WiserTrader Industries Monthly

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December 2008                          Prescott, Arizona                     Contact Editor

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Contents

• Portfolio
• Trailing Stop Settings
• Leading Industries
• Industries Rising in Rank
• Industries Falling in Rank
• Lagging Industries

Published the 3^rd Tuesday of the month  

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Top-down stock selections are typically based on leading sectors and industries with a focus on stocks that pay dividends and show growth in market share, earnings and sales.  This month, in view of continued market volatility and the use of tight trailing stops, we continue to place emphasis on dividends.

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1.0 Top-Down Portfolio

     The portfolio is shown in Table 1A.  Gross P/L excludes dividends.

Table 1A

Top-Down Portfolio

Top - Down Portfolio Open Positions						As of Market close on			12/23
Stock	Begin Date	Begin Price	Last Date	Last Price	Gross P/L (%)	Status	Sell stop	Metrics	Indicated Dividend
TIP	12/31/07	101.32	12/23/08	100.48	-0.8%	Buy	86.28	Income	5.9%
TLT	10/21/08	94.42	12/23/08	121.16	28.3%	Buy	97.81	Income	4.5%
CHG	11/18/08	42.40	12/23/08	47.55	12.1%	Buy	42.50	Income	5.1%
Trailing Stop Settings are Bearish							Tspi (long) = -10%
Net capital for 2008 =			-18.8%				f (long) = 25%

Alerts: . . . none.

Current Holdings:

iShares Lehman TIPS Bond (NYSE: TIP) is an inflation-protected US Treasury ETF.  Dividends are paid monthly.  While the indicated annual dividend is 5.9%, the current annual rate is 9.26%.  As mentioned in the weekly newsletter, the ETF gets its name from the fact that it a Lehman index.  The ETF is not managed by Lehman but by SEI Investments Distribution Co. (SEI) and Barclays Global Fund Advisors serves as an advisor.  The trailing stop for this ETF was widened to -20% to take advantage of the dividend which recently was paid at an annual  rate of 9.9%

iShares Lehman 20+ Year Treas Bond (TLT)  corresponds generally to the price and yield performance of the long-term sector of the United States Treasury market as defined by the Lehman Brothers 20+ Year U.S. Treasury index.  Again, the ETF is not managed by Lehman but by SEI Investments Distribution Co. (SEI) and Barclays Global Fund Advisors serves as an advisor.  The fund generally invests at least 90% of assets in the bonds of the underlying index and at least 95% of assets in U.S. government. It may also invest up to 10% of assets in U.S. government bonds not included in the underlying index. The fund also may invest up to 5% of assets in repurchase agreements collateralized by U.S. government obligations and in cash and cash equivalents.  Use a -20% trailing stop.

CH Energy Group, Inc., (NYSE: CHG) is a diversified utility company.  Through its subsidiaries, Central Hudson Gas & Electric Corporation (Central Hudson) and Central Hudson Enterprises Corporation (CHEC), it engages in the electric utility, natural gas utility, and fuel distribution business.  Central Hudson purchases, sells at wholesale, and distributes electricity and natural gas at retail in portions of New York State.  The stock price has been net flat, yet quite volatile, over the past month.  The stock has gained 30% since its October low as a result of disappointing earnings.  CH Energy Group was founded in 1926 and is headquartered in Poughkeepsie, New York.  The company expects to pay a 5.1% dividend. 

     Closed positions throughout this year are listed in Table 1B.

Table 1B

Closed Positions

Top - Down Portfolio Closed Positions					As of Market close on			11/18
Stock	Begin Date	Begin Price	Last Date	Last Price	Gross P/L (%)	Status	Sell stop	Metrics
CNX	12/31/07	71.52	1/4/08	65.48	-8.4%	closed	66.22	Growth
BBY	12/31/07	52.51	1/4/08	47.48	-9.6%	closed	48.04	Growth
PBR	12/31/07	115.24	1/16/08	98.09	-14.9%	closed	106.93	Growth
SRP	12/31/07	16.98	1/22/08	14.90	-12.2%	closed	15.28	Defensive
CPD	1/16/08	17.00	1/28/08	15.27	-10.2%	closed	15.30	Defensive
ACH	2/19/08	45.26	3/6/08	45.71	1.0%	closed	46.91	Growth
POT	2/19/08	152.50	3/10/08	143.03	-6.2%	closed	147.85	Growth
BHP	2/19/08	72.66	3/10/08	66.16	-8.9%	closed	68.18	Growth
NFLX	3/18/08	35.00	4/22/08	30.00	-14.3%	closed	32.56	Growth
FXE	12/31/07	146.40	5/1/08	154.66	5.6%	closed	128.08	Defensive
FXA	2/19/08	92.34	5/1/08	93.49	1.2%	closed	76.40	Defensive
FXF	3/18/08	99.85	5/1/08	95.16	-4.7%	closed	80.90	Defensive
FXY	3/18/08	100.30	5/1/08	95.50	-4.8%	closed	80.70	Defensive
IYE	4/15/08	138.54	5/1/08	139.32	0.6%	closed	117.42	Growth
OIH	4/15/08	190.73	5/1/08	191.77	0.5%	closed	166.13	Growth
USO	4/15/08	91.44	5/1/08	90.38	-1.2%	closed	76.55	Growth
MOS	6/17/08	161.08	6/24/08	142.98	-11.2%	closed	144.97	Growth
TRA	6/17/08	55.10	6/25/08	48.87	-11.3%	closed	49.59	Growth
X	5/20/08	184.02	7/2/08	153.40	-16.6%	closed	172.76	Growth
AGU	6/17/08	110.99	7/2/08	99.75	-10.1%	closed	101.21	Growth
IYE	5/20/08	155.25	7/9/08	138.11	-11.0%	closed	139.73	Growth
OIH	5/20/08	218.22	7/9/08	200.46	-8.1%	closed	201.79	Growth
USO	5/20/08	104.30	7/17/08	105.53	1.2%	closed	105.73	Growth
AMED	7/15/08	57.36	8/13/08	52.32	-8.8%	closed	52.86	Growth
BXS	9/16/08	25.65	9/29/08	26.15	1.9%	closed	26.96	Income
JNJ	8/19/08	70.69	10/6/08	64.50	-8.8%	closed	65.00	Income
CASY	8/19/08	28.73	10/7/08	27.01	-6.0%	closed	27.25	Income
SJL	10/21/08	143.67	10/28/08	159.00	10.7%	closed	175.50	Income
FXY	10/21/08	99.65	10/28/08	101.96	2.3%	closed	95.94	currency
UUP	10/21/08	26.04	12/15/08	24.85	-4.6%	closed	24.37	currency

     The overall performance is shown in Table 1C.

Table 1C

Top-Down Portfolio Performance

Top-Down Trading in 2008 ($9809.07 Initial Capital)		% Initial Capital
Closed trades in 2008 =	30
Average Trade Size =	$1,000.00
Total Closed Position Share costs =	$30,000.00
Gross Profit on Closed Positions =	-$1,668.96	-17.01%
Number of Open Positions =	3
Cost of Open Positions =	$3,000.00
Gross Profit on Open Positions in 2008 =	$396.37	4.04%
Total Gross Profit =	-$1,272.59	-12.97%
Broker Commission ($9.99/trade) =	-$569.43
Subscription Cost to date =	$0.00
Net 2008 Profit After Expenses =	-$1,842.02	-18.78%
Cash =	$4,570.68
Current Capital =	$7,967.05	12/23/08

     Figure 1A is a view of sectors over the past month..  Sectors are ranked in Table 1D.  The major indices are down an average of 40.1% for the year.  The market continues to move sideways.

FIGURE 1A

Table 1D

Sector Rank

Rank	Sector	Last	1 wk	1 mo
1	Industrial Goods	-1.0%	-6.8%	12.0%
2	Transportation	-1.0%	-1.6%	10.6%
3	Basic Materials	0.2%	-8.4%	9.9%
4	Services	-1.0%	-3.6%	9.1%
5	Healthcare	-0.5%	0.2%	8.0%
6	Technology	-1.1%	-3.5%	7.1%
7	Financial	-0.9%	-3.9%	6.9%
8	Consumer Noncyclical	-0.9%	-1.7%	6.3%
9	Energy	-1.1%	-8.3%	2.8%
10	Consumer Cyclical	-1.4%	-5.1%	2.7%
11	Conglomerates	0.3%	-6.7%	2.4%
12	Utilities	-0.8%	-2.9%	0.3%
	Average	-0.8%	-4.4%	6.5%

Addition to portfolio:

ISHARES BARCLAYS 7-1(NYSEArca: IEF) seeks results that correspond generally to the price and yield performance of the intermediate-term sector of the United States Treasury market as defined by the Lehman Brothers 7-10 Year U.S. Treasury index.  The fund generally invests at least 90% of assets in the bonds of the underlying index and at least 95% of assets in U.S. government. It may also invest up to 10% of assets in U.S. government bonds not included in the underlying index. The fund also may invest up to 5% of assets in repurchase agreements collateralized by U.S. government obligations and in cash and cash equivalents.  This ETF is currently trading at its net asset value with a current distribution rate of 3.8%.

2.0 Portfolio Trailing Stop Settings

The trailing stop percentage T_SP for WiserTrader portfolios is described below.  When stocks are bought in a bullish market, an initial trailing stop percentage T_SPI = -20% is just about right.  However, the market can change.  A -20% trailing stop is too wide when the market turns bearish and a -10% trailing stop is too narrow when the market is bullish.  Also, there is the feeling that when profits grow beyond a certain level, say 65%, a stock should have a progressively wider trailing stop.  So a 65% profit acts as a new transition point.  These considerations are described graphically in Figure 2A for long positions.  The lines indicate the T_SP for bullish, cautious and bearish market conditions.

FIGURE 2A

1. When the maximum percentage profit P_MAX% is less than 65%, the initial trailing stop percentage T_SPi is a fixed value that depends on market conditions.  For a long position,

· Bullish, T_SPi = -20%, as when the S&P 500 is above its SMA 30

· Cautious, T_SPi = -15%,  as when the S&P 500 is below its SMA 30

· Bearish, T_SPi = -10%, as when the S&P 500 SMA 30 slope is negative

     2. For a long position, when P_MAX%  is 65% or more greater than the buy price,

· T_SP varies according to,

o f is the fraction of gains placed at risk,

§ Bullish, f = 0.5,  as when the S&P 500 is above its SMA 30

§ Cautious, f = 0.375,  as when the S&P 500 is below its SMA 30

§ Bearish, f = 0.25,  as when the S&P 500 SMA 30 slope is negative

o P_MAX% = (P_MAX  - P_BUY) / P_BUY

o P_MAX is the maximum price reached and

o P_BUY is the buy price

Note: The signs for T_SP and T_SPi are negative for long positions and positive for short positions.  For short positions the maximum price reached is replaced by the minimum price reached.

 3. The sell stop price P_SELL is,

Current Settings:  Bearish

The S&P 500 is currently below its SMA 30. 

The S&P 500 SMA 30 slope is currently negative.

	S&P > SMA30 SMA30 slope >0		S&P < SMA30 SMA30 slope >0		S&P < SMA30 SMA30 slope <0		S&P > SMA30 SMA30 slope <0
	Bullish	Bullish	Cautious	Cautious	Bearish	Bearish	Bearish	Cautious
	Long	Short	Long	Short	Long	Short	Long	Short
TSPi	-20%	10%	-15%	15%	-10%	20%	-10%	15%
f	0.5	0.25	0.375	0.375	0.25	0.5	0.25	0.375

    The settings are designed at worst to, (1) take a 20% loss, (2) break even when there is a 20% maximum gain and (3) walk away with at least half of a 65% or greater maximum gain.  At the same time the stock price is given room to vary.  Deviations from these settings for individual stocks are possible when their industry undergoes unusual activity. 

     If you follow these portfolios, keep in mind that they are only benchmarks which can not be matched exactly because of the round numbers used.  Entry prices are taken from the previous close and exit prices are taken from the close on the day that trailing stops are triggered.  You can either sell as soon as a trailing stop is triggered or wait until after the close and try to get better prices over the next few days.  Once out of a position, a stock is set aside for a period of about two months. 

3.0 Leading Industries

     The leading industries for the past month are ranked in Table 3A.  The leftmost column is the rank based on the previous 4-week percentage change.  The second column from the left is ranked by the number of positions an industry is above or below its 4-week average rank.  The third column from the left is the average of the first two columns.  Clicking on the industry name takes you to an industry summary page.  The “C’s” will display the companies in the industry.  The last three columns on the right are the percentage gains for the previous trading day, the previous week and the previous four weeks.

 Table 3A

Leading Industries

Rank [R]	Rank of Change   [C]	(R+C)/2	Industries	Companies	Last Gain	1 wk Gain	1 mo Gain
1	49	25	Silver	C's	1.2%	0.2%	54.6%
2	72	37	Surety & Title Insurance	C's	0.5%	0.0%	47.7%
3	29	16	Office Supplies	C's	-0.9%	11.1%	38.2%
4	18	11	Gaming Activities	C's	-3.0%	-0.2%	34.1%
5	60	33	General Contractors	C's	0.3%	-6.8%	33.6%
6	1	4	Semiconductor- Memory Chips	C's	-6.9%	1.2%	33.2%
7	74	41	Computer Based Systems	C's	1.6%	7.9%	33.1%
8	86	47	Cement	C's	2.8%	-8.7%	33.1%
9	21	15	Major Airlines	C's	-0.5%	0.3%	32.0%
10	2	6	Closed-End Fund - Foreign	C's	-0.9%	21.5%	30.8%
11	28	20	Health Care Plans	C's	0.3%	4.2%	30.3%
12	62	37	Diversified Communication Services	C's	-1.3%	3.0%	29.2%
13	54	34	Residential Construction	C's	-2.5%	-10.8%	26.2%
14	17	16	Electronics Stores	C's	-2.9%	-6.1%	26.2%
15	33	24	General Entertainment	C's	0.8%	-1.1%	25.0%
16	8	12	REIT - Industrial	C's	0.9%	1.0%	24.5%
17	80	49	Long Distance Carriers	C's	-0.3%	-1.2%	23.9%
18	56	37	Home Furnishing Stores	C's	-1.3%	-2.9%	23.7%
19	6	13	Sporting Activities	C's	-1.1%	-0.4%	22.7%
20	99	60	Auto Parts Stores	C's	-0.1%	-3.4%	21.4%
21	13	17	Lodging	C's	1.2%	-2.4%	21.2%
22	131	77	Gold	C's	2.8%	-5.8%	21.0%
23	96	60	Music & Video Stores	C's	-2.7%	-5.5%	20.6%
24	7	16	Textile Industrial	C's	-1.9%	-1.1%	19.8%
25	5	15	Resorts & Casinos	C's	-0.3%	-2.8%	19.4%
26	36	31	Wholesale, Other	C's	1.1%	-1.2%	19.3%
27	79	53	Basic Materials Wholesale	C's	-1.3%	-3.0%	19.2%
28	22	25	Air Services, Other	C's	0.3%	2.1%	19.1%
29	10	20	REIT - Retail	C's	0.1%	-3.8%	18.9%
30	48	39	Machine Tools & Accessories	C's	-0.3%	-1.5%	18.8%
31	115	73	Heavy Construction	C's	0.5%	-11.9%	18.3%
32	123	78	Independent Oil & Gas	C's	-2.0%	-12.8%	18.3%
33	102	68	Mortgage Investment	C's	0.6%	-0.9%	18.1%
34	142	88	Technical Services	C's	-0.5%	-4.9%	18.0%
35	40	38	Life Insurance	C's	-1.9%	-6.5%	18.0%
36	14	25	Dairy Products	C's	-2.7%	-0.2%	18.0%
37	3	20	Computers Wholesale	C's	-1.0%	-0.5%	17.0%
38	20	29	REIT - Healthcare Facilities	C's	1.4%	-2.1%	16.5%
39	24	32	Building Materials Wholesale	C's	-1.3%	-0.1%	16.4%
40	65	53	Appliances	C's	-2.3%	-1.0%	16.4%

     Percentage gains for the top 20 leading industries are plotted in Figure 3A.

FIGURE 3A

4.0 Industries Rising in Rank

     Table 4A contains the industries that are moving up in position the fastest.  The 20 fastest rising in rank are plotted in Figure 4A.

 Table 4A

Industries Advancing in Rank the Fastest

	Rank [R]		Rank of Change   [C]		(R+C)/2		Industries	Companies		Last Gain		1 wk Gain		1 mo Gain
Rank [R]		Rank of Change   [C]		(R+C)/2		Industries			Companies		Last Gain		1 wk Gain	1 mo Gain
6		1		4		Semiconductor- Memory Chips			C's		-6.9%		1.2%	33.2%
10		2		6		Closed-End Fund - Foreign			C's		-0.9%		21.5%	30.8%
37		3		20		Computers Wholesale			C's		-1.0%		-0.5%	17.0%
82		4		43		Hospitals			C's		-1.4%		-0.4%	9.0%
25		5		15		Resorts & Casinos			C's		-0.3%		-2.8%	19.4%
19		6		13		Sporting Activities			C's		-1.1%		-0.4%	22.7%
24		7		16		Textile Industrial			C's		-1.9%		-1.1%	19.8%
16		8		12		REIT - Industrial			C's		0.9%		1.0%	24.5%
57		9		33		Shipping			C's		-0.3%		-8.2%	12.4%
29		10		20		REIT - Retail			C's		0.1%		-3.8%	18.9%
59		11		35		Long-Term Care Facilities			C's		-3.1%		-0.7%	12.2%
42		12		27		Internet Information Providers			C's		0.3%		-7.5%	16.2%
21		13		17		Lodging			C's		1.2%		-2.4%	21.2%
36		14		25		Dairy Products			C's		-2.7%		-0.2%	18.0%
79		15		47		Regional Airlines			C's		-0.3%		0.3%	9.3%
86		16		51		Research Services			C's		-0.3%		0.4%	8.5%
14		17		16		Electronics Stores			C's		-2.9%		-6.1%	26.2%
4		18		11		Gaming Activities			C's		-3.0%		-0.2%	34.1%
71		19		45		Rental & Leasing Services			C's		-1.5%		0.2%	10.1%
38		20		29		REIT - Healthcare Facilities			C's		1.4%		-2.1%	16.5%
9		21		15		Major Airlines			C's		-0.5%		0.3%	32.0%
28		22		25		Air Services, Other			C's		0.3%		2.1%	19.1%
52		23		38		Medical Practitioners			C's		4.8%		10.8%	13.4%
39		24		32		Building Materials Wholesale			C's		-1.3%		-0.1%	16.4%
119		25		72		Closed-End Fund - Debt			C's		0.3%		8.9%	4.6%
106		26		66		Closed-End Fund - Equity			C's		0.2%		-0.1%	6.1%
75		27		51		Drug Related Products			C's		1.0%		8.2%	9.6%
11		28		20		Health Care Plans			C's		0.3%		4.2%	30.3%
3		29		16		Office Supplies			C's		-0.9%		11.1%	38.2%
88		30		59		Property Management			C's		-1.7%		-4.1%	8.2%
113		31		72		Printed Circuit Boards			C's		-2.4%		-4.7%	5.1%
72		33		53		Drugs Wholesale			C's		-0.5%		-3.4%	10.0%
15		32		24		General Entertainment			C's		0.8%		-1.1%	25.0%
56		34		45		Apparel Stores			C's		-2.3%		-3.9%	12.7%
64		35		50		Semiconductor - Specialized			C's		-0.6%		-3.4%	11.0%
26		36		31		Wholesale, Other			C's		1.1%		-1.2%	19.3%
44		37		41		Electronics Wholesale			C's		0.4%		-1.2%	15.6%
70		38		54		Asset Management			C's		-2.1%		-5.9%	10.1%
66		39		53		Aluminum			C's		1.3%		-8.9%	10.5%
35		40		38		Life Insurance			C's		-1.9%		-6.5%	18.0%

FIGURE 4A

5.0 Industries Falling in Rank

     A list of the industries declining in rank the fastest is given in Table 5A.  The 20 fastest declining in rank are plotted in Figure 5A.

 Table 5A

Industries Declining in Rank the Fastest

	Rank [R]		Rank of Change   [C]		(R+C)/2		Industries	Companies			Last Gain		1 wk Gain		1 mo Gain
194		176		185		Savings & Loans			C's	-1.6%		-5.1%		-3.7%
184		177		181		Processed & Packaged Goods			C's	-0.3%		-2.1%		-2.8%
209		178		194		Housewares & Accessories			C's	-3.4%		-21.7%		-8.4%
125		179		152		Business Software & Services			C's	-0.5%		-0.1%		3.8%
174		180		177		Cigarettes			C's	-0.3%		0.7%		-1.7%
172		181		177		Drug Delivery			C's	-1.9%		-8.6%		-1.6%
200		182		191		Regional - Midwest Banks			C's	-1.2%		-7.8%		-4.7%
206		183		195		Regional - Southeast Banks			C's	-0.9%		-3.7%		-5.7%
144		184		164		Industrial Equipment & Components			C's	-1.9%		-3.8%		2.1%
162		185		174		Networking & Communication Devices			C's	-0.7%		-6.3%		-0.1%
139		186		163		Water Utilities			C's	0.3%		2.7%		2.4%
146		187		167		Beverages - Soft Drinks			C's	-1.1%		-3.5%		1.9%
154		188		171		Sporting Goods			C's	-0.9%		-6.3%		0.6%
127		189		158		Education & Training Services			C's	-0.3%		0.0%		3.7%
142		190		166		Telecom Services - Domestic			C's	-1.3%		-1.3%		2.2%
132		191		162		Auto Parts			C's	-2.1%		-6.2%		3.1%
202		192		197		Auto Manufacturers - Major			C's	-1.9%		-12.0%		-4.9%
189		193		191		Regional - Northeast Banks			C's	-1.8%		-5.5%		-3.1%
205		194		200		Regional - Southwest Banks			C's	-0.9%		-5.1%		-5.4%
114		195		155		Wireless Communications			C's	-2.0%		-9.2%		5.0%
163		196		180		Diversified Computer Systems