Friday, January 08, 2010

The Weak Grow Strong



One pattern that is becoming quite common lately is to see the weak stocks rally and become some of the strongest stocks in the market. For example, back in November the Airline stocks were lagging the overall market and looked extremely bearish. Once the downtrend line was broken, the airline stocks became one of the strongest groups in the marketplace.

Now we are seeing the same thing happen with the homebuilders, drillers and the banking stocks. These three groups were lagging the market in December and are now coming to life.



The homebuilders are breaking out of an inverse head and shoulders pattern which projects an upside target that should challenge the September high.



The bank stocks which were looking extremely sickly last month have now grown to become one of the strongest acting groups over the past week.



The oil stocks were also looking weak last month and have now come to life. When I see this type of price action where the weak suddenly become strong, it's usually an indication that the bull is alive and well.

3 comments:

Mike Truong said...

Or this could be the end of the rally as they distribute the final pieces of junk onto the masses...

Sean said...

I agree with Mike, Kevin. It's simply, to me, sector rotation to prop the market up before a serious sell-off.

frank said...

Kevin- nay comments on the USD?

is this a buying opportunity in UUP?

thanks

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