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Aug. 11, 2016, 10:25 a.m. EDT

Stocks right now are a rebel without a pause

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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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By Kevin Marder


Everett Collection

The best to describe the U.S. stock market right now might be to call it a rebel without a pause, meaning it keeps on defying the predictions of many.

On Tuesday, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.27% , the leader among major averages, tacked up its ninth win in 11 tries. The index has not strung together as much as two losing days in a row during the 30-day post-Brexit rally. In fact, a 3%-5% reaction has eluded the Naz. Thus far, the pullbacks have been limited to one of 1.9% and another of 1.7%.

For a larger chart, please click here .

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

Leadership is typical for a mature bull market. To wit, capital goods would be expected to lead. The segment usually benefits from improved corporate profits late in a cycle. This gives companies the wherewithal to invest in plants and equipment, boosting the fortunes of the technology sector. Since technology is a capital good, it also explains tech's No. 1 leadership position currently among broad sectors.

The breadth of the advance remains solid, for the most part. One divergence that is more recent involves the 10-day NYSE net high/low differential. This indicator was discussed in the July 19 column and is shown below.

For a larger chart, please click below .

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

It shows that this metric, a proxy for the average stock, has weakened over the past three weeks. This has occurred as the S&P /zigman2/quotes/210599714/realtime SPX -0.20%  moves onto new-high turf, creating a divergence. The longer this divergence goes without being cured, the greater the chance of a breakdown in the index, i.e. the market.

Critically, breakouts in leading stocks are working. Recent examples include semiconductor concern Inphi /zigman2/quotes/208445412/composite IPHI +0.38% , Chinese Web portal Sina /zigman2/quotes/206755492/composite SINA -1.16% , social networker Weibo /zigman2/quotes/206830028/composite WB -4.45% (perhaps the most classic growth actor in the market), Nevro /zigman2/quotes/209913092/composite NVRO +0.47% , Microchip Technology /zigman2/quotes/208326291/composite MCHP -1.48% , medical software provider Evolent Healt /zigman2/quotes/207127728/composite EVH +2.49% and medical-product maker Insulet /zigman2/quotes/205106258/composite PODD +0.93% .

Volume, the mother's milk of any intermediate-term rally, is slightly better on the Nasdaq than during the first-quarter advance. The market is entering a seasonally slow period due to the many vacationing participants. For example, Tuesday's New York Stock Exchange volume was the slowest in 10 weeks. This would be a logical time for an overheated market to take a breather and either pull back or just idle sideways.

Among the names, Gol Intelligent Airlines /zigman2/quotes/206391664/composite GOL -0.44%   has operated at a loss for the past five years. Most Wall Street analysts who track the Brazilian carrier expect more red ink this year and next.

After a long multi-year descent culminating in a low of 2.44 in January, Gol broke out of a four-month cup-with-handle pattern on good volume a month ago. After a two-week run-up of 62%, price has formed another base over the last three weeks. A plus is the 99th percentile relative-strength (RS) rank it has earned over the past year vs. all other stocks.

For very aggressive speculators that do not mind trading off the chart alone without regard for a company's fundamentals, the July 21 high of 18.46 might be considered as an entrance pivot for a breakout play. Alternatively, should the general market correct, a pullback to the 10-day moving average would offer another possible entrance.

/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
11,042.50
+30.27 +0.27%
Volume: 3.09M
Aug. 13, 2020 5:16p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,373.43
-6.92 -0.20%
Volume: 1.96B
Aug. 13, 2020 5:10p
loading...
/zigman2/quotes/208445412/composite
US : U.S.: NYSE
$ 114.28
+0.43 +0.38%
Volume: 798,343
Aug. 13, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$5.91 billion
Rev. per Employee
$507,741
loading...
/zigman2/quotes/206755492/composite
US : U.S.: Nasdaq
$ 39.69
-0.47 -1.16%
Volume: 540,514
Aug. 13, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.63 billion
Rev. per Employee
$256,363
loading...
/zigman2/quotes/206830028/composite
US : U.S.: Nasdaq
$ 34.13
-1.59 -4.45%
Volume: 1.14M
Aug. 13, 2020 4:00p
P/E Ratio
19.75
Dividend Yield
N/A
Market Cap
$8.09 billion
Rev. per Employee
$510,853
loading...
/zigman2/quotes/209913092/composite
US : U.S.: NYSE
$ 138.16
+0.65 +0.47%
Volume: 259,731
Aug. 13, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$4.72 billion
Rev. per Employee
$481,703
loading...
/zigman2/quotes/208326291/composite
US : U.S.: Nasdaq
$ 100.58
-1.51 -1.48%
Volume: 1.79M
Aug. 13, 2020 4:00p
P/E Ratio
40.25
Dividend Yield
1.46%
Market Cap
$25.77 billion
Rev. per Employee
$352,817
loading...
/zigman2/quotes/207127728/composite
US : U.S.: NYSE
$ 14.02
+0.34 +2.49%
Volume: 1.69M
Aug. 13, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.17 billion
Rev. per Employee
$165,017
loading...
/zigman2/quotes/205106258/composite
US : U.S.: Nasdaq
$ 206.56
+1.91 +0.93%
Volume: 226,582
Aug. 13, 2020 4:00p
P/E Ratio
742.75
Dividend Yield
N/A
Market Cap
$13.44 billion
Rev. per Employee
$482,312
loading...
/zigman2/quotes/206391664/composite
US : U.S.: NYSE
$ 6.80
-0.03 -0.44%
Volume: 1.74M
Aug. 13, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.21 billion
Rev. per Employee
$204,069
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