Tuesday, January 6, 2009

Sellers Return for Second Day of Trading

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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Traders returned from their holiday vacations on Monday and the usual beginning of the year buying was more than matched by selling. All the major stock indices were down on the day as trading volume, while still low, rose from Friday's anemic levels. Oil and energy related stocks were once again the big winners as they were on the first trading day of the year and those gains were made on another day of high volume.

While the market went down yesterday, the selling wasn't relentless as it was in the beginning of 2008. The Dow and Nasdaq were both down 0.9%, while the S&P500 dropped only 0.5%. Small caps had the smallest loss, just as they had the smallest gain the day before. The Russell 2000 being down only 0.2%. There just doesn't seem to be much interest in small caps one way or the other.

Oil and energy related stocks not only performed the best for a second day in a row, but were way ahead of every other industry group. The ETF Oil was up almost 5%. A large percentage of energy related stocks had significant moves up, even though the market as a whole was dropping. While major money is clearly flowing into this sector, this does not mean you need to rush out and buy into it. Oil looks like it is only in the first stage of its bottoming process. The big money is drawing a line in the sand however and telegraphing quite clearly that it will be picking energy stocks up on price drops. The second best performing stock group on Monday was another inflation related sector, Agriculture.

The worst performing groups were most of the same Credit Crisis and recession impacted groups that did poorly on Friday. Savings and Loans were once again at the bottom and shared that space with Real Estate, Office Products, and (somewhat surprisingly) Food and Beverages. Semiconductors and Computer Software were only slightly less bearish. Retail, Consumer Products, Apparel, and Media Companies rounded out the list of groups with the least buying interest.

After two more days of trading, there will be a more complete picture of where investing money is flowing into and out of in what is the most importing trading period for the market all year. In 2008, the picture was clearly ugly and this was the basis of the New York Investing meetup predicting that it would be a bad year for U.S. stocks. So far, the picture for 2009 looks like it will be more nuanced.

NEXT: Seesaw Market Action Continues on Day Three of 2009

Daryl Montgomery
Organizer,New York Investing meetup

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

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