A Slow Holiday Week Ahead

by: David Brown

The S&P 500 ended on Friday exactly where it began the week, at 1199, and today it closed just one point lower, at 1197.84. To be sure, there were some minor fireworks during the week, but look for this holiday week to be rather dull, with the market being closed on Thursday for Thanksgiving and closing early on Friday. I would not expect anything to rock the market this week, short of a world-shaking event, and even that might not move this market.

Week in Review. Last week’s minor fireworks started with fears of the Irish bailout and inflationary fears from China, which caused a sharp down day on Tuesday. But on Thursday, the market gained back virtually everything it lost on Tuesday, fueled by enthusiasm for General Motors’ (NYSE:GM) successful $20 billion offering.

The dollar continued to rise last week, despite the massive QE2 “giveaway.” The euro fell, at least in part, due to the broad concerns about the Irish PIIGS (no offense to our Irish friends); and as you might expect from such a flat week, the VIX—the “fear” index—was down.

It was a mostly positive week for economic reports. Retail sales fared better than expected, with most retailers posting upside performance for the month of October. Inflationary data remained quite tame, except for China; and there was a tiny bit of good news from the job market, with the initial jobless claims staying below 450,000 for the second consecutive week. The one negative report was housing starts, down 11%, which was another jab at the beleaguered housing industry.

Market Stats. The not-very-eventful week was led by Small-cap Growth, up +1% for the week. It is worth noting that Small-cap Growth not only led last week, but has also led for the last 3 months and 12 months. A good place to be. A not-so-good place to be was Large-cap Value, which dropped -0.08% last week, and it has also been the worst cap/style for the last 1 month, 3 months and 12 months.

From a sector viewpoint, last week looked a lot like the week before. Consumer Durables led, up +2.25%, followed by Transportation, up +1.5%, and Consumer Non-durables, up +1.39%. Out of favor last week were Basic Industries, down -0.36%, which is almost certainly related to the rising dollar. Finance was down -0.35% and Utilities, down -0.27%. All other sectors were up a small amount.

It is very hard to judge where we go from here. I still think the market may duplicate its behavior of last April, when it reached a two-year high and then plummeted. If it does, we may be in for a bearish slide, although last week’s entire downward movement was, at its worst, only 20 points.

Stock Ideas for This Market

I’m hedging my bets this week, with regard to stock ideas, and am offering 5 Bull picks and 5 Bear picks. Sabrient ranks stocks that perform best in bullish environments and stocks that perform best in a bearish environment. I’ve taken 5 of the top stocks from each list, based on market behavior during the past 90 days.

Best Stocks in a Bullish Market

Brookfield Homes Corp. (BHS) – Consumer Durables Sector (Home Building) – Small-cap
Coeur d’Alene Mines Corporation (NYSE:CDE) – Basic Industries Sector (Precious Metals) Mid-cap
Dycom Industries (NYSE:DY) – Capital Goods Sector (Building Materials) – Small-cap
Hecla Mining Company (NYSE:HL) – Basic Industries Sector (Precious Metals) – Mid-cap
TrueBlue, Inc. (NYSE:TBI) – Consumer Services Sector (Industrial Services) – Small-cap

Best Stocks in a Bearish Market

A.T. Cross Company (NASDAQ:ATX) – Capital Goods Sector (Office Products) – Micro-cap
CEVA, Inc. (NASDAQ:CEVA) – Technology Sector (Semiconductors & Components) – Small-cap
Flowers Foods, Inc. (NYSE:FLO) – Consumer Non-Durables Sector (Food Processors) – Mid-cap
QuinStreet, Inc. (NASDAQ:QNST) – Consumer Services Sector (Communications) – Small-cap
Verint Systems, Inc. – Technology Sector (Software & EDP Services) – Mid-cap