Everyone must admit that the major stock indexes have staged a tremendous three day rally. Most major stock indexes have surged higher by more than 6.0 percent in that time. The NASDAQ Composite is leading the rally and has actually surged higher by 8.0 percent. On the surface everything looks fine and a potential bottom could be in place. There is one problem with this theory and that is the poor activity in the leading stocks.
Apple Inc (NASDAQ:AAPL) has been considered the leading technology stock in the world. A couple of days ago the company lost their co-founder Steve Jobs to a long illness and the stock has been struggling around the $370.00 level. While this support area is holding up at this time, the more the stock trades sideways the more vulnerable it will become to another decline. APPL stock is not leading the markets at this time and it must be watched closely. This stock is a major component of the NASDAQ 100 Index.
Amazon.com Inc (NASDAQ:AMZN) is another leading technology stock that is also a major retail company. This stock soared to new highs on September 19, 2011 when it traded as high as $244.00 a share. The stock has not been able to rally back up to that level and could be somewhat vulnerable in the near term. If this makes a series of lower highs it will become a bearish indicator for the near term. The stock has short term daily chart support around the $198.00 level.
Netflix Inc (NASDAQ:NFLX) was a stock market leader until mid-July 2011 when the stock traded as high as $300.00 a share. This morning, NFLX stock is trading lower by $1.62 to $121.52 a share. This stock has completely broken down and continues to look horrible on the daily chart. It is safe to say that NFLX is no longer leading the markets.
Copper and many of the base metals have completely broken down. Over the past three days many of the industrial metal stocks have bounced a bit, however, it is important to remember that nothing in the stock market goes straight down or up. Everything will usually get a short term bounce from and oversold technical condition. Energy stocks also look very poor at this time. The financial stocks are bouncing a little this week and that could be a positive sign. The financial stocks have been absolutely decimated over the past three months so this could just be a dead cat bounce.
So what is the bottom line with this market? This stock market rally is lacking real leadership at this time. Until there is some real leadership role by one sector or another, traders must be somewhat cautious. This fast bouncing rally can sometimes end as quickly as they begin.