We are now starting to see fund flows rotate into a few big momentum winners again and some of these top stocks look ready to go. This year we have seen something different than last year when the stock market went straight up with zero volatility as the DOW didn’t even pullback over 3% from a 52-week high once.
Last year everything just about went up together.
But a few weeks ago the DOW dumped for a 10% drop and a lot of stocks inside the stock market broke down (here is my take on the reason why the stock market dropped). Luckily the DOW held it’s 200-day moving average on the technical analysis charts and the computer trading robots kicked in to buy as things stabilized and in March the Nasdaq made a new 52-week high.
But as you can see from these charts the DOW did not make a new high at the same time.
What is happening is that market gains are now being fueled by just a few stocks. There are about two dozen stocks in the Nasdaq 100 going straight up that are helping to fuel it’s rise while many stocks in the DOW (such as GE, IBM, CAT, WMT, and MCD are broken and lagging).
The top gainers for the Nasdaq 100 fueling the move this year are MELI, NFLX, STX, FOX, AKAM, AMZN, CSCO, WYNN, ADBE, VRSNm QCOM, MU, ATVI, and WDC.
The final innings of a bull market and topping phases occur when just a few stocks lead and many individual sectors and stocks break down and start to decline.
There are warning signs.
We have seen the US dollar trade down in a bear market this year along with a drop in bonds, which would mark a turning point in the biggest bubble in human history just starting to deflate.
But with the stock market it appears that we are just starting a topping process so the leaders can run more.
Take a look at these four leading stocks in the Nasdaq 100.
NFLX and AMZN as you can see have been going straight up and both by themselves have such a big market cap that they are helping to push the Nasdaq higher. The two indicators on these charts on the bottom are the relative strength comparing the stock’s performance to the QQQ ETF and on balance volume indicators. Both are going up.
CSCO and AAPL have also done well so far in March, but have not broken out to new highs yet like NFLX.
AAPL was lagging for a period of time, but now appears to be geared to run.
NFLX has gone up so much without even pausing that I have a hard time buying it now.
But I think we can consider AMZN, CSCO, and AAPL as three stocks that are simply ready to run with the bulls. The market had a pullback in February that caused computer trading robots to even turn off their buys for a few hours when the DOW fell over 1,000 points and a few VIX ETF’s blew up. But now that things have stabilized the robots are buying dips and momentum players are piling into whatever is going up the best. And that means these three stocks are ready to run with the bulls. If the market goes up more it will be these stocks that push it higher.
Also take a look at NVDA as a stock with a similar chart to AAPL now too.
But there is damage done to some key sectors and stocks.
There are some things now that are ready to drop and should be considered doomed.
There are in fact five stocks that are widely owned inside the Nasdaq 100 that I would not buy now and would even consider selling if you own them.
And I talk about them in this video.
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