FAVORED MARKET SECTORS BLOW PAST GENERAL MARKET INDICES IN 1Q 2006

BEST-MOVING SECTORS PRODUCE BEST RESULTS

Dorsey Wright Associates (DWA) is the investment service that the Author principally follows. Several posts from 2005 discuss the methodology. But at its core the DWA methodology is a top-down technical method. If key importance is the fact that from 70-80% of a stock’s movement is due to overall movement of the stock market and overall movement of the stock’s sector. The fundamentals of an individual stock are far less important than market and sector strength.

As stated in a recent post “S&P 500 has a 3.7% Return in the First Quarter 2006, Highest First Quarter Return Since 1999”, the market has had a good first quarter. The S&P Equal-Weighted Index, SPXEWI, was up 6.6% for the first quarter. (DWA has the SPXEWI up 6.1%. The Author used the Exchange-traded fund RSP to calculate the SPXEWI, so this could account for the .5 point difference.)

“STEELY” DETERMINATION AND THE PIZAZZ OF PRECIOUS METALS

The DWA Steel Sector had a 33.9% return for the first quarter. Precious metals were up over 20% and the oil sector was up 16%. On the whole, these somewhat commodity-based sectors continue a theme that has provided out-performance for the last couple of years. As long as demand for these basic materials increases, companies in these sectors will increase concomitantly.

OIL EXCHANGE TRADED FUND LAUNCHED

The United States Oil Fund (USO) began trading today on the AMEX. Below is a description of the fund from an article on TheStreet.com:

The objective of the USO is to reflect the spot price of West Texas Intermediate light, sweet crude delivered to an Oklahoma-based storage facility. The fund will invest in oil futures contracts traded on the New York Mercantile Exchange or other U.S. and foreign exchanges. It will also hold other interests, such as cash-settled options and forward contracts, in order to gain exposure to the price of oil.[i]

If an investor seeks exposure to oil price movements, this is an investment to consider.

IMPORANT DISCLAIMER: This newsletter is offered for informational purposes only. Sources of information provided are believed to be reliable, but are not guaranteed to be complete or without error. Opinions and suggestions are provided with the understanding that readers acting on information contained herein assume all risks involved. The Author may or may not buy or sell securities discussed in this newsletter.

REALITY OFTEN PASSES FOR IRONY IN THE DESERT OF THE REAL!

[i] http://www.thestreet.com/_yahoo/etf/etf/10278348.html?
cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA