crisis now.

How is next week’s calendar looking?

US Economic Calendar.

US Retail Sales for September. After the August data release, Econoday reported, “The weak jobs market is pulling back consumer spending as retail sales fell for a second straight month, down 0.3 percent in August vs. a downwardly 0.5 percent drop in July (-0.1 previously reported). The August number was far worse than the market projection for a 0.3 percent gain… Outside of vehicle sales, which were strong due to GM incentives, August sales showed wide declines: electronics -1.3 percent, building materials -2.2 percent, general merchandise -0.2 percent, non-store retailers -2.3 percent. Gasoline sales, reflecting lower prices and soft demand, fell 2.5 percent. Autos did jump, up 1.9 percent to limit the overall damage in August… Excluding autos, sales plunged 0.7 percent, a very low reading for this category. The consensus had expected a 0.2 percent dip in ex auto sales. Excluding both autos and gasoline, retail sales still were notably negative, falling 0.4 percent after rising by the same amount in July... Overall retail sales on a year-on-year basis in August were up 1.6 percent - down from 2.1 percent in July. Excluding motor vehicles, the year-on-year gain came in at up 5.5 percent while excluding motor vehicles and gasoline, the year-ago increase stood at 5.9 percent… Treasury yields and the dollar moved lower in immediate reaction to this report and a big headline drop in the PPI. But the bottom line is that the consumer sector is running out of steam. Today's report adds to the argument that Q3 will be flat. Equities likely will be soft - especially in the consumer discretionary sector.”

US Producer Price Index for September. After the August data release, Econoday reported: “Producer price inflation in August turned negative at the headline level due to a drop in energy costs. Meanwhile, core inflation eased at least temporarily from heavy discounting by auto dealers. The overall PPI fell 0.9 percent, partially reversing July's huge 1.2 percent spike. August's decline was greater than the consensus projection for a 0.5 percent drop in the overall PPI. The core PPI rate eased to 0.2 percent, after jumping to 0.7 percent in July. The August core matched the market forecast for a 0.2 percent gain… As expected, energy pulled headline inflation down in August with a 4.6 percent drop after a 3.1 percent boost in July. Food price inflation was unchanged at 0.3 percent… Indeed, the core was pushed down by discounting by auto dealers. Passenger cars slipped 0.3 percent while light trucks dropped 1.9 percent. Otherwise, core components were mixed… For the overall PPI, the year-on-year rate slipped to up 9.7 percent from 9.8 percent in July (seasonally adjusted). The core rate rose to up 3.7 percent in August from up 3.6 percent the previous month… Today's PPI report is favorable toward bonds as is this morning's retail sales report which came in notably weak. Equities will likely focus on the deteriorating consumer sector and will likely be headed down.”

US Consumer Price Index for September. After the August data release, Econoday reported: “Consumer price inflation in August eased sharply on lower energy costs. The headline CPI declined 0.1 percent, following a 0.8 percent jump the month before. August's decrease matched the market forecast for a 0.1 percent dip. The core rate slowed to a 0.2 percent rise from July's boost of 0.3 percent. The consensus had forecast a 0.2 percent increase… Pulling the overall CPI down was a monthly drop of 3.1 percent in the energy component, after a 4.0 percent boost the month before. Gasoline dipped 4.2 percent in August. Food inflation also slowed but remained quite elevated with a 0.6 percent increase, following a 0.9 percent surge in July. Higher production costs are still feeding into food production… The modest easing in the core was led by a 1.1 percent drop in lodging away from home, along with decreases for new vehicles and used cars & trucks, down 0.6 percent and 0.3 percent, respectively. Also, owners' equivalent rent remained low with a 0.1 percent increase - matching July's rise. Apparel slowed but remained high at 0.5 percent, following a 1.2 percent jump the month before. Recreation firmed to 0.5 percent after a 0.4 percent gain in July… Year-on-year, the overall CPI eased to 5.4 percent (seasonally adjusted) in August from 5.5 percent in July. The core rate was unchanged at 2.5 percent… The latest inflation news looks good at face value for both headline and core numbers. But the detail shows mixed trends. The decline in energy costs was expected but we may see some reversal from shortages of gasoline and natural gas due to the impact of Hurricane Ike. Elevated energy costs are keeping food inflation high. For core components, economic weakness is pulling some prices down as is a glut of new and used motor vehicles. But import prices are keeping apparel on the high side.”

US Industrial Production for September. After the August data release, Econoday stated: “Industrial production in August fell sharply with declines somewhat widespread. Overall industrial production fell 1.1 percent in August, following a 0.1 percent rise in July. The August decrease was worse than the consensus forecast for a 0.3 percent decline. The manufacturing component dropped 1.1 percent, after a 0.1 percent rise in July. Utilities output fell 3.2 percent in August, while mining output decreased 0.4 percent… For manufacturing, weakness was heavily from an 11.9 percent drop in motor vehicles & parts. Excluding motor vehicles, manufacturing output slipped 0.3 percent after a 0.1 percent dip in July. Notable declines were also seen in nonmetallic minerals, electrical equipment, furniture, apparel, petroleum & coal, and plastics & rubber products. Notable gains were found in wood products, primary metals, and printing… On a year-on-year basis, industrial production in August slipped to down 1.5 percent from down 0.4 percent in July… Overall capacity utilization in August declined to 78.7 percent from 79.1 percent in July and compared to the market forecast for 79.5 percent for the latest month… Today's report shows manufacturing to be weak and should weigh on equities and will only add to market concerns over the Lehman Brothers' bankruptcy.”.

US Housing Starts for September. After the August data release, Econoday reported: “Housing starts in August continued its downward spiral as tight credit and bloated supplies of unsold homes continue to depress new construction. Starts fell 6.2 percent, following a 12.4 percent drop in July. The August pace of 0.895 million units annualized was down 33.1 percent year-on-year and fell short of the market forecast for 0.950 million units. The decrease in starts was led by multifamily starts, which dropped 15.1 percent, after a 28.7 percent fall in July. Single-family starts also declined but at a much more moderate pace, decreasing 1.9 percent in the latest month, after dropping 3.2 percent in July… By region, the drop in starts was led by a monthly 14.5 percent decline in the Northeast with the Midwest and South also declining, by 13.6 percent and 7.4 percent, respectively. The West rebounded 10.8 percent… Permits also declined in August, falling 8.9 percent, following a 17.7 percent decrease in July. August's 0.854 million unit pace for permits was down 36.4 percent year-on-year… Today's report shows further deterioration in the housing sector. Equities will not like the news but bonds should. The further decline in this sector will give next week's existing and new home sales reports even more attention. The latest starts numbers also point to a decline in the residential investment component of third quarter GDP.”

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US Equity Markets Review

DJIA ino.com chart

DJIA stockcharts.com chart

History was made this week. The DJIA and S&P 500 took the biggest percentage weekly loss in almost 100 years.

All ten sectors were down for the week, and over the week all 30 DJIA components were down, but on Friday there were three sectors up and 7 own. Trading volume zoomed.

The losses this week will long be remembered as five of the DJIA 30 were down over -25%: General Motors (GM -45.7%); Alcoa (AA -41.5%); Bank of America (BAC -39.5%); Chevron (CVX -27.2%); and American Express (AXP -25.0%).

That is unprecedented.

A week earlier, American Express also got hammered: (AXP -21.9%) and Alcoa (AA -18.3%).

Alcoa, Chevron and American Express are fine companies and their share prices will come back. General Motors and Bank of America, however, may be burnt toast.

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NASDAQ Composite ino.com chart

NASDAQ Composite stockcharts.com chart

The NASDAQ Composite plunged -15.3% this week. The good news is that this index had a gain of +0.3% on Friday.

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

If you find these stocks rallying hard on high volume next week, then I believe you will be watching the power of the Bull.

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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Sector ETF Summary for the US equity market

Again this week, there were zero sectors up and 10 down. The week before that wasn’t a good one either.

The worst this week were Energy (XLE -24.9%) and Telecom (IYZ -21.9%).

Here’s the SPY Monthly, Weekly and Daily data charts: [I apologize for the bad data from the vendor]

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
SMH	20.30	-0.22	-1.07%	-11.35%	-21.47%	-21.17%	-35.27%	-28.45%	-33.42%	-46.71%
XLP	23.60	0.20	0.85%	-13.33%	-14.80%	-19.04%	-16.87%	-12.98%	-15.62%	-16.01%
XLB	25.68	-0.62	-2.36%	-13.77%	-27.13%	-32.83%	-37.82%	-34.47%	-39.89%	-40.61%
XLK	15.90	-0.10	-0.63%	-14.56%	-23.56%	-26.42%	-39.13%	-29.11%	-31.55%	-42.68%
XLY	22.13	0.46	2.12%	-14.72%	-24.34%	-28.96%	-31.27%	-18.43%	-29.72%	-41.46%
XLI	23.54	-0.78	-3.21%	-14.86%	-25.44%	-30.99%	-38.87%	-29.73%	-37.92%	-43.19%
IYH	50.23	-1.68	-3.24%	-17.07%	-21.15%	-23.53%	-28.35%	-20.75%	-22.27%	-30.56%
SPY	88.50	-2.20	-2.43%	-19.79%	-26.77%	-29.81%	-38.94%	-29.37%	-34.94%	-43.35%
XLU	25.76	-1.09	-4.06%	-19.83%	-25.40%	-29.39%	-38.80%	-36.86%	-34.42%	-37.14%
XLF	15.10	1.41	10.30%	-19.85%	-29.41%	-28.74%	-46.76%	-21.52%	-41.02%	-57.46%
IYZ	15.03	-0.15	-0.99%	-21.92%	-29.24%	-34.77%	-48.47%	-35.22%	-36.53%	-55.59%
XLE	43.40	-1.85	-4.09%	-24.89%	-35.89%	-36.96%	-45.41%	-47.29%	-44.85%	-43.51%

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
STO	18.00	-0.43	-2.33%	-15.53%	-28.40%	-29.69%	-42.38%	-47.89%	-45.11%	-44.08%
SLB	60.50	-0.05	-0.08%	-16.59%	-29.68%	-31.78%	-39.85%	-39.03%	-34.67%	-44.12%
PTR	79.49	4.86	6.51%	-18.05%	-28.70%	-29.38%	-54.22%	-37.25%	-39.37%	-57.63%
TOT	46.20	-1.68	-3.51%	-18.16%	-28.49%	-28.70%	-44.52%	-41.98%	-41.10%	-40.78%
XOM	62.36	-5.64	-8.29%	-19.99%	-22.68%	-19.54%	-33.31%	-27.54%	-30.36%	-33.04%
RIG	69.05	-8.62	-11.10%	-27.05%	-43.32%	-43.72%	-52.69%	-52.87%	-53.16%	-39.66%
CVX	57.83	-6.17	-9.64%	-27.15%	-33.49%	-31.35%	-38.12%	-39.92%	-35.46%	-37.20%
PBR	26.10	-1.49	-5.40%	-28.92%	-43.94%	-42.89%	-78.03%	-57.73%	-77.34%	-68.70%
CEO	74.09	-2.37	-3.10%	-29.22%	-40.87%	-39.83%	-55.75%	-56.61%	-53.48%	-55.44%
ECA	38.65	-5.01	-11.48%	-29.39%	-44.23%	-42.76%	-44.48%	-53.40%	-51.41%	-38.64%
IMO	25.75	-3.07	-10.65%	-32.70%	-42.65%	-41.61%	-53.11%	-50.54%	-52.43%	-45.69%
SU	22.67	-1.58	-6.52%	-32.75%	-50.03%	-52.01%	-58.88%	-61.11%	-57.74%	-53.25%

Crude Oil ($WTIC closed the week down -16.93% this week to 77.99. A week earlier the drop was -12.17%.

A week ago I wrote here, “I do think many of the oil-heavy hedge funds were on the ropes and are now dead, which could take HB&B a week or two to clean the blood off Wall Street… Now that the $100 psychological level didn’t hold and 90 is looking precarious, is another of my earlier targets (80-85) ready to be hit?” The 80 level might hold.

The monster hit to the Crude Oil price over the past two weeks explains the monster hit to the related stocks. Energy ETF (XLE) plunged -24.89% this week, which was on top of the prior week drop of -14.65%.

XLE has fallen to 43.80. Three months ago, XLE was 90.

In two weeks, XLE is down -35.9%; and in 4 weeks it’s down -37.0%, in 3 months it’s -47.3% and 6 months its -45.0% -- worst in class (10th out of 10) in every time frame.

Exxon (XOM), which is a Buy pick of mine, dropped -20.0% this week; and -22.7% in 2 weeks, -19.5% in 4 weeks; -27.5% in 3 months and -30.4% in 6 months – not nearly as bad as the sector ETF (XLE). That’s because XOM is a quality company, and Cara 100.

But a one week loss of -20% is terrible. The price is $62.36.

When did I recommend that traders sell this stock? Yes, in November 2007, at 94, and again in December at 95. Nobody who reads this blog missed what I wrote about the biggest US-headquartered company.

Bill Cara: Week in Review #45 (2007-11-10)
I won’t harp on this, but Mr. Exxon is down to 86.85 and headed lower. Yes, as I wrote earlier, ...
billcara.com/archives/2007/11/week_in_review_45_20071110.html

Bill Cara: Week in Review #50 (2007-12-16)
Despite much higher crude oil prices and processed prices, Exxon actually made ... Tell them you sold XOM at 94 and that you still think it’s a world-class ...
www.billcara.com/archives/2007/12/week_in_review_50_20071216.html

Bill Cara: Week in Review #51 (2007-12-23)
XOM, Exxon Mobil Corp. .... It’s possibly giving you yet another chance to sell XOM at 94 or better. You’ll look back in six months and say thank you, ...
billcara.com/archives/2007/12/week_in_review_51_2007-12-23.html

Bill Cara: Week in Review #52 (2007-12-30)
Exxon (XOM) had a terrific week in the market, moving from $93.43 to $95 for a ... Now you know I say that six months from now your having sold XOM at 94 ...
billcara.com/archives/2007/12/week_in_review_52_20071230.html

Bill Cara: Week in Review #3 (2008-01-20)
It’s possibly giving you yet another chance to sell XOM at 94 or better. ... Yes this week XOM (-5.8 pct) and Baby Exxon (IMO) (-5.7 pct) were actually the ...
billcara.com/archives/2008/01/week_in_review_3_20080120.html

Bill Cara: Cara's Commentary & Community Chat, Wed., Feb. 6, 2008 ...
Look at the billions lost in Exxon market cap since I urged traders to get out at 94-95. It's almost got a 70's handle now. ...
billcara.com/archives/2008/02/caras_commentary_community_cha_124.html

Bill Cara: Week in Review #6 (2008-02-10)
XOM, Exxon Mobil Corp. .... Isn’t it nice when a plan (ie, “sell XOM at 94-95”) works out? The 200-day Moving Average of $WTIC is up to 80.07 from 79.46, ...
www.billcara.com/archives/2008/02/week_in_review_6_20080210.html

Bill Cara: Week in Review #11 (2008-03-16)
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 ...
billcara.com/archives/2008/03/week_in_review_11_20080316.html -

Bill Cara: Daily Report for Thu, Jul 17, 2008
Exxon for instance was one I repeatedly discussed as a candidate to sell in the 94-95 level and buy in the 70’s. You had that chance in April and again in ...
www.billcara.com/archives/2008/07/daily_report_for_thu_jul_17_20.html -

Bill Cara: Bill Cara's Community Chat, Mon., Aug. 4, 2008, 9:30am ET
... you will start to read all kinds of nonsense that Exxon is a lousy company, yada yada. Laugh at them. Call them clowns. Tell them you sold XOM at 94 and ...
www.billcara.com/archives/2008/08/bill_caras_community_chat_mon_13.html -

Now read what I wrote the last time I analyzed Exxon, just four weeks ago:

By following along this blog, you can see clearly that I was shouting out SELL at prices over 94 for XOM, indicating later that I wouldn’t buy until the mid-70’s, but with expert use of put and call options (conservatively applied), I believed a trader could acquire XOM at a price in the high 60’s, perhaps 68.

I am confident of that because these are stable, very large cap companies with very few meaningful “surprises”. That means you can confidently apply put and call option strategies. At what I believe is a cycle bottoming condition, I write puts at strike prices where I find solid economic value (ie, very low capital risk), and where I believe I have an upside Total Return growth of say +26% per year.

With XOM, if my cost base is say 68 and my two-year target is say 120 (low end for VL forecast), plus a growing dividend (one that I project to be $1.55 (2008), $1.78 (2009) and $2.02 (2010), you will significantly exceed your performance expectations. You will even beat it if your next sale at say 120 takes three years. VL is projecting up to ~145 for XOM into the 2011-2013 period, based on 10x cash flow per share of $14.65. This is a reasonable analysis and conclusion.

If there is a roaring bull market between now and say 2011, which is quite possible, then 145 is also possible. But, I am more conservative; I don’t think the global economy is going to be that hot, so I’ll stick to the long-term 120 price target. With the extensive stock buy-backs in process, I could see that Earnings Per Share might approach say $10.50 in 2011, so a 120 price target would require a PE of 11.4, which in a Bull market would be quite reasonable.

Exxon will remain a core component of my portfolio. Well-timed put writes plus a solid dividend (please make it higher) give me high income, and well time purchases of the stock and long calls provide solid capital growth. What’s not to like.

I won’t even argue that many of you were waiting until the price of XOM got down to 68, and when you saw the price of Crude Oil collapsing, the $USD soaring, and the broad market looking awfully shaky, you froze, which means you sold at 94 and you are still out at $62.36. I will presume you did buy at an average of 68, which means your present holding is down -8.3%, and you are concerned. But if you sold at 94, you missed a loss of -27.7%.

If on Friday you wrote the Jan 60 puts for at least +8.00, your cost is now 60 and you have given another trader the opportunity to put more XOM to you at 60. So, your cost basis is at worst 60. Wow!

Now work those numbers above where I said that I expect to see a 2011 price of 120 for XOM based on a reasonable PE of 11.4 and Price to cash flow/share of 10 (remember that’s a Bull market I am projecting for 2011). There is nothing wrong with a double in three years, and with solid dividends that I project to be $1.55 (2008), $1.78 (2009) and $2.02 (2010), that’s another $5.25 (pre-tax) income to lower your cost basis.

Muriel Siebert has it right. At $62.36 for XOM and a massive $8.00 premium for the Jan 60 put write, some stocks are just screaming, “buy me”. The present Monthly-Weekly-Daily RSI-7 is at 19.6/18.2/17.3. With these RSI numbers and price protection down to $54.36, plus those dividends, I think you ought to buy it now (and write the January 60 puts). I wouldn’t wait for the Daily RSI-7 to cross back above 30 because this stock could be 70-72 before you blink.

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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 Basic Materials:

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	30.75	1.00	3.36%	-11.51%	-30.68%	-37.74%	-46.96%	-53.71%	-57.08%	-47.26%
DOW	24.40	-1.39	-5.39%	-18.37%	-28.17%	-32.69%	-37.03%	-24.97%	-36.79%	-45.54%
PKX	65.10	3.65	5.94%	-19.35%	-35.72%	-35.09%	-55.55%	-47.71%	-47.13%	-65.83%
BHP	37.25	-1.43	-3.70%	-20.91%	-36.71%	-39.43%	-47.10%	-51.38%	-52.23%	-54.60%
RIO	12.06	-0.13	-1.07%	-23.53%	-42.27%	-50.29%	-63.13%	-61.74%	-66.88%	-64.79%
RTP	170.75	-4.09	-2.34%	-24.11%	-36.99%	-47.53%	-59.32%	-60.30%	-63.35%	-52.81%
TS	24.10	-1.60	-6.23%	-26.28%	-42.62%	-49.43%	-45.71%	-64.45%	-53.02%	-54.18%
TCK	14.31	-2.36	-14.16%	-32.94%	-55.87%	-61.02%	-60.51%	-66.02%	-69.46%	-72.52%
GGB	5.980	-0.170	-2.76%	-34.36%	-52.27%	-58.50%	-79.16%	-72.59%	-83.77%	-79.99%
MT	29.17	-2.33	-7.40%	-34.63%	-48.73%	-55.44%	-61.82%	-67.58%	-65.94%	-62.66%
VCP	7.210	-0.790	-9.87%	-34.99%	-57.54%	-65.15%	-75.72%	-72.40%	-77.21%	-75.04%
AA	11.25	-1.21	-9.71%	-41.53%	-52.21%	-60.76%	-68.86%	-67.49%	-68.85%	-70.95%

Basic Materials (XLB -13.77% to 25.68) was the third best sector performer this week. Partly the reason is because XLB had sold off -15.49% the previous week, which made it the worst performer.

The winner on my monitor (relatively speaking!) was Nucor (NUE -11.5%), which means that some of the real losers got whacked. How about Alcoa, down -41.5% this week (-52.2% over two weeks!)? Will the auto industry really shut down for good so that aluminum is no longer needed? How about aluminum foil or pop and beer cans?

Alcoa was not alone. How about one of my favorites, Votorantim Pulp & Paper, a great family owned company in Brazil, now down to $7.21, which happens to be 2003 prices. VCP plunged -35.0% this week and is down -57.2% in two weeks. The RSI-7 for M-W-D is 17.5/3.9/12.7. Yes, a weekly RSI-7 of 3.9. This is a Cara 100 company. Look into it.

Another disaster is Teck Corp, headquartered in Vancouver Canada, in my view the best diversified metals miner in the world, with excellent management. TCK this week plunged -32.9% and is down -55.9% over two weeks. That’s a full Bear market each week. TCK is down to $14.31. The 52-week high was $53.80 on May 21. The RSI-7 for M-W-D is 23.7/11.2/12.0. Wow. Look into it.

In the Energy section, I could have said the same for EnCana (ECA) and Suncor (SU).

You know that early this year, I did not like the prices of any of these stocks; but I’m telling you I do now. Back in Feb-May, every mining analyst and oil analyst in the Humungous Bank & Broker world was telling clients to Buy! Now many of them no longer have jobs, or like the staff at Bear Stearns, Lehman, Merrill Lynch, Morgan Stanley and maybe Goldman Sachs, they are personally suffering as bad as most of their clients.

How about that Merrill Lynch, down this week -40.9%! Still, their legal department has sent me a letter and a follow-up letter a week later to remove four of their reports from twenty-four months ago from my blog. At first I thought maybe the lawyers at Merrill Lynch had better things to do these days. Then I figured the law department must be trying to spend the billions paid by Bank of America before they sink into oblivion. You know, kinda like a work program to improve the resume (“October 2008; I put Bill Cara in his place!”). Now, I figure there could be bad advice in those reports that they don’t want class action lawyers to find on the internet. Whatever. I did promise to remove the four two-year old reports and I will if I can find them, the moment I get 15 clear minutes.

Life on Wall Street has really changed.

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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
GE	21.50	2.49	13.10%	-0.32%	-14.85%	-19.63%	-41.51%	-22.21%	-41.50%	-48.58%
FDX	68.36	1.56	2.34%	-12.36%	-16.18%	-24.75%	-20.66%	-9.12%	-27.54%	-36.28%
UTX	47.63	1.30	2.81%	-13.18%	-21.74%	-26.11%	-36.67%	-23.39%	-33.71%	-40.83%
UPS	51.70	-1.30	-2.45%	-14.91%	-19.71%	-24.64%	-25.25%	-12.82%	-27.52%	-32.27%
CAT	43.13	-1.67	-3.73%	-15.78%	-32.75%	-34.11%	-38.94%	-36.96%	-43.03%	-46.86%
MMM	54.26	0.76	1.42%	-16.01%	-21.87%	-22.65%	-34.40%	-21.27%	-32.47%	-43.37%
FLR	37.94	-1.27	-3.24%	-18.86%	-31.65%	-41.64%	-47.45%	-56.72%	-50.21%	-52.08%
HON	30.60	-0.79	-2.52%	-19.13%	-30.72%	-35.65%	-48.91%	-40.29%	-47.96%	-49.60%
ABB	13.85	-0.46	-3.21%	-21.75%	-31.30%	-35.07%	-51.64%	-48.32%	-48.70%	-49.51%
BA	41.80	-2.61	-5.88%	-22.35%	-28.33%	-33.97%	-51.74%	-36.66%	-46.70%	-57.64%
TXT	19.03	0.74	4.05%	-24.54%	-41.43%	-51.10%	-71.52%	-60.02%	-66.85%	-69.87%
ERJ	17.20	-1.43	-7.68%	-28.42%	-40.57%	-44.50%	-61.89%	-36.79%	-60.86%	-65.31%

The Industrials (XLI -14.86% W/W) closed at 23.54. Was down -12.42% a week earlier too. Feels like a Bear market.

Bad joke. Dark humor.

Brown Bear. Definitely not a Polar, although the temperature of this market is definitely ice cold.

General Electric (Cara 100) had a terrific session on Friday (up +13.1%), and closed up +0.32% W/W to $21.50.

But how about that Textron? Textron is definitely not a Cara 100, but its on my monitor to help me figure out what’s going on, or going down actually because TXT was about 65 to start June and is now down to $19.03. The loss this week was –24.5%, making it -41.4% over two weeks.

Does this not tell you that traders (i) need stops, and (ii) often have to day trade or else sit it out in cash?

Brazil’s aircraft maker, Embraer (ERJ) dropped -28.4% this week and -40.6% over two weeks. Ouch. This is a Cara 100, and I like it at $17.20. ERJ was more than double that a month ago. The M-W-D RSI-7 is now at 23.1/14.4/9.9.

Boeing, Bombardier or Embraer – take your pick. I assure you they will still be making planes next quarter, next year, and the year after that. And, probably be making solid profits too.

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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
WHR	66.90	2.40	3.72%	-5.95%	-20.70%	-23.60%	-16.25%	7.56%	-21.49%	-27.50%
BDK	52.05	0.92	1.80%	-6.84%	-17.24%	-23.06%	-25.57%	-5.31%	-22.81%	-36.59%
BBBY	26.19	-0.35	-1.32%	-10.74%	-18.77%	-18.31%	-7.65%	-7.78%	-11.73%	-25.32%
EBAY	16.73	0.77	4.82%	-11.67%	-25.88%	-25.81%	-48.51%	-40.63%	-47.65%	-57.52%
NKE	54.53	1.45	2.73%	-13.79%	-19.56%	-11.93%	-13.83%	-2.05%	-19.06%	-11.85%
CCL	28.02	0.10	0.36%	-14.42%	-21.07%	-31.82%	-35.82%	-9.26%	-30.40%	-45.10%
TGT	37.00	-0.53	-1.41%	-15.25%	-28.11%	-35.38%	-25.27%	-17.58%	-30.40%	-43.74%
TTM	5.910	0.100	1.72%	-17.11%	-29.64%	-36.11%	-69.61%	-36.99%	-62.16%	-70.83%
TM	61.25	-1.15	-1.84%	-21.5