Börsipäev 10. november - intressimäärad fookuses - Investeerimine - Foorum

10.11.2004 15:49

Rev Shark:

Throughout most of the 1990s the technology sector was led by four stocks. This group of leaders was often referred to as the "Four Horsemen" -- Cisco (CSCO:Nasdaq), Microsoft (MSFT:Nasdaq), Dell (DELL:Nasdaq) and Intel (INTC:Nasdaq). All four still are huge entities that dominate their particular sectors but they have not been true leaders for some time.

Since the Nasdaq peak in early 2000 none of the four have been able to make it back to old highs and they have seldom been the leaders when we have rallied. The true leadership in the market has been in stocks that are of smaller size but growing at a faster pace. A good recent example is Google (GGOG:Nasdaq) in the Internet sector, which is likely to be a stock that leads the way as rallies and pullbacks develop.

The difficulty in determining which stocks are true leaders stems from confusing the importance of size vs. the importance of growth. There are plenty of big, stodgy companies out there that dominate their industries but that doesn't necessarily make them leaders. The leaders are the companies that are taking market share, developing new products and producing steady top and bottom line growth.

Cisco is a good example of a big sector-dominating company that is no longer a major market leader. Certainly Cisco provides some clues as to what is going on in the networking sector, but there are smaller, faster-moving companies that are leading the way in that group.

It is pretty clear by the market's reaction to the mediocre Cisco earnings report that it is no longer considered to be the leader it once was. A similar report five years ago would have the major indices gapping down big to start the day. Not only are they not gapping down today but we have buyers stepping up in premarket action.

The big, well-known companies will always attract media attention but that doesn't make them leaders. If you want to determine what is going to drive this market we will have to look beyond the Four Horsemen of yore.

The leadership reigns are going to shift quickly this morning from individual companies to the Federal Open Market Committee, which releases its interest rate decision at 2:15 p.m. EST. A quarter-point hike is widely expected but, once again, it the accompanying policy statement that will be the market driver. Market participants will be looking for clues as to how aggressive the FOMC is likely to be in the future.

Technically the indices have been holding up impressively even though they are extended. A sharp drop in crude oil has helped but the major driving force recently has simply been fear of being left out.

Regardless of the rather lofty technical status of the indices there continue to be excellent trading opportunities in individual stocks. Don't allow yourself to be blinded to those possibilities by focusing on deposed leaders like Cisco and the overbought conditions of the indices.

We have a positive open on the way. Oil continues to be pressured, which is helping matters, and I suspect that some shorts are feeling a bit squeezed by the indifference to Cisco's results.

Things will likely settle down in front of the FOMC decision so be careful about being sucked into the positive emotion we have at the moment.

Gary B. Smith:

Börsipäev 10. november - intressimäärad fookuses

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