Written by:  Russell Markham

Despite the ongoing downward trending market (as noted by our Confirmed Down Call in VectorVest), there are a few industries that continue to shine. Our job as investors is to identify those industries. The best place to find out where the opportunities lie is to look at the Industry Viewer in VectorVest.

To access the Industry Viewer, click on the Viewers tab and then click on Industry Viewer. All the industries are sorted by Relative Timing (RT) in descending order to bring the fastest moving industries to the top. To clarify, RT looks at the short-term price momentum taking place, in this case, it is the short-term price momentum across all 44 industries as tracked by VectorVest. As of 12 July 2022, the top 4 industries as sorted by Relative Timing in descending order are: ETFs (Short), ETFs (Bonds), Financial (Insurance) and ETFs (International). As this market seeks to find a market bottom, the ETFs (Short) have been performing very well.

The ETFs (Short) consist of these 4 Contra ETFs: SNAS.AX, BBOZ.AX, BBUS.AX and BEAR.AX. The cumulative performance of these 4 ETFs in recent days has been as follows:

7 July to 12 July 2022: 1.47%

If we look back over the months, the returns are as follows:

1 April to 29 April 2022: 10.63%
2 May to 31 May 2022: 0.09%
1 June to 30 June 2022: 18.23%
1 July – 12 July 2022: -4.20%

Interestingly, these 4 Contra ETFs as of 14 January 2022 (when the C/Dn took place) through until 12 July 2022 has returned 24.44% compared to the VVC/AU at -14.13%. The Price of the VVC/AU is the average of all stocks that we track. Although the cumulative return for July is negative, if this market is not done finding a market bottom just yet, chances are the Contra ETFs will produce another month of returns. But be warned, when that market turns, Contra ETFs will most certainly go the other way! Market Timing must be viewed very closely.

The second highest industry per the Industry Viewer on 12 July 2022 is ETFs (Bonds). Bonds have had a tough time in the market. In fact, US bonds are on track to have their toughest year on record since 1842. Please click here to read more. With inflation surging, this has impacted on the bond market. That has been the key narrative in the media. However, notice how the ETF (Bonds) are right up there in the Industry Viewer. Is this the turnaround for bonds in the making? Since the start of July, 22 out of the 25 Bond ETFs that we track on the ASX are in the green. Keep your eye on the Bond ETFs to see if this is the start of the turnaround. VectorVest reports it how it is…for July so far, the Bond ETFs have been on the rise. The best performer for the month (1 July 2022 to 12 July 2022) is IHHY.AX which is up 1.72%.

The third highest ranked industry as of 12 July 2022 is Financial (Insurance) which currently comprises of 11 stocks. From 1 July 2022 to 12 July 2022, AMP.AX has returned 4.66% followed by NHF.AX at 4.08% and AUB.AX at 3.13%. 6 out of the 11 Financial Insurance companies have posted positive returns. Why the surge in the current market? It could be due to valuations.

Livewiremarkets did a telling article on insurance companies and worked through numerous factors affecting this industry. Please click here to read the article. Have investors sold down financial insurance companies too far? A quick look at VectorVest notes that the average Price of a financial insurance company is $5.28 and the average Value is $5.51. Check out the Price versus Value on the 11 financial insurance companies. NOL.AX and QBE.AX are priced a fair bit below the VectorVest valuations.

Coming in at 4th place per the Industry Viewer sorted by RT as of 12 July 2022 is the ETFs (International) industry. This industry comprises of 68 ETFs in total. From 1 July to 12 July 2022 – the 68 ETFs have returned 1.98%. The best performer has been CURE.AX at 11.66% followed by LNAS.AX at 8.50% and MGF.AX at 7.98%. Interesting to see CURE.AX popping up again. We made reference to CURE.AX in the Essay on the 28th of May 2021.

There you have it, you can keep your eye on the best performing industries. In a rising market, the best performing industries are a superb way to profit from short-term trends. In a downward trending market, one needs to be more careful…not to say you cannot take advantage. Chances are your trading plan that you have tested via VectorVest BackTester is keeping you out of the market for now. But interesting to see the industries which are starting to go against the market trend!

Please click here to see this week’s video.


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