These Groups Will Pave The Way For A New Move

  • December 16, 2003
  • Tim Truebenbach

There
is no doubt that growth stocks are in major correction mode
right now. The Dow and S&P 500 have been the areas to find support and institutional
buyers for the past couple of weeks. Today was no different, as the S&P
500 rallied on heavier volume than yesterday.

image src=”https://tradingmarkets.com/media/2003/Tim/tt121603-01.gif” />

Nursing Home stocks provide
a perfect example. The group has still performed in the top 2% of all groups
for the past 12 months, even though it has been taken apart in recent weeks.

Vistacare

(
VSTA |
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PowerRating) and Odyssey Healthcare

(
ODSY |
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PowerRating) provide examples of the recent exodus from growth stocks, yet the
group is still one of the top names.

image src=”https://tradingmarkets.com/media/2003/Tim/tt121603-02.gif” />

image src=”https://tradingmarkets.com/media/2003/Tim/tt121603-03.gif” />

It is crazy to see, but
names like Caterpillar
(
CAT |
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PowerRating)
have been surging higher as institutional investors seem to think they are undervalued.

image src=”https://tradingmarkets.com/media/2003/Tim/tt121603-04.gif” />

Obviously, slow-growth names
like this cannot keep going without quickly becoming overvalued. Growth stocks
are in the midst of building bases and will eventually emerge to lead the market
once again.

In the meantime, the market’s
price-and-volume action appears healthy as we have yet to see overwhelming distribution
in the leading Nasdaq (don’t forget that this index is still up over 40%
this year as compared to just over 20% for the Dow and S&P).

This correction appears
very healthy and will most likely pave the way for a new move in some of the
leading areas of the market over the next few months. I wouldn’t count
Internets and other consumer-oriented names out quite yet.

There is plenty of healthy
action in the market, including the amount of new 52-week highs vs. new 52-week
lows on a daily basis. While the Nasdaq is taking a breather, it still posted
75 new highs today vs. 14 new lows. The NYSE showed 189 vs. 7.

Yahoo!

(
YHOO |
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PowerRating) is still a name I believe worth watching since it has been acting
very well out of the Internet names. It is a large stock that can appeal to
large institutional investors.

image src=”https://tradingmarkets.com/media/2003/Tim/tt121603-05.gif” />

Rather than moving around
the market or looking the other way, it may pay off very well to focus on growth
stocks as they correct, and build new bases. When they begin to move higher,
we will be on top of the strongest names.

Tim Truebenbach

timt@tradingmarkets.com