Sunday, December 06, 2009

Weekly Sector Update

I've updated the DJUS Sectors. I've only included weekly charts, not daily this week. I've updated it on the "Resources" tab, and you can find it here.

There is much surmising about which way the indices will break. The choices are simple:


Of course, you know that NO ONE knows with any certitude which way it will go. Frankly, I'm tiring a bit of the blowhards that have made all manner of predictions; cherry pick a few of the right ones; and chest thump their s0-called accuracy while ignoring all of the wrong calls that have been made.

All any of us can do is consider the weight of the evidence. I prepare the sector updates each week because I believe that having an understanding of the undulations among the sectors will give one some insight on what is holding up/back the indices. I offer this view which is an extract of the top/bottom performing sectors v. SPY:

Looking only at the SPY, there is only a modest decline over the week. But looking at the sector action, there are two "Holy Guacamole" sectors: Airlines and Business Training.

My point in sharing this with you is that by poking below the surface, you will see things that are not tipped by the hand of the index by a surface reading. Spending a little time looking at the undercurrents will give some insight. There is still sector leadership, but it is changing.

With the USD gaining some strength, then commodities are going to come under a bit of pressure, and you are seeing that in the results above. Also, multi-nationals who have benefited from the tailwinds of a declining USD will soften. I also believe that there is potential for some mitigation of the underlying fear of interest rates increasing to make up for the currency decline which might cause our foreign creditors to demand greater return.

If the USD turns down again (and yes, I'm aware of the arguments that predict the long term demise of our not-so-mighty dollar), then we'll see a resurgence in these sectors. And, we'll see a resurgence once the fundamental picture strengthens.

For now, the sectors that are declining are providing benefit to the economy as a whole because the cost of doing business is less. Watch the small caps for some strength, as they will now be the recipient of tailwinds.


Anonymous said...

Hi leisa-

Just checking in. You summarize nicely the recent confusion on the part of market pundits.

The market, like everything else in life, will display unpredictable movements. I can't say inexplicable, as we can count on someone coming up with an explanation someday that will at least seem to make sense. Those of us who have raised kids know all about it.

I haven't done well 2H2009. You may recall I had a phenomenal 80+% return from the March lows through July by betting big on the ultralongs.

Since July, I've been treading water, and am now down to the 74% range YTD. I was converted to the concept of taking losses quickly this year- given my predilection for playing counter-trend, that strategy has saved my ---.

I keep up with your comments on SOH as well.

Keep up the good work.


Leisa said...

Hi 2nd: I've missed seeing you post. YOur returns are impressive. I also know that you've worked very hard to earn that return. Congrats.

Anonymous said...

sorry 2nd - no pity here for someone who had 80% gain, and is now sitting with 74%. You need to get a bigger 401k or other slow-moving, unweildy, hard-to-trade-with investment vehicle. Oh wait, I'm an "investor"; you're probably just a "trader" :)

congrats on your returns

Biffermas (Chris) said...

"Frankly, I'm tiring a bit of the blowhards that have made all manner of predictions; cherry pick a few of the right ones; and chest thump their so-called accuracy while ignoring all of the wrong calls that have been made."

Who doesn't despise this approach? Sadly, many people follow these Cro Magnon gurus.

Thanks for the sector synopsis. Your chart showing relative performance vs. the S&P 500 is pretty eye-opening. Airlines and real estate usurping the miners is something I didn't expect. Sector rotation seems likely given the stale index action.

Anonymous said...

Can't tell what direction the indices will be moving? Don't rely on direction then!


Anonymous said...

It's always been maximum frustration.

Is anyone able to get it right consistently? Bogle had it 'right' for >20 years with 'buy-and-hold.' Miller reigned for 11 years. Julian Robertson bet big a few times and basked in glory, then ultimated faded away. Buffett and Soros had (well, still have) well-deserved reputations for investing, but they've made a few bad moves also.

So 2009 is no different, as the market continues to frustrate.

'No direction' might be the theme for the next few months. Maybe the game changes to 'Bulls get slaughtered, bears get slaughtered. (Daytrading) Pigs make money.'