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March 12, 2015, 3:27 p.m. EDT

Technical backdrop brings out the positives for the Nasdaq

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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

While institutional rotation due to the booming dollar muddies up the mix, the growth-stock speculator bides his time and watches the leading issues closely.

Notwithstanding the Nasdaq Composite's being off in five of the last seven sessions, the growth index has held up well relative to the S&P, as was shown in the first chart of Tuesday's report.

The chart below shows the Naz descending nearly to the level of its recent basing structure. The market takes the stairs up and the elevator down.

For a larger chart, please click here .

Chart created using TradeStation . ©TradeStation Technologies, 2001-2015. All rights reserved.

While no speculator knows for sure where the dollar ends up, or crude for that matter, what is known is the identity and behavior of the relative-strength actors. These titles are important because a) they are where a momentum player wants his money to be, and b) they are a superb barometer of speculative sentiment.

Otherwise, the technical underpinnings are solid. Small-capitalization shares have outperformed since mid January, more so in the last several sessions as the dollar falls apart. The brokers /zigman2/quotes/210598459/delayed XBD +0.26% show ridiculous outperformance vs. the S&P, the degree to which has never resulted in a market getting into trouble, at least in this participant's memory.

Also moving out from a relative strength standpoint are the retailers /zigman2/quotes/206947004/composite XRT -1.35% . Ditto for the consumer discretionarys /zigman2/quotes/200844504/composite XLY -0.01% .

In short, most key segments outperform.

Normally, a bull market ends after an extended period of subsurface deterioration amid new highs in the S&P and/or Dow Jones Industrial Average. Large investors precipitate this decay by rotating out of smaller- and medium-sized equities into the blue-chip dominated indices.

Far from the case now.

Among the names, Esperion Therapeutics /zigman2/quotes/207049816/composite ESPR +3.58% has been a top performer over the past six months. The biotech interest came public 21 months ago at 14.00, and presently stands just below 70.00. Since this is a development company, there are no earnings or revenue.

(Perhaps to state the obvious, during the next bear market, names like ESPR and other biotech development-stage outfits are likely to show the heftiest of all losses. It is safe to say that most will never get close to their bull-market valuations. This process played itself out in the Bubble Era and its aftermath. What was technology then is biotechnology now.)

Esperion has a 99th percentile relative strength rank over the past 12 months, while its industry group also has a 99 rank for the past six months.

Here is why it may make sense for an aggressive speculator to take the breakout entrance above the 70.87 high of Feb. 17. During this seven-day decline in the Nasdaq Composite, ESPR has outperformed the S&P in six of those seven days. The stock is under extreme accumulation on an intermediate-term basis. And the iShares Nasdaq Biotech /zigman2/quotes/206189322/composite IBB +0.46% hit a new relative-strength high Wednesday.

But the key is the six-of-seven-days' outperformance.

US : ICE Gib Ind
+1.24 +0.26%
Volume: 0.00
Dec. 1, 2022 7:40p
US : U.S.: NYSE Arca
$ 66.37
-0.91 -1.35%
Volume: 6.86M
Dec. 1, 2022 4:00p
US : U.S.: NYSE Arca
$ 146.15
-0.02 -0.01%
Volume: 4.83M
Dec. 1, 2022 4:00p
US : U.S.: Nasdaq
$ 6.94
+0.24 +3.58%
Volume: 1.06M
Dec. 1, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$493.68 million
Rev. per Employee
US : U.S.: Nasdaq
$ 137.16
+0.63 +0.46%
Volume: 2.09M
Dec. 1, 2022 4:15p
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