Bespoke Trade Ideas

Bespoke Trade Ideas
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By Bespoke Investment Group | 5 September 2008

Prior to the open on Friday, it looked like we were set for another big down day after the market declined nearly 3% on the day before. We sent out the B.I.G. Tips report below to Bespoke Premium subscribers prior to the open yesterday to highlight that the day might not turn out so bad after all. Historically, when the market has had a big down day and then futures trade down significantly again the following morning, the pattern from the open to the close that day is positive. Yesterday turned out no different. After trading down about 150 points in the morning, the Dow reversed to close the day up 33 points.

Best Performing Stocks Year To Date

Below we highlight the 25 best performing stocks in the Russell 3,000 year to date. While energy-related names led the way for much of the first half of the year, the top three spots are now made up of two consumer stocks and one financial. Star Scientific (STSI) is currently the best performing stock in the index, up 401.26% year to date. STSI is a technology-oriented tobacco company seeking to develop, license, and implement technology to reduce the carcinogenic toxins in tobacco and tobacco smoke. A chart of the stock shows that the majority of its gains have come in the last few weeks.

Retailer Finish Line (FINL) ranks second with a gain of 353% in 2008, followed by Crawford & Co (CRD/B), which provides claim management solutions to insurance companies around the world. Rounding out the top five best performers are two alternative-energy firms, FSYS and QTWW.

In our second table, we highlight the two best performing stocks in each of the ten major sectors that make up the Russell 3,000. As shown, the second best consumer staples stock behind STSI is up just 61% (SYUT). The difference between performance of the top two stocks in the consumer staples sector is by far the most extreme. And as you may have noticed in the table above, there were no Telecom or Utilities stocks in the top 25. The best performing Telecom stock year to date is only up 19.77% (GNCMA), while the best Utilities stock is up 26% (LG).

Global Equity Market Returns

After declining 4.25% on Wednesday, 3.94% yesterday, and 3.75% today, Russia's RTS index is now 41.19% below its 52-week high. These declines put it second to last behind China when looking at recent equity market returns for 22 major countries. As shown, China has fallen 64% from its 52-week high last October! The declines recently in global equity markets have really been astounding. Japan, Spain, Brazil, India, Italy, South Korea, Singapore, Sweden, Taiwan, and Hong Kong all join China and Russia with equity markets off at least 30% from their 52-week highs. North American countries rank 1,2,3 as far as countries holding up the best. International exposure has never hurt so bad.

Oil, Stock, And Housing Declines

Ironically, oil is now down more than the stock market and even home prices! From their peaks, oil is down 27.18%, the S&P 500 is down 22.16%, and the S&P/Case-Shiller 10-City Median Home Price index is down 20.46%.

8 Straight Months Of Job Losses

This month's decline of 84,000 non-farming jobs marks the eighth straight month of job losses in the US. While the monthly job losses haven't gotten close to levels seen in past recessions [[thanks to our doctored statistics: normxxx]], this many consecutive months of a negative jobs number has coincided with official recessions in all instances except one. (There were 10 straight months of declines from 12/43-9/44 without a declared recession.)

Currency ETFs Break Historical Uptrends

The Australian Dollar ETF (FXA), British Pound ETF (FXB), and Euro ETF (FXE) have all suffered big declines over the last few weeks. These trendline breaks are bearish for technicians, and they provide an even bigger signal that the US Dollar tide has turned.

Sector Prices Vs. Summer Lows

The S&P 500 is on pace to have its worse day [9/4/08] since at least late June 26th on continued concerns over Financials and the economy. Additionally, today's generally negative same-store sales figures for the retailers haven't helped. With these headlines in mind, one would think that the Financials and Consumer Discretionary stocks would be among the weakest sectors out there. While the Financial sector is among the weakest today, when we look to see where sectors are currently trading with respect to their Summer lows, the two that are up the most are Financials and Consumer Discretionary.

On the downside, Utilities, Energy, and Materials are the only three sectors which are currently trading below their Summer lows.

OECD Lowers Growth Projections For All G-7 Countries Except The US

Below is a chart of the OECD's most recent projections for 2008 growth rates of G-7 countries. As shown, the OECD decreased growth estimates for every country except the US versus their June projections (Advantage: US Dollar). The biggest declines in estimates came in the UK and France. Click here to read the OECD's most recent economic outlook. It's worth a look.

Mortgage Rates And Default Risk Charts

A couple of weeks ago, credit crisis watchers were focused on rapidly rising 30-year fixed mortgage rates as well as the spiking cost to insure against corporate debt default. As shown in the charts below, default risk still remains extremely elevated, but at least the 30-year fixed mortgage rate has come down from the 6.5% level to about 6.2% over the last few weeks.

Bespoke's Sector Snapshot

September has not started out as a good month for stocks. The S&P 500 has moved below its 50-day moving average and back into oversold territory since the Labor Day holiday. Technology, Energy, Utilities and Materials have cratered the most, all moving well into or even below the green zone. Health Care and both Consumer sectors remain closer to overbought territory than oversold, and surprisingly, the chart of the Financial sector looks better than most of the others.

  M O R E. . .

Normxxx    
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The content of any message or post by normxxx anywhere on this site is not to be construed as constituting market or investment advice. Such is intended for educational purposes only. Individuals should always consult with their own advisors for specific investment advice.