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  • Oil-to-Tech Could Win Leading Role

    By Rev Shark
    RealMoney.com Contributor
    2/22/2006 9:30 AM EST
       

    "The function of leadership is to produce more leaders."

    -- Ralph Nader

    The biggest obstacle this market faces right now is a lack of solid leadership. There is no group that is inspiring confidence, attracting investors and providing hope that the future is bright and promising. Until a key sector -- such as semiconductors, financials, retailers or whatever -- takes the lead and inspires more stocks to move forward, it is going to be tough for the market to make substantial progress. 

     
    Until recently key market-leading groups were oil and metals. Although those groups often have negative consequences for other sectors of the market, they did seem to provide leadership that kept the market moving to new highs. With energy and metals now stumbling a bit and continued pressure on big-cap technology stocks, as is evident if you look at the Nasdaq 100, there is no solid leadership.

    Small-caps as a group have had excellent relative strength, but what we need is a specific industry sector rather than a group of common capitalization to lead. Ideally, the best leaders are big-cap technology stocks. They are the group that has the best chance of dragging along a host of other groups.

    I've commented a number of times lately that I haven't seen material weakness in many of the stocks that I am holding. I tend to focus primarily on stocks that have quasi-CANSLIM characteristics and that is one group that has seemed to hold up.

    However, it is a mish-mash of groups and sector, and there is no clear leadership theme. As is often the case, stocks with good earnings numbers and charts are preferable to most other things. Even on a day like yesterday, the IBD 100 stocks as a group was positive on the day, which tells us something about the market.

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