We got lots of great feedback following Monday’s newsletter about spotting sector rotation, and how to capitalize on it. In fact, the feedback was so good, we’re going to go ahead and post an even-deeper look at current industry trends.

Using the same kind of analysis - comparing long-term performance with short-term results - we’ve found several industry-specific trends worth a closer look (industries are sub-sets of sectors). We’ll look at those opportunities in a moment. First, let’s just look at the foundation for the forecast. The table below tells all.

What we’re looking for are what may be the best and the worst arenas right now. If the short-term numbers are horrible but the long-term numbers are great, we may be seeing an over-extended industry starting to implode…a bearish possibility. If the short-term results are very strong but the long-term numbers are poor, we may be seeing a recovery in the making.

But what if the short-term numbers and long-term results are both bullish or bearish? That’s ok too - it might indicate a sustained trend (though caution is advised - keep reading). 

The starting point for our study is the one-month return. That’s a long enough time to weed out simple volatility, but still a short enough time frame to catch the early part of any emerging trend. Also, though we said above consistent trends can also be trade-worthy, we’re not necessarily looking for the stocks that are the strongest of the strong or the weakest of the weak. Those scenarios are often too dangerous to get involved in.

Take a look at the table. We’ve highlighted what we think are the best trade-worthy possibilities.

Top 15 Industries - One Month

Bottom 15 Industries - One Month

The industries highlighted in green or orange are the ones we felt were/are most apt to offer bullish or bearish (respectively) trading opportunities.

Obviously the work isn’t done here. You can rarely trade an industry ETF, particularly for some of the focused indices cited above (like soft drinks, recreational products, heavy construction, or tires). However, there are clearly underlying stocks in those groups. Any of the top or bottom 15 might make good places to look for stocks that are moving. 

In other words, these industries are moving for a reason - the task now is to go find the stocks leading the charge.

Over the next few days we’re going to dig up some ’stocks of interest’ within as many of these categories that we can. Be sure to check the blog again soon.

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