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WiserTrader Monthly |
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May 2007 Prescott, Arizona editor@WiserTrader.com __________________________________________________________________________
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Ranking Industries |
Ranking IndustriesJames A. Andrews May 15, 2007
___________________________________________________________________________ A promise was made to focus on broader industry issues. Industry rankings are useful to the short-term trader. Leading and lagging industry lists explain how industries have performed on a relative basis. However, these lists say little about how industries have performed in absolute terms, how their rankings are currently changing relative to one another and how rankings are likely to emerge in the near future. This month, the newsletter explains how to gather this information quickly to identify the leading companies in leading industries. ___________________________________________________________________________
1.0 Industry Rank
Two factors are taken into account when industries are ranked at this website. About 90% of an industry’s rank is weighted by the percent increase in its index price over the previous 4 weeks and 10% is weighted by how much the index is oversold based on its 10-period Williams-%R. This definition is used for a trend following trading system with a two to ten day options trading period. Other criteria for industry performance can be defined for different trading systems and periods.
Industries are ranked from a high of 1 to a low of 215 based on a list of 215 industries that is maintained at Yahoo Finance. The Yahoo industry classification provides a finer breakdown of major sectors by a factor of one and a half to two compared with other classification systems. This has certain advantages. For example, last week the personal computer industry was ranked 11 out of 215 while computer based systems was ranked near the bottom at 203. Placing all computer companies into one industry index can give an incomplete picture.
There are some disadvantages also. Yahoo is still learning how to maintain its industry classification system. Stock splits cause the system to break down, skewing a composite index value by more than 50%. It is obvious when this occurs and requires checking. A one-day move from the first to the last position is a sure tip off. On May 10th, Trucks & Other Vehicles suddenly dropped by 59%. It turns out that Volvo had undergone a stock split. It takes several days for a composite index value to be corrected. This is the only major drawback found so far in using this system.
The main reason for using this classification system is the ready availability of industry performance. Each industry’s performance is accessible through online data retrieval software that imports the numbers directly from Yahoo Finance into a spreadsheet where they can be manipulated. Industry index values are updated continuously throughout the trading day. Industries can easily be ranked in the spreadsheet, as shown for the 40 leading industries in Table 1 and the 40 lagging industries in Table 2. The leftmost column is the rank. The second column from the left is discussed below. The third column from the left is the industry number. To the right of the industry name are five columns that show the percentage gain for each of the 4 previous weeks and finally for the entire month at the far right.
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Table 1
Leading Industries
May 14, 2007
|
Rank |
Change in Rank |
No. |
Leading Industries |
1 wk Ago Gain |
2 wks Ago Gain |
3 wks Ago Gain |
4 wks Ago Gain |
1 mo Gain |
|
1 |
51 |
712 |
Aluminum |
-0.7% |
17.9% |
4.2% |
-1.6% |
20.0% |
|
2 |
46 |
718 |
Appliances |
0.4% |
5.6% |
7.0% |
1.3% |
14.9% |
|
3 |
77 |
894 |
Semiconductor - Specialized |
-0.3% |
2.6% |
1.4% |
3.3% |
7.2% |
|
4 |
91 |
815 |
Heavy Construction |
7.5% |
3.9% |
-2.0% |
2.1% |
11.7% |
|
5 |
33 |
879 |
Personal Computers |
2.1% |
3.5% |
4.5% |
0.2% |
10.6% |
|
6 |
2 |
846 |
Toy & Hobby Stores |
0.8% |
3.9% |
0.6% |
3.4% |
8.9% |
|
7 |
103 |
844 |
Catalog & Mail Order Houses |
-0.2% |
0.6% |
8.7% |
-2.6% |
6.2% |
|
8 |
89 |
724 |
Sporting Goods |
-0.1% |
-0.5% |
2.5% |
5.2% |
7.1% |
|
9 |
56 |
833 |
Publishing - Periodicals |
-1.6% |
10.9% |
-0.3% |
0.8% |
9.7% |
|
10 |
26 |
806 |
Small Tools & Accessories |
0.3% |
3.1% |
3.9% |
1.2% |
8.6% |
|
11 |
66 |
809 |
Textile Industrial |
0.8% |
2.1% |
-0.5% |
3.2% |
5.8% |
|
12 |
47 |
864 |
Consumer Services |
-1.0% |
2.2% |
2.5% |
-0.8% |
2.9% |
|
13 |
61 |
780 |
Mortgage Investment |
-0.1% |
3.0% |
0.3% |
3.4% |
6.7% |
|
14 |
11 |
741 |
Processed & Packaged Goods |
-0.9% |
2.3% |
-0.4% |
1.6% |
2.6% |
|
15 |
13 |
817 |
Waste Management |
-0.1% |
2.5% |
3.7% |
1.8% |
8.1% |
|
16 |
118 |
892 |
Semiconductor - Broad Line |
1.3% |
2.3% |
0.2% |
3.8% |
7.8% |
|
17 |
27 |
813 |
Cement |
-2.5% |
6.8% |
-0.8% |
-1.0% |
2.3% |
|
18 |
6 |
717 |
Conglomerates |
-1.1% |
1.8% |
4.3% |
-0.3% |
4.7% |
|
19 |
34 |
843 |
Auto Parts Stores |
0.4% |
-0.2% |
-0.3% |
2.0% |
2.0% |
|
20 |
8 |
834 |
Publishing - Books |
2.1% |
3.8% |
1.5% |
1.4% |
9.1% |
|
21 |
29 |
744 |
Confectioners |
-4.1% |
0.7% |
4.1% |
1.4% |
2.0% |
|
22 |
87 |
747 |
Beverages - Soft Drinks |
-2.0% |
2.5% |
0.8% |
2.1% |
3.4% |
|
23 |
143 |
877 |
Railroads |
1.2% |
2.3% |
1.8% |
2.1% |
7.5% |
|
24 |
35 |
810 |
Residential Construction |
-1.9% |
-0.2% |
-0.6% |
4.7% |
1.9% |
|
25 |
104 |
784 |
Drug Manufacturers - Other |
-2.3% |
2.1% |
1.1% |
0.7% |
1.6% |
|
26 |
40 |
887 |
Security Software & Services |
-0.8% |
2.1% |
5.9% |
-0.8% |
6.5% |
|
27 |
106 |
876 |
Shipping |
0.0% |
2.7% |
1.5% |
3.0% |
7.4% |
|
28 |
131 |
708 |
Oil & Gas Equipment & Services |
0.6% |
2.2% |
1.7% |
-2.9% |
1.4% |
|
29 |
85 |
801 |
Farm & Construction Machinery |
2.4% |
1.7% |
-0.6% |
4.9% |
8.6% |
|
30 |
139 |
711 |
Copper |
-0.1% |
7.0% |
-3.8% |
3.7% |
6.7% |
|
31 |
12 |
878 |
Diversified Computer Systems |
2.3% |
2.1% |
3.6% |
-0.2% |
8.0% |
|
32 |
25 |
812 |
Lumber, Wood Production |
-1.8% |
6.3% |
0.3% |
-0.4% |
4.2% |
|
33 |
84 |
785 |
Drugs - Generic |
-1.6% |
4.5% |
0.5% |
-1.5% |
1.7% |
|
34 |
41 |
814 |
General Building Materials |
-1.2% |
5.0% |
0.4% |
2.0% |
6.2% |
|
35 |
16 |
800 |
Aerospace/Defense Products & Serv |
1.4% |
2.8% |
0.6% |
2.9% |
7.8% |
|
36 |
119 |
769 |
Accident & Health Insurance |
-0.1% |
4.9% |
1.5% |
0.8% |
7.2% |
|
37 |
10 |
782 |
Real Estate Development |
-1.4% |
1.5% |
0.9% |
1.5% |
2.5% |
|
38 |
81 |
807 |
Metal Fabrication |
1.8% |
4.4% |
-2.0% |
2.4% |
6.6% |
|
39 |
49 |
738 |
Auto Parts |
0.9% |
3.3% |
-0.3% |
2.3% |
6.2% |
|
40 |
43 |
726 |
Photographic Equipment & Supplies |
-1.8% |
4.3% |
1.8% |
-1.1% |
3.1% |
Table 2
Lagging Industries
May 14, 2007
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Rank |
Change in Rank |
No. |
Lagging Industries |
1 wk Ago Gain |
2 wks Ago Gain |
3 wks Ago Gain |
4 wks Ago Gain |
1 mo Gain |
|
176 |
141 |
792 |
Health Care Plans |
0.5% |
2.6% |
-1.9% |
-0.3% |
0.9% |
|
177 |
69 |
823 |
Sporting Activities |
-0.3% |
0.4% |
-1.8% |
-1.1% |
-2.7% |
|
178 |
159 |
863 |
Personal Services |
-0.1% |
2.5% |
-3.8% |
2.0% |
0.5% |
|
179 |
125 |
763 |
Diversified Investments |
-0.8% |
-1.2% |
-0.1% |
-2.3% |
-4.3% |
|
180 |
64 |
748 |
Cigarettes |
-0.3% |
1.0% |
-0.3% |
-0.3% |
0.1% |
|
181 |
190 |
856 |
Computers Wholesale |
0.4% |
0.5% |
-1.3% |
-0.3% |
-0.7% |
|
182 |
150 |
836 |
Department Stores |
-3.0% |
-0.9% |
-2.4% |
0.4% |
-5.8% |
|
183 |
154 |
858 |
Food Wholesale |
-0.5% |
-0.6% |
-2.5% |
-0.6% |
-4.1% |
|
184 |
153 |
787 |
Drug Related Products |
-1.0% |
1.4% |
-2.4% |
-0.5% |
-2.5% |
|
185 |
138 |
906 |
Diversified Communication Services |
0.8% |
1.2% |
-1.0% |
-2.2% |
-1.2% |
|
186 |
182 |
909 |
Internet Software & Services |
0.1% |
2.1% |
-2.0% |
-0.8% |
-0.6% |
|
187 |
179 |
850 |
Specialty Retail, Other |
-0.6% |
1.3% |
-2.9% |
-0.6% |
-2.8% |
|
188 |
173 |
880 |
Computer Based Systems |
-3.0% |
-0.1% |
-1.6% |
-1.3% |
-5.8% |
|
189 |
200 |
767 |
Closed-End Fund - Foreign |
-0.3% |
1.4% |
-1.3% |
-0.8% |
-1.1% |
|
190 |
204 |
702 |
Agricultural Chemicals |
-1.1% |
1.5% |
-0.8% |
-1.7% |
-2.1% |
|
191 |
122 |
829 |
Broadcasting - Radio |
-0.7% |
2.0% |
-0.4% |
-2.3% |
-1.4% |
|
192 |
135 |
776 |
REIT - Hotel/Motel |
-0.8% |
0.3% |
-3.0% |
-0.4% |
-3.8% |
|
193 |
207 |
729 |
Rubber & Plastics |
-7.7% |
2.3% |
0.0% |
-0.3% |
-6.0% |
|
194 |
124 |
914 |
Water Utilities |
-1.7% |
0.8% |
-3.5% |
-0.8% |
-5.2% |
|
195 |
211 |
852 |
Building Materials Wholesale |
-0.7% |
3.8% |
-7.9% |
3.1% |
-2.2% |
|
196 |
201 |
884 |
Multimedia & Graphics Software |
-3.4% |
2.0% |
-2.9% |
-2.5% |
-6.7% |
|
197 |
176 |
872 |
Regional Airlines |
0.3% |
-1.7% |
-3.4% |
-0.1% |
-4.8% |
|
198 |
121 |
778 |
REIT - Residential |
3.7% |
-1.4% |
-4.1% |
1.4% |
-0.6% |
|
199 |
148 |
840 |
Electronics Stores |
-0.5% |
0.4% |
-3.9% |
1.3% |
-2.8% |
|
200 |
181 |
862 |
Rental & Leasing Services |
0.0% |
2.0% |
-3.6% |
0.2% |
-1.5% |
|
201 |
112 |
728 |
Textile - Apparel Footwear & Access. |
-1.7% |
0.9% |
-3.0% |
-0.4% |
-4.2% |
|
202 |
172 |
819 |
Resorts & Casinos |
-2.6% |
-2.4% |
-3.9% |
1.2% |
-7.6% |
|
203 |
158 |
838 |
Drug Stores |
0.1% |
0.3% |
-1.0% |
-0.2% |
-0.8% |
|
204 |
155 |
818 |
Lodging |
-1.4% |
3.2% |
-3.7% |
-2.2% |
-4.1% |
|
205 |
175 |
857 |
Drugs Wholesale |
-0.7% |
1.5% |
-5.4% |
0.8% |
-3.9% |
|
206 |
213 |
793 |
Long-Term Care Facilities |
-0.1% |
0.3% |
-1.3% |
-0.1% |
-1.2% |
|
207 |
202 |
727 |
Textile - Apparel Clothing |
1.0% |
-3.6% |
-1.7% |
0.1% |
-4.2% |
|
208 |
214 |
715 |
Silver |
-5.3% |
5.2% |
-3.7% |
-3.6% |
-7.5% |
|
209 |
147 |
845 |
Sporting Goods Stores |
-3.4% |
-3.4% |
-3.0% |
-0.8% |
-10.2% |
|
210 |
156 |
871 |
Major Airlines |
-1.7% |
2.1% |
-4.5% |
-4.6% |
-8.6% |
|
211 |
109 |
743 |
Dairy Products |
-3.5% |
-0.7% |
-7.5% |
1.2% |
-10.2% |
|
212 |
192 |
714 |
Gold |
-4.3% |
3.8% |
-3.9% |
-4.3% |
-8.6% |
|
213 |
174 |
734 |
Office Supplies |
1.3% |
-9.4% |
-6.6% |
-0.9% |
-15.1% |
|
214 |
115 |
848 |
Music & Video Stores |
-4.6% |
-7.4% |
0.4% |
-7.5% |
-17.9% |
|
215 |
215 |
736 |
Trucks & Other Vehicles |
-58.9% |
3.7% |
15.2% |
4.1% |
-48.9% |
2.0 Changes in Rank
Industries ranked in a given position do not remain there for very long. Rank position changes over a given period lead to another possible way to rank industries that gives insight into how the ranking list could emerge in the near future. Relative industry rankings form a closed system. For every upward move in rank, there is an equal and opposite downward move by one or more industries. The sum of rank position changes in one direction equals the sum of rank position changes in the opposite direction. This concept allows you to rank industries according to how much their rankings have changed from their average value over time. The relative number of rank positions changed over time is a direct indication of the velocity of position movement. Positions continually change as illustrated by the second column from the left in Tables 1 and 2 where industries ranked closest to 1 are moving up the fastest. Those ranked closest to 215 are moving down the fastest.
This brings to mind two other lists, such as the one in Table 3 containing the 40 industries that are moving up in position the fastest. Toys & Hobby Stores? Where did they come from? Leading industries must start from somewhere. Before we know it, an under the radar industry pops up as one of the leaders. The missing industry for rising rank number 14 should be Regional Mid-Atlantic Banks. This is a software bug as the industry is tied at number 13 with Waste Management. There is no number 14, actually. Some way will be found to remedy this kind of occurrence. A list of the 40 industries declining in rank the fastest looks similar in Table 4.
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Table 3
Industries Advancing in Rank the Fastest
May 114, 2007
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Rank |
Rising Rank |
No. |
Advancing Industries |
1 wk Ago Gain |
2 wks Ago Gain |
3 wks Ago Gain |
4 wks Ago Gain |
1 mo Gain |
|
77 |
1 |
735 |
Auto Manufacturers - Major |
0.8% |
0.2% |
-1.4% |
0.3% |
0.0% |
|
6 |
2 |
846 |
Toy & Hobby Stores |
0.8% |
3.9% |
0.6% |
3.4% |
8.9% |
|
61 |
3 |
740 |
Farm Products |
-3.6% |
0.8% |
-1.8% |
3.8% |
-1.0% |
|
42 |
4 |
803 |
Diversified Machinery |
-1.3% |
1.5% |
0.4% |
1.6% |
2.2% |
|
53 |
5 |
804 |
Pollution & Treatment Controls |
1.4% |
1.1% |
1.1% |
1.1% |
4.8% |
|
18 |
6 |
717 |
Conglomerates |
-1.1% |
1.8% |
4.3% |
-0.3% |
4.7% |
|
58 |
7 |
723 |
Toys & Games |
-1.5% |
3.3% |
-1.5% |
-0.2% |
0.1% |
|
20 |
8 |
834 |
Publishing - Books |
2.1% |
3.8% |
1.5% |
1.4% |
9.1% |
|
64 |
9 |
902 |
Processing Systems & Products |
-1.4% |
5.0% |
0.6% |
-1.2% |
2.9% |
|
37 |
10 |
782 |
Real Estate Development |
-1.4% |
1.5% |
0.9% |
1.5% |
2.5% |
|
14 |
11 |
741 |
Processed & Packaged Goods |
-0.9% |
2.3% |
-0.4% |
1.6% |
2.6% |
|
31 |
12 |
878 |
Diversified Computer Systems |
2.3% |
2.1% |
3.6% |
-0.2% |
8.0% |
|
15 |
13 |
817 |
Waste Management |
-0.1% |
2.5% |
3.7% |
1.8% |
8.1% |
|
#N/A |
14 |
#N/A |
#N/A |
#N/A |
#N/A |
#N/A |
#N/A |
#N/A |
|
89 |
15 |
765 |
Closed-End Fund - Debt |
-0.3% |
0.2% |
0.2% |
0.3% |
0.3% |
|
35 |
16 |
800 |
Aerospace/Defense Products & Services |
1.4% |
2.8% |
0.6% |
2.9% |
7.8% |
|
73 |
17 |
891 |
Information & Delivery Services |
-0.9% |
2.2% |
0.4% |
0.4% |
2.1% |
|
98 |
18 |
890 |
Business Software & Services |
-0.6% |
0.5% |
-1.0% |
-0.5% |
-1.6% |
|
94 |
19 |
779 |
REIT - Retail |
-1.8% |
-0.7% |
-2.3% |
2.5% |
-2.4% |
|
86 |
20 |
759 |
Savings & Loans |
-0.9% |
2.0% |
-0.9% |
0.7% |
0.9% |
|
49 |
21 |
794 |
Hospitals |
-2.0% |
1.7% |
0.3% |
0.1% |
0.1% |
|
93 |
22 |
754 |
Regional - Midwest Banks |
-1.1% |
1.5% |
-0.6% |
-0.4% |
-0.6% |
|
100 |
23 |
777 |
REIT - Industrial |
-1.4% |
-0.1% |
-3.1% |
2.8% |
-1.9% |
|
101 |
24 |
774 |
REIT - Office |
-0.2% |
-0.6% |
-1.2% |
1.9% |
-0.2% |
|
32 |
25 |
812 |
Lumber, Wood Production |
-1.8% |
6.3% |
0.3% |
-0.4% |
4.2% |
|
10 |
26 |
806 |
Small Tools & Accessories |
0.3% |
3.1% |
3.9% |
1.2% |
8.6% |
|
17 |
27 |
813 |
Cement |
-2.5% |
6.8% |
-0.8% |
-1.0% |
2.3% |
|
75 |
28 |
824 |
General Entertainment |
0.7% |
-1.7% |
2.8% |
0.6% |
2.4% |
|
21 |
29 |
744 |
Confectioners |
-4.1% |
0.7% |
4.1% |
1.4% |
2.0% |
|
62 |
30 |
898 |
Diversified Electronics |
-1.8% |
1.5% |
0.7% |
-0.4% |
-0.2% |
|
130 |
31 |
825 |
Advertising Agencies |
-1.7% |
1.3% |
-2.2% |
-0.2% |
-2.7% |
|
105 |
32 |
732 |
Packaging & Containers |
-0.1% |
1.7% |
1.9% |
-1.2% |
2.2% |
|
5 |
33 |
879 |
Personal Computers |
2.1% |
3.5% |
4.5% |
0.2% |
10.6% |
|
19 |
34 |
843 |
Auto Parts Stores |
0.4% |
-0.2% |
-0.3% |
2.0% |
2.0% |
|
24 |
35 |
810 |
Residential Construction |
-1.9% |
-0.2% |
-0.6% |
4.7% |
1.9% |
|
112 |
36 |
865 |
Staffing & Outsourcing Services |
1.1% |
2.9% |
-0.3% |
-0.6% |
3.1% |
|
88 |
37 |
719 |
Home Furnishings & Fixtures |
-2.0% |
0.3% |
-0.8% |
0.5% |
-2.0% |
|
59 |
38 |
899 |
Scientific & Technical Instruments |
-1.4% |
1.2% |
0.0% |
0.2% |
0.0% |
|
45 |
39 |
888 |
Information Technology Services |
-0.4% |
-0.6% |
-0.2% |
1.4% |
0.2% |
|
26 |
40 |
887 |
Security Software & Services |
-0.8% |
2.1% |
5.9% |
-0.8% |
6.5% |
Table 4
Industries Declining in Rank the Fastest
May 14, 2007
|
Rank |
Falling Rank |
No. |
Declining Industries |
1 wk Ago Gain |
2 wks Ago Gain |
3 wks Ago Gain |
4 wks Ago Gain |
1 mo Gain |
|
197 |
176 |
872 |
Regional Airlines |
0.3% |
-1.7% |
-3.4% |
-0.1% |
-4.8% |
|
90 |
177 |
783 |
Drug Manufacturers - Major |
-1.7% |
1.7% |
-0.3% |
0.4% |
0.0% |
|
164 |
178 |
826 |
Marketing Services |
2.7% |
0.8% |
-2.1% |
1.4% |
2.8% |
|
187 |
179 |
850 |
Specialty Retail, Other |
-0.6% |
1.3% |
-2.9% |
-0.6% |
-2.8% |
|
95 |
180 |
739 |
Food - Major Diversified |
-1.1% |
-1.2% |
0.0% |
1.3% |
-0.9% |
|
200 |
181 |
862 |
Rental & Leasing Services |
0.0% |
2.0% |
-3.6% |
0.2% |
-1.5% |
|
186 |
182 |
909 |
Internet Software & Services |
0.1% |
2.1% |
-2.0% |
-0.8% |
-0.6% |
|
150 |
183 |
722 |
Electronic Equipment |
-1.0% |
2.5% |
-1.3% |
-1.3% |
-1.1% |
|
139 |
184 |
721 |
Business Equipment |
-1.2% |
0.2% |
-0.3% |
0.1% |
-1.1% |
|
128 |
185 |
705 |
Independent Oil & Gas |
2.0% |
3.8% |
-0.9% |
-1.6% |
3.2% |
|
148 |
186 |
903 |
Long Distance Carriers |
1.0% |
5.0% |
-1.3% |
-3.0% |
1.5% |
|
144 |
187 |
896 |
Semiconductor Equipment & Materials |
-1.1% |
1.9% |
0.1% |
-0.3% |
0.6% |
|
161 |
188 |
883 |
Computer Peripherals |
-3.8% |
1.4% |
-1.3% |
-0.5% |
-4.2% |
|
97 |
189 |
764 |
Credit Services |
-0.3% |
2.2% |
0.3% |
0.7% |
2.9% |
|
181 |
190 |
856 |
Computers Wholesale |
0.4% |
0.5% |
-1.3% |
-0.3% |
-0.7% |
|
104 |
191 |
789 |
Diagnostic Substances |
-2.9% |
0.1% |
0.2% |
0.1% |
-2.5% |
|
212 |
192 |
714 |
Gold |
-4.3% |
3.8% |
-3.9% |
-4.3% |
-8.6% |
|
154 |
193 |
886 |
Technical & System Software |
-0.1% |
0.4% |
-0.3% |
-1.8% |
-1.7% |
|
151 |
194 |
830 |
CATV Systems |
-0.9% |
2.8% |
-2.2% |
-0.6% |
-0.9% |
|
131 |
195 |
707 |
Oil & Gas Drilling & Exploration |
-2.2% |
2.3% |
0.2% |
-1.7% |
-1.4% |
|
123 |
196 |
822 |
Gaming Activities |
0.8% |
1.4% |
-3.3% |
2.1% |
0.9% |
|
96 |
197 |
762 |
Asset Management |
-1.1% |
3.0% |
-0.1% |
0.7% |
2.4% |
|
169 |
198 |
900 |
Wireless Communications |
-0.5% |
2.3% |
-0.5% |
-0.6% |
0.6% |
|
114 |
199 |
725 |
Recreational Goods, Other |
2.7% |
3.3% |
-2.6% |
-0.7% |
2.5% |
|
189 |
200 |
767 |
Closed-End Fund - Foreign |
-0.3% |
1.4% |
-1.3% |
-0.8% |
-1.1% |
|
196 |
201 |
884 |
Multimedia & Graphics Software |
-3.4% |
2.0% |
-2.9% |
-2.5% |
-6.7% |
|
207 |
202 |
727 |
Textile - Apparel Clothing |
1.0% |
-3.6% |
-1.7% |
0.1% |
-4.2% |
|
152 |
203 |
703 |
Specialty Chemicals |
0.4% |
2.7% |
-0.2% |
-0.9% |
2.1% |
|
190 |
204 |
702 |
Agricultural Chemicals |
-1.1% |
1.5% |
-0.8% |
-1.7% |
-2.1% |
|
137 |
205 |
757 |
Foreign Money Center Banks |
-0.5% |
1.9% |
-1.6% |
0.6% |
0.4% |
|
167 |
206 |
745 |
Beverages - Brewers |
-0.7% |
3.3% |
-3.3% |
0.2% |
-0.6% |
|
193 |
207 |
729 |
Rubber & Plastics |
-7.7% |
2.3% |
0.0% |
-0.3% |
-6.0% |
|
174 |
208 |
701 |
Synthetics |
-0.4% |
2.6% |
-1.4% |
-0.6% |
0.2% |
|
160 |
209 |
713 |
Industrial Metals & Minerals |
-3.3% |
6.5% |
-1.8% |
-2.5% |
-1.4% |
|
170 |
210 |
786 |
Drug Delivery |
-1.9% |
3.2% |
-4.3% |
1.0% |
-2.1% |
|
195 |
211 |
852 |
Building Materials Wholesale |
-0.7% |
3.8% |
-7.9% |
3.1% |
-2.2% |
|
165 |
212 |
811 |
Manufactured Housing |
3.7% |
1.4% |
-1.8% |
-0.8% |
2.5% |
|
206 |
213 |
793 |
Long-Term Care Facilities |
-0.1% |
0.3% |
-1.3% |
-0.1% |
-1.2% |
|
208 |
214 |
715 |
Silver |
-5.3% |
5.2% |
-3.7% |
-3.6% |
-7.5% |
|
215 |
215 |
736 |
Trucks & Other Vehicles |
-58.9% |
3.7% |
15.2% |
4.1% |
-48.9% |
|
Notice the change in color from green to red in the monthly gain column as you move from Table 3 to Table 4. Many industries changing the fastest are already near their respective top and bottom rankings. This bodes well for the lack of a major sector rotation, at least for the near term. Nevertheless, these changes in rank go on continually. For an options trader, it is good to make top down selections for buying calls from industries ranked in the top 40 and moving up in rank the fastest. Top down selections for buying puts can be made from industries ranked in the bottom 40 and moving down in rank the fastest.
The list of ranked industries can be charted to see more clearly the progress of an industry’s rise to prominence or fall from grace. The spreadsheet contains a chart for each of the above four tables. Only portions of the two most interesting ones are shown below. Figure 1 shows the 20 industries that are rising in rank the fastest and Figure 2 shows the 20 industries that are declining the fastest. The erroneous precipitous one-day drop in rank for Trucks & Other Vehicles can be seen in Figure 2. Both figures are as of the market close on 5/14/07.
|
FIGURE 1
FIGURE 2
3.0 Relative Rank
The important thing to note is that the usefulness of industry rankings depends on how each industry is actually performing. When the market performs poorly, the leading industry could very well be the one that declines the least. An industry could be doing nothing price wise but could end up near the top or bottom of the ranking list because other industries might be doing extremely poorly or well. There is not enough information in an industry’s ranking list alone to infer how the industry index has actually changed over time. Given the average industry performance or the percent change of the top and bottom ranked industries, one can only estimate how each of the remaining industries have performed. There is no substitute for looking at the actual percentage change of an index for the industry of interest.
The spreadsheet from which the two charts and four tables was obtained has been available in various stages of development for some time as a free download. It is named the “industries” spreadsheet and is obtained by clicking on the Excel Files link. XLQPlus is required. The industries spreadsheet gives you performance values for all 215 industries on a single page.
This only gets you half way there. One would like to identify the leading companies in a leading industry to evaluate preferences for price, percent change over time, average volume and the exchange the company is traded on. One can find all the Yahoo industries at http://biz.yahoo.com/p/sum_conameu.html . By clicking on the industry index of interest, one is provided with a list of all the companies that make up that index, along with the stock symbol, percentage price change for the previous trading day, market cap and a host of company specific information.
However, here again, the percent price change for all the companies gives an incomplete picture. One can infer the exchange, somewhat, from the stock symbol. However, to get the price and volume, one has to click on the individual company link and go to another page. This gets tiresome for each individual company, let alone for multiple industries.
This brings up the need for another tool that allows one to easily scan all the companies in an industry on a single page for things like price, average volume and percent price change over any chosen period and the exchange where traded. This spreadsheet is named (you guessed it) the “companies” spreadsheet and is downloaded for free from the same web page as the “industries” spreadsheet. By copying and pasting the Yahoo company data to a precise location in the spreadsheet, the desired information is quickly displayed for each company in the industry.
An example output of “companies” for the currently leading industry is shown in Table 5. Out of the 12 stocks, industry leaders can easily be identified by their higher percent change in price. The beginning reference date is selectable. When trading options, it is preferable to weed out companies with trading volumes below 200,000 shares, those that trade Over the Counter or Bulletin Board and those with prices lower than about $30. Companies having undesirable options trading characteristics are flagged in red.
This leaves about 5 companies from which to choose. Alcoa just made an offer to buy Alcan, Inc. Therefore, Alcan would not be expected to move up much more in the near future. This leaves AA, ACH, CENX and TSO to investigate further for a possible trade. The process of identifying the leading industry and the most promising companies of that industry took just a couple of minutes.
|
Table 5
Aluminum Industry Components
May 14, 2007
|
|
|
|
|
Beginning Date -------> |
4/10/2007 |
|
|
Company |
Stock |
Exchange |
Last |
Last |
Average |
Percent |
|
Name |
Symbol |
Traded |
Price |
Volume |
Volume |
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alcan, Inc. |
AL |
NYSE |
$79.54 |
5,788,300 |
2,879,780 |
47.2% |
|
Alcoa Inc. |
AA |
NYSE |
$38.35 |
12,222,530 |
12,011,800 |
10.4% |
|
Aluminum Corp. of China Ltd. |
ACH |
NYSE |
$35.11 |
1,665,020 |
750,150 |
21.1% |
|
Cathay Merchant Group Inc. |
CMQ |
AMEX |
$0.48 |
31,500 |
69,784 |
20.0% |
|
Century Aluminum Co. |
CENX |
NasdaqNM |
$55.38 |
798,408 |
668,067 |
13.6% |
|
Kaiser Aluminum Corp. |
KALU |
NGM |
$87.95 |
174,756 |
97,881 |
10.0% |
|
MAXXAM Inc. |
MXM |
AMEX |
$29.28 |
1,300 |
3,267 |
-5.2% |
|
Novelis Inc. |
NVL |
NYSE |
$44.90 |
1,193,600 |
2,345,280 |
0.9% |
|
Quanex Corp. |
NX |
NYSE |
$44.24 |
162,400 |
449,908 |
3.4% |
|
Superior Essex Inc. |
SPSX |
NasdaqNM |
$35.49 |
202,246 |
178,621 |
0.0% |
|
Tredegar Corp. |
TG |
NYSE |
$22.04 |
133,000 |
212,765 |
-6.1% |
|
Tesoro Corp. |
TSO |
NYSE |
$117.80 |
3,128,806 |
2,965,780 |
8.8% |
|
|
|
|
|
|
|
|
4.0 Summary
Every tool has its advantages and weaknesses. The more flexible a tool is, generally, the more difficult it is to use. Some tools cost less and demand more expertise while others may cost more, demand less time and skill but have less flexibility. Every trader has to decide which is more important. The more time you have to spend, the more you should look for flexibility in a tool. There is nothing like having time on your hands with nowhere to go. Simpler tools are probably more appropriate for those with less time to spend.
Using the methods above, it is quite a simple matter to get highly detailed information on the performance of 215 industries. Just keep in mind that industry rank forms a closed system that, for the unwary, can lead to isolated relative performance that has no meaning in relation to absolute price performance. To prevent such departures from reality, the percentage gain for each industry can be included. Industries ranked according to how much their rank positions have changed from their average is a strong indicator of future industry leadership. This indicator also confirms how well a leading industry is maintaining its position. The job of identifying leading industries is only part of the task. It remains to identify leading companies in leading industries. Methods described above offer a quick means for completing both tasks.
|
____________________________
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- Market Data -
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