Wiser Trader Stocks and Options Newsletter

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Issue No. 73   April 17, 2006 Prescott, Arizona Systems@WiserTrader.com

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1.0 Trading

      As earnings season moves into high gear, we take a snapshot of market performance.

1.1 Market Caution

        The chart in Figure 1 illustrates how the market has recently become more cautious.  The S&P is about 3.7% above its 200-day SMA. 

FIGURE 1

© 2006 Desert Mountain Systems, LLC.  Members of wisertrader.com are neither licensed brokers nor licensed advisors.  Trades discussed represent recommendations made by the editor for the wisertrader.com portfolio.  The newsletter and web site are for information only and should not be considered as personal advice.  While it is believed that the posted information is factual, mistakes can be made in transcription.  Investors should trade stocks only after verifying all information and consulting with a licensed broker or adviser.  Desert Mountain Systems markets third party trading systems but has no other affiliation with trading system companies. 

1.2 Industry Tracking

     Tracking industry performance can be tricky if one is trying to monitor the complete market.  Standard and Poor provides reports on 51 industries at its website.  The Dow Jones industry listing at BigCharts.com divides the market into 10 sectors and 95 distinct industries.  Investors Business Daily tracks 192 industries.  The American Association of Individual Investors (AAII) classifies companies into 12 sectors and 102 industries.  Yahoo.com tracks 9 sectors containing 212 industries.  Other systems coming into wide use have chosen to change the meaning of the terms sectors and industries.  Companies belong to an industry in one system may not belong to an industry having a similar name in another system.  When the press and media report industry performance, it is not usually stated which system is being used. 

      With all the different systems of industry classification, one needs a cross reference from one to another.  Without such a cross reference, it can be difficult to feel confident that one has a clear picture.  Unfortunately, no such cross reference has been found. 

     This newsletter uses two systems.  The leading and lagging industry lists in Section 2 use the Dow Jones system of 10 sectors and 95 industries.  The Dow Jones industry performance list is updated daily at BigCharts.com.  The watchlists in Section 3 use the AAII system of 12 sectors and 102 industries.  AAII does not provide relative industry performance. 

     A third system described today is the Yahoo system of 9 sectors and 212 industries.  Yahoo updates industry performance on an ongoing basis, hence its unique value.  Industry performance can be automatically retrieved into Microsoft Excel with a 20-minute delay using XLQ.  This allows one to sort the best and worst performing industries at any time of the day according to short and long-term criteria. 

     Table 1 is an example of a small portion of an Excel spreadsheet where the top 10 industries are sorted according to the number of up days out of the last 17 days.  Interestingly, the waste management industry has been the must consistent performer but the copper industry has had a much higher percentage gain over the past 15 trading days. 

     Table 2 shows a small portion of the bottom portion of the same Excel spreadsheet where the top 10 industries are sorted according to the number of up days out of the last 17 days.  Confectioners have been the least consistent performer with the highest percentage loss over the past 15 trading days.  This is no doubt due to the rising price of sugar needed to make ethanol that is in short supply. 

      The use of 17 for the number of days is incidental to the number of trading days the spreadsheet has been in use.  Macros were added to update the performance history at the end of each trading day and sort the entire list according to any of the columns shown with a single control key entry.  Once a history of about 20 days (4 weeks) has been built up, the spreadsheet will become available to any Excel user who has downloaded XLQ-Plus, which is required to make it work. The spreadsheet does not require the AAII Stock Investor Pro software.  Let me know if you want a free copy.  XLQ-Plus can be evaluated free for 45 days.  If you are already an Excel user, I strongly recommend evaluating its many automated data retrieval features.

Table 1 – Ten Leading Industries Sorted by Number of Up days out of 17

Sector	212 Yahoo Industries	4/13/06	W%R	5 Days	10 Days	15 Days	Up Days
	Average gain of all Industries       4	0.2%		Prior	Prior	Prior	Out of
	Percentage of industries Gaining    4	61%		Gain	Gain	Gain	17
Industrial Goods	Waste Management	0.5%	0	1.1%	3.9%	6.0%	94%
Services	Basic Materials Wholesale	0.1%	-48	-0.9%	0.7%	5.0%	82%
Services	Consumer Services	0.4%	-72	-4.3%	-1.8%	0.6%	76%
Industrial Goods	General Building Materials	0.6%	-45	-0.7%	1.7%	3.5%	76%
Basic Materials	Industrial Metals & Minerals	-0.5%	-38	-1.3%	3.6%	11.3%	76%
Basic Materials	Copper	0.7%	-28	-0.3%	2.6%	12.8%	76%
Basic Materials	Oil & Gas Drilling & Exploration	0.6%	-9	-0.9%	-0.3%	4.8%	76%
Basic Materials	Oil & Gas Refining & Marketing	0.1%	0	0.9%	2.6%	5.6%	76%
Consumer Goods	Toys & Games	0.0%	-97	-1.4%	-1.6%	-0.9%	71%
Basic Materials	Oil & Gas Equipment & Services	0.7%	-97	-16.4%	-15.5%	-10.9%	71%

Table 2 – Ten Lagging Industries Sorted by Number of Up days out of 17

Sector		212 Yahoo Industries	4/13/06	W%R	5 Days	10 Days	15 Days	Up Days
		Average gain of all Industries     4	0.2%		Prior	Prior	Prior	Out of
		Percentage of industries Gaining  4	61%		Gain	Gain	Gain	17
Healthcare	Drug Delivery		0.7%	0	0.7%	-0.5%	-1.2%	41%
Utilities	Diversified Utilities		-0.3%	-100	-3.6%	-2.1%	-3.8%	35%
Basic Materials	Nonmetallic Mineral Mining		-1.1%	-100	-5.4%	-3.8%	0.5%	35%
Consumer Goods	Packaging & Containers		-0.2%	-95	-2.7%	-1.3%	-1.8%	35%
Consumer Goods	Textile - Apparel Footwear & Accessories		0.4%	-79	-2.1%	-2.9%	-3.3%	35%
Financial	REIT - Office		-1.0%	-100	-4.7%	-5.9%	-4.8%	29%
Services	Restaurants		-0.2%	-94	-1.0%	-0.5%	-0.6%	29%
Services	Discount, Variety Stores		-0.2%	-87	-2.3%	-3.3%	-4.8%	29%
Technology	Personal Computers		-0.7%	-100	-4.4%	-4.7%	-3.3%	24%
Consumer Goods	Confectioners		-1.1%	-100	-13.4%	-14.0%	-15.3%	24%

2.0 Market Analysis

      This week bond yields continued to rise sharply and interest rate sensitive stocks continued to consolidate.  As earnings season picks up, the market is cautious.  Ten-year treasury yields are at 5% and oil is above $70 a barrel.

      Key industry ETF’s in Table 2A are Biotech and Semiconductors, which confirm the NASDAQ.  Transportation confirms the Dow Jones Industrial Average according to Dow Theory.  Banking and Financials are confirming indicators for the S&P 500.  Gold and Housing are respective indicators for the inverse health of the currency (inflation) and the capacity for consumer spending. 

Table 2A

Indices, Key Industry ETF’s and Sector SPDR’s

	1 month	1 wk ago	2 wks ago	3 wks ago	4 wks ago
Dow Jones Industrial Index	-1.3%	0.2%	0.1%	-1.5%	0.0%
NASDAQ Composite Index	0.9%	-0.6%	0.0%	1.2%	0.3%
NYSE Composite Index	-1.4%	-0.5%	0.0%	-0.6%	-0.3%
S & P 500 Index	-0.5%	-0.5%	0.5%	-0.2%	-0.2%
Russell 2000 Index	0.7%	-0.7%	-1.2%	1.5%	1.0%
HGX, Phil. Housing Index	-3.4%	-3.6%	2.3%	-1.7%	-0.3%
IYR, Real Estate	-8.0%	-2.7%	-3.6%	1.1%	-3.0%
GLD, GOLD	7.9%	1.6%	0.8%	4.3%	1.1%
RKH, Banking	-1.8%	0.0%	0.1%	-1.4%	-0.5%
IYT, Transportation	1.9%	-0.9%	2.4%	1.0%	-0.7%
SMH, Semiconductors	3.5%	-0.2%	1.6%	0.3%	1.8%
BBH, Biotechnology	-5.5%	1.1%	-4.0%	-0.3%	-2.4%
OIH, Oil	7.3%	0.4%	2.7%	2.9%	1.0%
XLE, Energy	4.0%	0.8%	1.7%	1.0%	0.4%