Markets Still Trending Up Despite Faltering Leaders

Dec. 9.09 | About: Apple Inc. (AAPL)

It’s really a strange thing, a strange thing indeed. When you pay special attention to leading stocks or sectors, your objectivity naturally becomes a bit askew. But as a practice, it’s important to keep an eye on the leaders, and their behavior during broader market moves. It’s important because, if the leaders are not participating in that move, then the move has to be suspect. At least that’s the general wisdom. Right?

Then why are the broader markets unaffected by the weakness shown by some leaders. Is there a lack of liquidity, is the market eroding internally, are the leaders showing the first signs of a crack? I don’t think so, there’s plenty of cash to go around, plenty of participants, great breadth. And so why these few companies? Why should AAPL, which has zero debt and blowout quarters, growing margins all in the face of a weak consumer, get hammered in the market?

There’s still great strength in this market. Still a lot of potential upside. It’s easy to see when you do a stock scan and compare bullish indicators against bearish ones. There are far more stocks participating in the bullish scenarios than not.

Let’s take a snapshot of a few of these indicators, across different markets…

Technical Indicators Nasdaq NYSE AMEX Total
New 52-week Highs 92 185 7 284
New 52-week Lows 16 3 0 19
Bullish MACD Crossovers 37 33 1 71
Bearish MACD Crossovers 9 19 5 33
Click to enlarge

This is just a small sampling. Virtually every technical scan that I’ve done, shows the bullish case far outnumbers the bearish one. But this goes beyond technical scans. Most markets are doing great. Sure there are some better than others, like Healthcare, Consumer Staples and Technology have been the leaders in this rally. A strange group, I know. Then there are the relative laggers, like Consumer Discretionary, Industrial and Energy. Those make more sense, when you consider manufacturing as a whole has been hit pretty hard.

There’s definitely some sector rotation going on. For example, right now it appears that Tech is losing favor, and being replaced by Transportation and Telecom. The big money is fluid, and somewhat unpredictable. The shifts from one sector to another can happen within a single session, sometimes it seems they happen in the last hour. Am I too cynical to point out that it all looks coordinated.

Disclosure: Long AAPL