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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 -0.20% , 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 -0.52%  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 , Chinese Web portal Sina , social networker Weibo /zigman2/quotes/206830028/composite WB -1.90% (perhaps the most classic growth actor in the market), Nevro /zigman2/quotes/209913092/composite NVRO -15.58% , Microchip Technology /zigman2/quotes/208326291/composite MCHP +1.34% , medical software provider Evolent Healt /zigman2/quotes/207127728/composite EVH +5.65% and medical-product maker Insulet /zigman2/quotes/205106258/composite PODD -1.61% .

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 -3.32%   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 : Nasdaq
13,742.02
-26.90 -0.20%
Volume: 4.87M
Jan. 24, 2022 3:34p
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/zigman2/quotes/210599714/realtime
US : S&P US
4,374.89
-23.05 -0.52%
Volume: 2.92B
Jan. 24, 2022 3:34p
loading...
/zigman2/quotes/206830028/composite
US : U.S.: Nasdaq
$ 32.83
-0.63 -1.90%
Volume: 934,570
Jan. 24, 2022 3:34p
P/E Ratio
22.32
Dividend Yield
N/A
Market Cap
$8.55 billion
Rev. per Employee
$424,641
loading...
/zigman2/quotes/209913092/composite
US : U.S.: NYSE
$ 72.48
-13.38 -15.58%
Volume: 1.61M
Jan. 24, 2022 3:34p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$3.00 billion
Rev. per Employee
$467,231
loading...
/zigman2/quotes/208326291/composite
US : U.S.: Nasdaq
$ 74.31
+0.98 +1.34%
Volume: 3.80M
Jan. 24, 2022 3:34p
P/E Ratio
64.11
Dividend Yield
1.26%
Market Cap
$40.69 billion
Rev. per Employee
$309,662
loading...
/zigman2/quotes/207127728/composite
US : U.S.: NYSE
$ 23.39
+1.25 +5.65%
Volume: 458,910
Jan. 24, 2022 3:33p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.98 billion
Rev. per Employee
$321,214
loading...
/zigman2/quotes/205106258/composite
US : U.S.: Nasdaq
$ 220.54
-3.60 -1.61%
Volume: 748,345
Jan. 24, 2022 3:34p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$15.46 billion
Rev. per Employee
$545,895
loading...
/zigman2/quotes/206391664/composite
US : U.S.: NYSE
$ 5.98
-0.21 -3.32%
Volume: 1.82M
Jan. 24, 2022 3:34p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.24 billion
Rev. per Employee
$86,120
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