Unfortunately, the stocks that are leading in the market bounce that began two weeks ago are not the prior winners. With exception, most are stocks that were the most beaten down. The only conclusion I can draw is that bargain hunters are driving the rebound and a real change of mood to the bullish side is not happening.
Long before the FANG acronym was in vogue, there was a group some called the market’s generals. It included the four FANGs and added such stocks as coffee purveyor Starbucks , biotech leader Gilead Sciences, sneaker maker Nike and, of course, AppleAAPL in Your Value Your Change Short position . The list is subjective as everyone had their own favorite leaders but the concept was the same. As goes the generals, so go the soldiers.
Right now, we can argue for the return of Starbucks to the fore with its strong breakout from a three-month slide (see Chart 3). It sports a clear change of trend, supported by such technicals as rising on-balance volume and relative strength. Also, its decline, while drawn out, was rather mild just as we’d expect from a leader.
For example, US Steel ( USX ) was up nearly 5% intraday but it set a 52-week low last week.
Blood management company Haemonetics released good third quarter results before the bell and the stock jumped over 8% in short order. Here, too, it traded at a 52-week low in January after losing a third of its value since last March. That is not exactly a surge back into a strong stock. Rather, it is hope for a technical turnaround that may or may not happen.
The leaders list is littered with gold stocks and biotechs. The former may be stabilizing after a bear market and the latter have been falling since last summer. The rush back to scoop up good stocks at cheaper prices so far is absent.
The point is that these are losers that got some interest and not leaders that are back in the lead.
That’s not a good condition for the bulls.
Michael Kahn, a longtime columnist for Barrons.com, comments on technical analysis at www.twitter.com/mnkahn. A former Chief Technical Analyst for BridgeNews and former director for the Market Technicians Association, Kahn has written three books about technical analysis.