Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

Yesterday we talked about the funds we use to track sector movement, the Select Sector SPDRs. So how do we track the movement of more specific groups of stocks? Simple - use any of the multitude of Industry indices that are out there.

Industry indices are produced by various financial organizations and exchanges for their own use, or to provide trading vehicles. Indexes are available from the likes of the American Stock Exchange (AMEX), Philadelphia Stock Exchange (PHLX), Standard & Poors (S&P), the Nasdaq, Dow Jones, Morgan Stanley, Goldman Sachs, and many others. From the Amex web site:

The indexes are calculated to support various index-based products such as ETFs, index options, and structured products.

So how do we find some of these indexes? I started in one of my favorite spots, the Market Summary page at StockCharts.com. There, under the heading “US Industry Indices”, you will find a list of about 28 of the most popular and/or commonly referred to indices: the Amex Airline Index ($XAL), the PHLX Banking Index ($BKX), the Interactive Week Internet Index ($IIX), the AMEX Oil Index ($XOI), the PHLX Oil Services Indes ($OSX), the S&P Retail Index ($RLX), and the PHLX Semiconductor Index ($SOX) among them. When BMB started tracking the industries, he started with this very list, and has since added a few more, like the PHLX Housing Index ($HGX), and the Amex Defense Index ($DFX).

The best information on the various indices can be found at the websites of the folks that created the index, or those that trade products based on them. The Amex has an entire page filled with links to information on a number of indexes, where you can find the list of stocks that make up the indices and the associated weightings assigned to each. The Philadelphia Stock Exchange has similar information on their website pertaining to their indexes as well. You might also be able to find component information on certain other financial sites. For example, Yahoo Finance and MSN have a ‘components’ link on their chart pages for many of the indices, if you can find them (here are the SOX components listed on Yahoo, and here they are on MSN). Every site seems to have a different symbol convention when it comes to the indices, so sometimes they’re difficult to find - on StockCharts.com, you can find the SOX under ‘$SOX‘, on Yahoo it’s under ‘^SOXX‘, and on MSN Money it’s under ‘$SOX.X‘. Sometimes digging up this stuff can be a bit of a challenge!

You may also find that the components of an index may not all be from the same stock group. For example, the PHLX Housing Index contains not only homebuilders, but includes materials providers like Masco, Vulcan Materials and Weyerhauser, whose business is impacted by the housing business. Another example might be the Amex Disk Drive index, of which 20% or so is made up by companies that don’t even make disk drives, but rather flash memory devices.

Another method that one could use to track group movement would be to track the price movement of a number of Exchange Traded Funds (ETFs). There are now large numbers of ETFs available, and more and more of them are becoming sector/group specific. Since these funds are unmanaged, they are created to track some sort of group index, and finding the component makeup of the ETFs is always very simple - again, either through the sponsoring firm of the ETF, or through a number of other sites.

If you’re looking for ways other than the industry indices to track group movement, some sites provide information that is somewhat different than the standard indices, and in all honesty, I’m not sure how it is computed. As an example, the Prophet.net website has whole sections of the site dedicated to charts of the sectors, sub-sectors and groups of stocks (”Explore / Chart Surfer”), and also provides rankings of all of their industry groups over various historical timeframes (”Explore / Industry Rankings”). BMB has recommended the Prophet site before, and makes frequent use of their tools - and much of it is free!

Hopefully the information presented here will help you decide how you would like to do your own tracking of stock group movements, or of course, you can just continue to watch the weekend posts here at BMB. If you have any questions pertaining to the industry indices, or are having a hard time finding information on a specific index, drop me an email and I’ll see if I can help.

Now let’s look at the latest moves in the industries, and we’ll toss in the Stockcharts.com symbols this week just to give you an idea what you’re looking at:

Everyone seems to think that if the Fed stops raising interest rates at the low end of the curve, that’s good news, right? Well, not necessarily. BMB has said all along that if the Fed doesn’t keep rates up, the dollar will suffer. Jim Jubak agrees, and in this article, examines a few more of the consequences of a Fed pause:

The dollar will weaken and make imports from Europe, Japan and maybe even China more expensive — and may, in turn, bump up the inflation rate. (Indeed, the dollar dropped 1.67% against the yen, 2.34% against the euro and nearly 2% against the pound last week.) The Federal Reserve’s aggressive increase in short-term interest rates gave overseas investors, who provide the cash to finance the huge $700 billion annual U.S. trade deficit with the rest of the world, confidence that inflation in the U.S. wasn’t about to get out of control. (Runaway inflation would lead to the kind of gigantic increases in interest rates that wipe out bond investors.)

That confidence will take a hit as the Fed moves to the sidelines — and overseas bond buyers have already got to be a little worried about what happens when the untried Ben Bernanke replaces the deeply trusted Alan Greenspan as Federal Reserve chairman on Jan. 31.