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Sector Performance Review: Is The Fiscal Cliff Another Y2K Scare?

 December 04, 2012 01:14 PM

(By Rich Bieglmeier) Stocks always have a story to tell, and what Wall Street is buying tells you which stories are selling right now. That's exactly why iStock does its weekly sector review. We let the market tell us what is happening rather than relying on the so called experts on TV or in the financial papers or websites.

While CNBC and the likes are fixated on the fiscal cliff, traders have shifted their attention to growth stocks. Think about that for a minute. The financial wizards on TV are all cliff all of the time, and, yet, Wall Street is shifting towards growth. That doesn't make any sense!

If the USA's economy is about to cannonball from the cliffs of Acapulco into a cup of water, why in the world would the street move into companies that require above average earnings growth to survive? That doesn't make any sense!

[Related -Defensive Sectors Lead Hesitant Market, But Traders Honor Long-standing Bullish Support]

No, if the risk to the economy from the politicos is the threat, then we'd expect to see low P/E, low beta, and "defensive" stocks taking the lead. Utilities, pharmaceuticals, sin stocks… should be at the forefront if hell and hand baskets are about to become reality.

That's not what we see and what you will see below. Instead, sectors/industries that made the out-performance lists rely on strong economic growth and discretionary income. Does that sound like a fiscal cliff to you?  

We wouldn't be surprised to see stocks recover sharply following a few soft days. Investors might want to focus on stock from our bullish camps. Meanwhile, there's not too much to worry about on the underperformance side of the scale; yet another conflicting observation versus the current conventional wisdom.

[Related -Will Janet Yellen's Outlook Prevail?]


EMERGING BULL: Industries with positive technical analysis traits that are in the early stages, indicating possible above average returns in the near-term:

  • Gambling
  • Telecom Equipment
  • Food Retail & Wholesale
  • Marine Transport
  • Waste Disposal
  • Personal Goods
  • Food Products
  • Footwear
  • Transport
  • Low-Cap
  • Mid-Cap
  • Small-Cap
  • Top-Cap
  • Mid-Cap Value

MATURE BULL: Industries that have outperformed and their charts suggest the above average returns could continue:

  • Autos
  • Clothing
  • Consumer Goods
  • Support Services
  • Specialty Finance
  • Travel & Tourism
  • Large-Cap Growth
  • Growth
  • Small-Cap Growth

MATURE BEAR: Industries that have underperformed and, based on their current chart patterns, could continue to lag:

  • Computer Services
  • Gold Mining

EMERGING BEAR: Industries that have fresh negative technical analysis set ups and could have sub-par performance in the weeks ahead:

  • NONE
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