October 2nd, 2005

The market has withstood two weeks of

The market has withstood two weeks of negative fundamental surpises and, most unexpectably, has shown sufficient resiliance to start an assault against the resistance levels mentioned previously (see Monday, September 12, 2005). Facing hurricanes Katrina and Rita, another Fed interest rate rise and weakening consumer confidence, the market, as represented by the S&P500, increased 1.11% to 1228.81. That move comprises nearly all of the gain in that index so far this year, or 1.39%.

For the past 10 years, October has produced excellent results and this year looks like it won’t be an exception. If resistance levels can be breached with conviction (1245 for the SP500, with volume) then a significant move is in the offing into year-end.

Energy sector stocks have consistently beenthe movers since the middle of last year with the various Oil&Gas Industry Groups ranking among the top of IBD’s list of 197 Industry Groups. If you’ve owned stocks in this group, they have probably continued to make list of new highs throughout the year.

But what groups appear now to be moving up significantly in the rankings? Over the past month, for example, because they may now look to be possible leaders in the near future?

Sector Rank Change 9/30/05 8/30/05
Computer Sftwr-Desktop 128 38 166
Bldg-Wood Prds 117 44 161
Steel-Producers 114 25 139
Bldg-Mobile Mfg./RV 107 55 162
Metal Ores 107 43 150
Metal Ores-Gold/Silver 90 20 110
Finance-Frgn Inv Fd 86 32 118
Internet-ISP 82 78 160
Banks-Frgn 69 19 88
Insurance-Brokers 68 108 176
Food-Meat Products 67 92 159
Auto Mfrs 57 68 125
Elec-Compont/Connectr 57 98 155
Beverages-Alcoholic 52 65 117
Internet-Software 50 114 164

Some of these Industry Sectors have improved because select member stocks have already moved beyond their resistance levels reflecting a growing assumption that inflation will appear in such commodities as the wood, metals and mining products. After scanning all the stocks making up these 15 groups, I’ve found some excellent prospects. The momentum has begun in some stocks in these groups and can be bought now; the following have yet to break out, should be added to your watchlists and bought when those resistance levels are breached:

Sector Stock Resistance Current
Bldg-Mobile/Mfg&Rv THO 37.00 34.00
Bldg-Wood Prds DEL 47.00 46.05
Bldg-Wood Prds GP 38.00 34.06
Bldg-Wood Prds LPX 29.00 27.69
Bldg-Wood Prds WY 69.00 68.75
Computer Sftwr-Desktop ADBE 31.00 29.85
Computer Sftwr-Desktop IVII 10.50 10.03
Computer Sftwr-Desktop MACR 41.00 40.67
Computer Sftwr-Desktop SCOX 5.25 4.18
Computer Sftwr-Desktop SNIC 22.50 21.50
Metal Ores ACO 21.00 19.07
Metal Ores AWC 20.50 18.89
Metal Ores MSB 21.00 19.46
Metal Ores N 46.00 47.35
Metal Ores AEM 16.00 14.81
Metal Ores BGO 3.00 2.69
Metal Ores-Gold/Silver EGO 4.00 3.55
Metal Ores-Gold/Silver GFI 15.50 14.53
Metal Ores-Gold/Silver KGC 8.50 7.68
Metal Ores-Gold/Silver MGN 6.60 6.06
Metal Ores-Gold/Silver NEM 50.00 47.17
Metal Ores-Gold/Silver PAAS 18.50 17.66
Metal Ores-Gold/Silver PDG 19.25 17.15
Metal Ores-Gold/Silver RIC 5.00 4.49
Steel-Producers AKS 9.75 8.57
Steel-Producers NUE 63.50 58.99
Steel-Producers OS 29.00 27.90
Steel-Producers STLD 36.00 33.96
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