On Tuesday, the market showed great resiliency by shrugging off bombings in India and reversing off the lows to end the day at the highs.  It was another big step in the right direction and it appeared the market was ready for a little run above key resistance levels (the 50 day moving averages of the Dow and S&P500).  That all changed with increasing tensions in the Middle East toward the end of the week.  With escalating violence and oil prices (break out to all time highs), the market turned tail, selling off with volume and setting up a move to retest the previous lows of the correction.  Despite the heavy selling of last week, there are no signs that the market is done selling.    I mentioned in a report during the week (www.investing.typepad.com), that the 2 year trend lines of the Dow and S&P500 are now in danger as well (the Nasdaq remains well below this important level of support).  With earnings kicking off in full force beginning this week, inflation data on Tues and Wed, FOMC minutes Thurs and the escalating situation in the Middle East, volatility will remain the name of the game.  I wouldn’t be surprised to see some sort of panic selling in the near future and a breach of those important trend lines.  How the market recovers from this kind of selling will be very important.  At this point, it’s best to get out of the way and let this market do its thing and test those trend lines from the sidelines. 

Following Tuesdays higher volume reversal, I made the mistake of anticipating a few more up days instead of being more patient and waiting for a confirmation move above resistance.  I initiated a couple more small long positions and was caught leaning the wrong way.  The Model Portfolio took a little hit, but damage was kept to a minimum as profits were locked in and losses cut quickly.  All  5 long positions were closed (3 Quick Strike Profit plays in CELG, BMRN and VRTX were closed for an average loss of 1.34%; 2 Breakout Stock plays were closed for an average loss of 4.15%).  The Model Portfolio was down about 1.5% for the week, but still well ahead of the S&P500 with a YTD gain of 12.9%, compared to a 1% loss for the S&P.

** Best/Worst Performers **

– Top 10 Performing Industries For the Week –

Oil stocks were clearly the leaders of last week, but considering the breakout to all time highs, those gains are not impressive.  There is a clear divergence right now between the price of crude and the price of most of the oil stocks.  Traders are probably waiting for the earnings of these companies to be released.  Keep an eye on how the stock prices react once earnings are released.

1. Multimedia & Graphics                  4.65%
2. Oil & Gas Equip & Services          2.80%
3. Major Integrated Oil & Gas            0.65%
4. Silver                                             0.65%
5. Independent Oil & Gas                  0.30%
6. Health Care Plans                          0.00%
7. Home Health Care                         -0.16%
8. Oil & Gas Refining & Marketing     -0.18%
9. Oil/Gas Drilling & Exploration         -0.20%
10. Banks – Southeast                       -0.25%

– Top 10 Worst Performig Industries For the Week –

1. Major Airlines                             -10.55%
2. Manufactured Housing                -9.90%
3. Catalog & Mail Order Houses       -9.90%
4. Farm & Construction Machinery   -9.75%
5. Regional Airlines                           -9.10%
6. Sporting Goods                            -9.10%
7. Residential Construction              -8.75%
8. Drug Related Products                 -7.90%
9. Music & Video Stores                  -7.50%
10. Building Materials Wholesale     -7.50%

– Top 5 Best Performing ETFs For the Week –
 
1. Ishares Gold (IAU)                        6.30%
2. StreetTracks Gold (GLD)              6.18%
3. Ishares Silver (SLV)                     3.75%
4. DB Commodity (DBC)                    3.60%
5. Ishares US Energy  (XLE)             2.00%

– Worst 5 Performing ETF’s –

1. SPDR Homebuilders (XHB)               -8.85%
2. Ishares Mexico (EWW)                     -6.95%
3. Ishares Japan (EWJ)                        -6.10%
4. Ishares Transportation (IYT)            -6.00%
5. Ishares Sweden  (EWD)                  -5.95%

**  IPO’s Set to Launch This Week **

It’s a real slow week for IPO’s

1.  NewPage Holdings (NWP):  The largest North American maker of coated paper by production capacity continues to operate at a loss.

** Upcoming Economic Reports (7/17/06- 7/21/06) **

Monday:        Industrial Production, NY Empire Manufacturing
Tuesday:       PPI
Wednesday:  CPI, Housing Starts, Petroleum Status, Mortgage Apps
Thursday:      Money Supply, FOMC Minutes, Philly Fed Survey, Jobless Claims
Friday:           None