Do we still have the same Market Leaders?

Posted by downtowntrader | 2/06/2006 08:12:00 PM | 1 comments »

We are having some interesting action in a few "market leaders". Sometime's when market leaders falter, it could be a signal of a market top. Think back to the weeks leading up to aapl, goog and even hans earnings. Analysts didn't have enough good things to say about them, with upgrades and increased price targets. I want you to stop and think about something. Why does an analyst upgrade a stock or increase the target? If they don't own the stock or are buying more, why would the upgrade it? This would just increase the price they have to pay for it. They need buyers to unload their shares, so they upgrade it. Sometimes, there are other institutions that are buying, and sometimes the upgrading institution just wants to pare down the position and the stock chugs along. However, in January, everyone was pumping aapl and goog. If that many instituions felt that strongly about them, then why did they let them slip past the 50 sma (typically a buying point for institutions) so easily. Some people say, well earnings were disappointing, but the name of the game in the stock market is percieved future earnings, not past. Some institutions are worried about the near term future, and decided to lock in their substantial gains. If institutions that typically scarf up shares of market leaders at the 50sma are now letting them slide by, then there certainly is a danger of a market top. However, there is a debate to who the true market leaders are. Some would say the small and even mid caps have been the true market leaders. This could certainly still be the case and we may just be having a rotation take place in a few stocks. The IWM etf is still looking decent, and the SP600 is in much better shape then the other indices. If we are indeed rotating market leaders, then a case has to be made for who the replacements will be. I have listed some charts of possible market leaders moving forward, and interestingly, chip stocks are what's been being bought on dips. Look at AMD, NVDA, and BRCM's charts for proof. The key point here is to not be blind to the possible rocky road ahead. No one can call an exact market top or bottom consistently, but when there are warning signs, it makes sense to be cautious. Here are the charts of the stocks mentioned.






Good Luck,

DT

keep an eye out for another post tonight with a few charts.

1 comments

  1. Roberto // 8:05 AM  

    Good stuff.