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Oct. 27, 2016, 11:11 a.m. EDT

For active speculators, it may be time to pull back the reins

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About Kevin Marder

Kevin Marder is a guest columnist and a co-founder of MarketWatch. He is principal of Marder Investment Advisors Corp. and a contributor to The Gilmo Report. Previously, he served as chief market strategist for Ladenburg Thalmann Co. and developed institutional fixed-income risk management software for Capital Management Sciences.

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While the major averages have rebounded over the past week and a half, some of the speculative growth-stock glamours remain down for the count. The overall theme shows a rotation out of the speculatives and into the liquid glamours such as Alphabet /zigman2/quotes/202490156/composite GOOGL -1.31%   /zigman2/quotes/205453964/composite GOOG -1.58%    and Facebook /zigman2/quotes/205064656/composite FB -2.95% .

This behavior is to be expected in a mature bull market, where the speculative sentiment peaks and is replaced by a rotation into larger titles at the expense of smaller names.

It should be noted that this is not yet happening en masse. The small-stock Russell 2000 /zigman2/quotes/210598147/delayed RUT -1.53%  shows some decay relative to the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.51% , but is not completely falling apart (see chart below). Too, of the growth-stock leaders, about half remain buoyant, while the other half have suffered from technical breakdowns.

For a larger chart, please click here .

Chart created using TradeStation . ©TradeStation Technologies, 2001-2016. All rights reserved.

Within the small-stock universe, the fading speculative sentiment is reflected by a notable rotation out of growth and into value, as the chart below shows.

For a larger chart, please click here .

Chart created using TradeStation . ©TradeStation Technologies, 2001-2016. All rights reserved.

The Nasdaq Composite itself is benefiting by a distinct preference for large-capitalization technology including Microsoft /zigman2/quotes/207732364/composite MSFT -1.04% , Texas Instruments /zigman2/quotes/202237907/composite TXN +1.48% and Adobe /zigman2/quotes/200389143/composite ADBE -1.48% , according to the chart of the Nasdaq 100 below.

For a larger chart, please click here .

Chart created using TradeStation . ©TradeStation Technologies, 2001-2016. All rights reserved.

In light of the dichotomous look to the recent speculative leaders, an aggressive player in these titles should consider reducing long exposure if he hasn't already.

Among the names, Exact Sciences /zigman2/quotes/206653925/composite EXAS -1.28% is a biotech issue that has been drenched in red ink for years. With Wall Street predicting more of the same, the stock nonetheless went from five-ish to 22-and-change in about five months. Its O'Neil relative strength rank is in the 99th percentile over the last year.

Price is currently forming a 10-week consolidation. Aggressive operators might consider taking EXAS on a break above the Sept. 22 high of 22.21.

/zigman2/quotes/202490156/composite
US : U.S.: Nasdaq
$ 2,631.35
-34.80 -1.31%
Volume: 1.97M
Jan. 21, 2022 3:44p
P/E Ratio
25.30
Dividend Yield
N/A
Market Cap
$1770.96 billion
Rev. per Employee
$1.77M
loading...
/zigman2/quotes/205453964/composite
US : U.S.: Nasdaq
$ 2,627.93
-42.20 -1.58%
Volume: 1.54M
Jan. 21, 2022 3:44p
P/E Ratio
25.30
Dividend Yield
N/A
Market Cap
$1770.96 billion
Rev. per Employee
$1.77M
loading...
/zigman2/quotes/205064656/composite
US : U.S.: Nasdaq
$ 307.21
-9.35 -2.95%
Volume: 22.25M
Jan. 21, 2022 3:44p
P/E Ratio
21.85
Dividend Yield
N/A
Market Cap
$880.59 billion
Rev. per Employee
$1.92M
loading...
/zigman2/quotes/210598147/delayed
US : US Composite
1,993.04
-31.00 -1.53%
Volume: 1.56M
Jan. 21, 2022 3:29p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
4,415.08
-67.65 -1.51%
Volume: 2.44B
Jan. 21, 2022 3:44p
loading...
/zigman2/quotes/207732364/composite
US : U.S.: Nasdaq
$ 298.46
-3.14 -1.04%
Volume: 42.62M
Jan. 21, 2022 3:44p
P/E Ratio
33.25
Dividend Yield
0.83%
Market Cap
$2264.41 billion
Rev. per Employee
$973,762
loading...
/zigman2/quotes/202237907/composite
US : U.S.: Nasdaq
$ 176.01
+2.56 +1.48%
Volume: 7.08M
Jan. 21, 2022 3:44p
P/E Ratio
22.50
Dividend Yield
2.62%
Market Cap
$160.19 billion
Rev. per Employee
$586,267
loading...
/zigman2/quotes/200389143/composite
US : U.S.: Nasdaq
$ 503.27
-7.58 -1.48%
Volume: 2.93M
Jan. 21, 2022 3:44p
P/E Ratio
50.12
Dividend Yield
N/A
Market Cap
$243.06 billion
Rev. per Employee
$701,057
loading...
/zigman2/quotes/206653925/composite
US : U.S.: Nasdaq
$ 75.06
-0.97 -1.28%
Volume: 2.30M
Jan. 21, 2022 3:44p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$13.20 billion
Rev. per Employee
$351,923
loading...
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