WiserTrader Industries Monthly

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October 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  

Subscription to Weekly Newsletter is $98 Annually

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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 are more conservative than usual. 

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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			10/21
Stock	Begin Date	Begin Price	Last Date	Last Price	Gross P/L (%)	Status	Sell stop	Metrics	Indicated Dividend
TIP	12/31/07	101.32	10/21/08	96.93	-4.3%	Hold	86.28	Income	5.91%
Trailing Stop Settings are Bearish							Tspi (long) = -10%
Net capital for 2008 =			-23.3%				f (long) = 25%

Alerts: . . . TIP is a Hold.

Current Holding:

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%

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

Table 1B

Closed Positions

Top - Down Portfolio Closed Positions						As of Market close on		10/21
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

     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 =	27
Average Trade Size =	$1,000.00
Total Closed Position Share costs =	$27,000.00
Gross Profit on Closed Positions =	-$1,753.16	-17.87%
Number of Open Positions =	1
Cost of Open Positions =	$1,000.00
Gross Profit on Open Positions in 2008 =	-$43.33	-0.44%
Total Gross Profit =	-$1,796.49	-18.31%
Broker Commission ($9.99/trade) =	-$489.51
Subscription Cost to date =	$0.00
Net 2008 Profit After Expenses =	-$2,286.00	-23.30%
Cash =	$6,566.40
Current Capital =	$7,523.07	10/21/08

     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 34% for the year.  About 21% of that occurred in the past month. 

FIGURE 1A

Table 1D

Sector Rank

Rank	Sector	Last	1 wk	1 mo
1	Utilities	-4.4%	-3.1%	-16.2%
2	Conglomerates	0.6%	-2.5%	-16.3%
3	Healthcare	-0.9%	-2.3%	-17.9%
4	Consumer Noncyclical	-3.2%	-4.4%	-18.0%
5	Transportation	-2.6%	-0.1%	-20.4%
6	Financial	-2.9%	-6.6%	-21.9%
7	Technology	-5.0%	-6.9%	-23.6%
8	Services	-3.3%	-5.5%	-25.9%
9	Consumer Cyclical	-2.8%	-6.2%	-26.2%
10	Energy	-4.4%	-5.9%	-27.4%
11	Industrial Goods	-3.5%	-6.7%	-27.9%
12	Basic Materials	-6.7%	-11.2%	-39.1%
	Average	-3.3%	-5.1%	-23.4%

Additions to portfolio:

     Since there are no sectors, or industries for that matter, that gained over the past month, we look for positive trends elsewhere. 

     One place to find positive trends is in the form of inverse ETF’s.  A large gainer was:

UltraShort Russell MidCap Val ProShares (SJL)  corresponds to the inverse of the daily performance of the Russell Midcap value index.  The fund normally invests 80% of assets in financial instruments with economic characteristics that should be inverse to those of the index. It may employ leveraged investment techniques in seeking its investment objective.  The fund is not diversified.  Use a -10% trailing stop.

     Another source of positive movement was in the currency arena, the two most outstanding currency ETF’s over the past month have been the Japanese yen and US dollar.

CurrencyShares Japanese Yen Trust (FXY) tracks the price of the Japanese Yen, net of trust expenses. The fund seeks to reflect the price of the Japanese Yen. The sponsor believes that, for many investors, the shares represent a cost-effective investment relative to traditional means of investing in the foreign exchange market. The fund is not diversified. Use a -10% trailing stop.

PowerShares DB US Dollar Index Bullish (UUP) tracks the price and yield performance, before fees and expenses, of the Deutsche Bank Long US Dollar Futures index. The index is comprised solely of long futures contracts. The futures contract is designed to replicate the performance of being long the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.  Use a -10% trailing stop.

     A third category for positive trends in US Treasuries.

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.

     Al four of the above are being added to the portfolio.

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	74	38	Tobacco Products, Other	C's	-0.7%	1.9%	-2.2%
2	1	2	Major Airlines	C's	0.9%	25.9%	-3.2%
3	103	53	Foreign Money Center Banks	C's	-2.7%	2.6%	-3.3%
4	4	4	Health Care Plans	C's	-1.1%	-1.7%	-5.3%
5	123	64	Regional - Mid-Atlantic Banks	C's	-2.6%	-4.0%	-7.5%
6	33	20	Home Health Care	C's	0.1%	1.3%	-7.8%
7	73	40	Water Utilities	C's	-2.7%	-2.2%	-8.2%
8	84	46	Personal Products	C's	-1.6%	-1.8%	-8.3%
9	113	61	Regional - Southeast Banks	C's	-0.2%	-2.1%	-8.5%
10	66	38	Drug Manufacturers - Major	C's	-2.5%	0.7%	-8.6%
11	114	63	Regional - Southwest Banks	C's	-3.0%	-3.9%	-9.1%
12	79	46	Discount, Variety Stores	C's	-1.5%	-2.0%	-9.2%
13	23	18	Biotechnology	C's	-0.9%	2.9%	-9.3%
14	135	75	Regional - Pacific Banks	C's	-2.2%	-3.7%	-9.9%
15	102	59	Cleaning Products	C's	-2.2%	-0.6%	-10.1%
16	21	19	Education & Training Services	C's	-1.2%	3.1%	-10.2%
17	49	33	Movie Production, Theaters	C's	-2.6%	0.4%	-10.5%
18	20	19	Telecom Services - Domestic	C's	-3.8%	-3.0%	-10.6%
19	101	60	Food - Major Diversified	C's	-2.3%	1.7%	-10.8%
20	141	81	Regional - Midwest Banks	C's	-1.8%	-4.1%	-11.0%
21	81	51	Cigarettes	C's	-4.6%	-5.1%	-11.4%
22	82	52	Regional - Northeast Banks	C's	-1.2%	-11.9%	-11.7%
23	2	13	Oil & Gas Pipelines	C's	-2.4%	3.3%	-12.2%
24	72	48	Drug Manufacturers - Other	C's	-3.3%	-2.0%	-12.3%
25	44	35	Beverages - Brewers	C's	-3.6%	-3.3%	-12.8%
26	89	58	Textile - Apparel Footwear & Accessories	C's	-2.1%	0.3%	-12.9%
27	147	87	Money Center Banks	C's	-2.2%	-7.7%	-13.1%
28	65	47	Diversified Investments	C's	-1.3%	-2.3%	-13.6%
29	17	23	Drug Stores	C's	1.0%	0.0%	-13.8%
30	5	18	Regional Airlines	C's	-2.3%	6.8%	-13.9%
31	75	53	Beverages - Soft Drinks	C's	-1.1%	3.3%	-14.2%
32	57	45	Drugs - Generic	C's	-0.4%	-1.6%	-14.4%
33	138	86	Processed & Packaged Goods	C's	-2.7%	-0.5%	-14.5%
34	70	52	Property & Casualty Insurance	C's	-1.3%	-1.1%	-14.6%
35	154	95	REIT - Healthcare Facilities	C's	-1.1%	-4.6%	-15.0%
36	149	93	Drug Related Products	C's	-1.3%	-6.3%	-15.1%
37	16	27	Electric Utilities	C's	-4.2%	0.3%	-15.1%
38	25	32	Consumer Services	C's	-1.6%	-1.8%	-15.1%
39	37	38	Diversified Utilities	C's	-2.5%	-0.2%	-15.1%
40	18	29	Waste Management	C's	-3.9%	-2.7%	-15.2%

     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
2	1	2	Major Airlines	C's	0.9%	25.9%	-3.2%
23	2	13	Oil & Gas Pipelines	C's	-2.4%	3.3%	-12.2%
87	3	45	Publishing - Books	C's	-4.7%	-5.7%	-22.0%
4	4	4	Health Care Plans	C's	-1.1%	-1.7%	-5.3%
30	5	18	Regional Airlines	C's	-2.3%	6.8%	-13.9%
88	6	47	Multimedia & Graphics Software	C's	-5.7%	-3.0%	-22.2%
59	7	33	Investment Brokerage - National	C's	-2.6%	-9.1%	-17.7%
72	8	40	General Entertainment	C's	-1.6%	-1.9%	-20.4%
71	9	40	Electronic Equipment	C's	-3.8%	-1.8%	-20.2%
79	10	45	Technical Services	C's	-4.2%	-2.8%	-21.1%
64	11	38	Packaging & Containers	C's	-2.2%	-4.4%	-19.1%
78	12	45	Information Technology Services	C's	-2.6%	-3.8%	-21.1%
135	13	74	Processing Systems & Products	C's	-6.1%	-6.3%	-27.0%
92	14	53	Synthetics	C's	-6.2%	-4.2%	-22.4%
116	16	66	Data Storage Devices	C's	-5.1%	-8.2%	-25.7%
37	15	26	Electric Utilities	C's	-4.2%	0.3%	-15.1%
29	17	23	Drug Stores	C's	1.0%	0.0%	-13.8%
40	18	29	Waste Management	C's	-3.9%	-2.7%	-15.2%
49	19	34	Conglomerates	C's	0.6%	-2.5%	-16.3%
18	20	19	Telecom Services - Domestic	C's	-3.8%	-3.0%	-10.6%
16	21	19	Education & Training Services	C's	-1.2%	3.1%	-10.2%
46	22	34	Photographic Equipment & Supplies	C's	-0.7%	-5.4%	-16.1%
13	23	18	Biotechnology	C's	-0.9%	2.9%	-9.3%
119	24	72	Specialty Chemicals	C's	-4.3%	-3.9%	-26.0%
53	25	39	Security Software & Services	C's	-5.7%	-1.3%	-16.8%
90	27	59	Computer Based Systems	C's	-2.7%	-6.2%	-22.3%
62	26	44	Home Improvement Stores	C's	-1.9%	-1.4%	-18.5%
39	28	34	Consumer Services	C's	-1.6%	-1.8%	-15.1%
69	29	49	Communication Equipment	C's	-6.1%	-5.6%	-19.8%
131	30	81	Personal Computers	C's	-6.8%	-11.8%	-26.9%
65	32	49	Aerospace/Defense - Major Diversified	C's	-2.7%	-1.7%	-19.2%
61	31	46	Auto Parts Stores	C's	-1.3%	0.8%	-18.1%
6	33	20	Home Health Care	C's	0.1%	1.3%	-7.8%
73	34	54	Industrial Equipment & Components	C's	-3.3%	-7.1%	-20.6%
74	35	55	Business Software & Services	C's	-3.5%	-3.8%	-20.6%
129	36	83	Closed-End Fund - Debt	C's	-0.6%	0.6%	-26.6%
38	37	38	Diversified Utilities	C's	-2.5%	-0.2%	-15.1%
151	38	95	Electronics Stores	C's	-3.8%	-5.6%	-28.9%
58	39	49	Drugs Wholesale	C's	-1.3%	0.3%	-17.5%
125	41	83	Machine Tools & Accessories	C's	-2.3%	-3.8%	-26.3%
122	40	81	Industrial Equipment Wholesale	C's	-6.4%	-4.8%	-26.1%

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
165		176		171		General Building Materials			C's	-4.4%		-6.0%		-29.9%
156		177		167		Advertising Agencies			C's	-7.8%		-10.7%		-29.2%
113		178		146		Pollution & Treatment Controls			C's	-2.2%		-5.4%		-25.3%
117		179		148		Staffing & Outsourcing Services			C's	-5.8%		-9.0%		-25.7%
136		180		158		Personal Services			C's	-8.6%		-12.2%		-27.2%
91		181		136		Air Delivery & Freight Services			C's	-3.0%		-8.2%		-22.4%
84		182		133		Accident & Health Insurance			C's	-1.9%		-6.0%		-21.4%
182		183		183		Sporting Activities			C's	-1.1%		-2.4%		-34.2%
66		184		125		Railroads			C's	-5.7%		-8.9%		-19.2%
164		185		175		Recreational Goods, Other			C's	0.9%		-6.5%		-29.9%
153		186		170		Broadcasting - TV			C's	-5.0%		-5.8%		-29.1%
115		187		151		Healthcare Information Services			C's	-2.0%		-4.0%		-25.4%
140		188		164		Specialty Eateries			C's	-4.4%		-5.7%		-27.7%
203		189		196		Wholesale, Other			C's	-3.8%		-8.0%		-39.8%
208		190		199		REIT - Hotel/Motel			C's	-5.1%		-9.9%		-42.1%
205		191		198		Auto Parts			C's	-2.9%		-13.8%		-40.8%
155		192		174		Oil & Gas Drilling & Exploration			C's	-4.4%		-7.6%		-29.1%
158		193		176		Investment Brokerage - Regional			C's	-6.7%		-15.6%		-29.5%
215		194		205		Silver			C's	-9.1%		-20.9%		-53.4%
68		195		132		Long Distance Carriers			C's	-8.3%		-11.1%		-19.3%
169		196		183		Textile - Apparel Clothing			C's	-2.4%		-7.5%		-31.0%
103		197		150		REIT - Residential			C's	-2.7%		-8.8%		-24.1%
112		198		155		Real Estate Development			C's	-4.8%		-8.6%		-25.2%
143		199		171		Sporting Goods			C's	-1.5%		-7.2%		-27.9%
106		200		153		Semiconductor- Memory Chips			C's	-0.6%		-7.6%		-24.5%
190		201		196		REIT - Retail			C's	-4.3%		-13.5%		-36.3%
199		202		201		Long-Term Care Facilities			C's	-0.2%		-11.7%		-39.2%
194		203		199