Monday, January 5, 2009

What We Learned From the First Trading Day of 2009

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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January 2nd was a good year for the markets throughout the world. Volume was low however since many traders took a four day weekend and this almost certainly reduced selling. While we can't look at the results as a complete picture, the first day does provide us with a good sense of what people are buying. While this is very useful information, you need to make sure selling pressure isn't overwhelming the buying interest. Under such circumstances, the areas of the market that were doing the best and worst are most likely to provide useful information.

All the U.S. indices rallied on Friday. The Nasdaq led the way, rising 55.18 points or 3.4%. The S&P was just slightly behind, going up 28.55 points or 3.1%. The Dow with its 258.30 rally was up 2.9%. Noticeably lagging were small cap stocks. The Russell 2000 rose only 6.39 points or 1.2%. Trading volume on the Dow was well below average. Nasdaq volume was low. Low volume was also seen in GLD, which was down slightly on the day. SLV which was slightly up, rose on somewhat above average volume. OIL though won the prize going up 8% on volume that was well above average.

Examining purchasing in individuals stocks, Energy related stocks had the highest percentage of buying interest by far of all industry groups. They were followed by Metals/Steel, Machinery,
Mining, and Aerospace stocks. The list of stocks that investors were scooping up could be best summed up as commodity related and infrastructure plays (the Obama administration is working on a one trillion dollar spending package which will benefit these companies).

And what stocks did investors shun like the plague? At the very top of that list was Savings and Loans. Office products were in essentially just as bad shape. Slightly better were Banks, Semiconductors, Insurance, and Computer Hardware in that order. The industries most lacking in buying interest could best be summed up as financial and those that produce products that are used for business operations - or perhaps, those that are part of the Credit Crisis and those most impacted by recession.

NEXT: Sellers Return for Second Day of Trading

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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