Flush, Flush
Just when you were
sure the favorable seasonals
would kick in.
Like the post-Labor Day rally that
never materialized.
A week ago, the backdrop was less
cloudy.
Sure, everyone knew tech was done.
But other important segments such as
the bios and brokers hadn’t yet shown their true colors definitively.
Fast forward to today.
Those two groups took out prior lows,
putting them in the danger zone.
For example, Merrill
(
MER |
Quote |
Chart |
News |
PowerRating), a good
barometer, has been distributed in four of the past eight outings.
Elsewhere, über glamour
Brocade
(
BRCD |
Quote |
Chart |
News |
PowerRating), practically the last vogue name to hold up, finally printed
a lower low, and on big turnover, putting it into an intermediate-term
downtrend.
Again, it is worth saying that the
market is not so pat as to always bottom simply because the must-owns like BRCD
have finally unraveled.
Otherwise, the unexpected
is what’s important in the market.
And so when you see the Naz implode 5%
at a time when it usually rallies — such as Thanksgiving week — it merely
underscores how weak things really are.
This reminds me of Thanksgiving week
in ’94, when the market scared a lot of people out with a selling climax, only
to stage some follow-through action the subsequent week.
That follow-through action paved the
way for the monster rally of ’95.
To the opportunistic position trader,
early signs of the impending ’95 rally were as obvious as the desert sun, what
with scores upon scores of bases being built by growth stocks of every color.
The good news is that this sort of
behavior will be all the more conspicuous to the discriminating eye this time
around.
This is because the landscape is much
more barren now than five years ago.
That means that the growth stocks of
tomorrow — when their time comes — will certainly stand out like a redwood in
a desert.