Mike Panzner put out an interesting piece last week.
The Nasdaq-100 has been on a tear since bottoming on March 5th, gaining 12.77% through yesterday’s close. Yet, if you break the technology-laden bellwether down into its 100 constituent members, it paints a slightly disconcerting picture. Despite all the talk from equity bulls about the health of the market and the rally’s
sustainability, the advance has been narrowly based.Apple, for example, has played a major role in pushing the index higher, equating to more than 20% of the overall gain. The rallies in Apple, Google, and Intel account for nearly a third, while seven stocks comprise half the move in the NDX. Finally, 13 out of 100 stocks — 13% — are responsible for two-thirds of the overall advance.
While this heavy lifting by a small number of shares does not mean the index can’t go higher still, history suggests rallies that lack widespread participation sometimes lack long-term staying power.
As the table below shows, most of the Nasdaq’s gains are unusually concentrated last quarter in about a dozen stocks.
Table of Nasdaq Gainers:
| Symbol | Name | 3/5/07 Close |
6/28/07 Close |
Net Change Points |
Net Change % |
% of Overall Move in NDX |
Cumulative % |
| NDX | Nasdaq-100 Index | 1712.94 | 1931.67 | 218.73 | 12.77% | ||
| AAPL | Apple | 86.27 | 120.56 | 34.29 | 39.75% | 21.63% | |
| GOOG | 440.81 | 525.01 | 84.2 | 19.10% | 6.20% | ||
| INTC | Intel | 19.10 | 23.92 | 4.82 | 25.24% | 5.13% | 32.96% |
| QCOM | Qualcomm | 39.14 | 43.46 | 4.32 | 11.04% | 4.54% | |
| AMZN | Amazon | 37.04 | 68.89 | 31.85 | 85.99% | 4.53% | |
| MSFT | Microsoft | 27.54 | 29.83 | 2.29 | 8.32% | 3.94% | |
| ORCL | Oracle | 16.37 | 19.85 | 3.48 | 21.26% | 3.90% | 49.88% |
| RIMM | Research in Motion | 134.44 | 165.55 | 31.11 | 23.14% | 3.03% | |
| PCAR | Paccar | 67.78 | 87.45 | 19.67 | 29.02% | 2.86% | |
| CSCO | Cisco | 25.44 | 27.85 | 2.41 | 9.47% | 2.73% | |
| DELL | Dell | 22.53 | 28.45 | 5.92 | 26.28% | 2.59% | |
| CHRW | CH Robinson | 49.97 | 53.16 | 3.19 | 6.38% | 2.49% | |
| NVDA | Nvidia | 28.74 | 41.99 | 13.25 | 46.10% | 2.47% | 66.05% |
Data courtesy of Mike Panzner
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What might this mean?
Are Technicals Waning as a Positive Influence? I’m not exactly sure — What I’d like to see is how past rallies have moved forward in terms of leadership.
Is it unusual to have 13 stocks in the NDX’s 100 account for 67% of the aggregate advance? Is this unusually narrow? When has this occurred, early or late in a run?
I don’t know the answers to these, but I am curious . . .
A 10-day moving average of new highs/new lows confirms the narrowed market, showing a severe divergence between the index and the MA.
It is a difficult but still “the best of the possible world” see the Swiss market which is climbing on one share only ABB 79 pct in one year 30 Pct in 6 months.
Not much choice either.
My opinion is that we are going to find leadership in Tech and Energy stocks in the 2nd half of this year. NASD still has to catch up with Dow and S&P.
I agree with my big city friend. Last weeks numbers suggest inventory correction may well be over.
Too many players rooting for a decline, imho.
http://www.safehaven.com/article-7850.htm
May be a visit to this page would help to assess the inventory possible outcome.
The inventories of the banks may bemore worysome.
Manufacturing growth in the U.S. accelerated last month to the highest level in 14 months, boosted by an increase in production and new orders, an industry report showed today.
The Institute for Supply Management’s factory index rose to 56 from 55 in May. Readings greater than 50 signal expansion.
ride’m manhatten “cowboy”
A good question would be to ask if the narrow NASDAQ rise is very similar to what is happening to the economy/people in the U.S.
ie…
The Top 7% get 50%
The Top 13% get 66%
ManhattanGuy – which part of Barry’s post was wrong? I see no Bear/Bull opinions whatsoever in his message. On the contrary he sounds very open-minded about wanting to know more.
This blog often features articles and cross-referenced posts that are bearish. This is because Barry wants to spur discussion that is buried under persistent media hype and disinformation that harmonizes with the bulls’ message, which is certainly more exciting!
I appreciate your comments here and the efforts you make to balance the discussion. Please don’t get yourself banned by making stupid assertions.
Heh, I guess MG’s comment already got taken down.
Saying Barry’s outlook on economy is unbiased is like saying Fox news is unbiased with their news coverage.
For instance, manufacturing data came out in the morning. How come there is not a seperate thread on this news? How convenient for Barry to ignore this positive news.
~~~
BR: You really don’t get it? I really have to explain this to you? OK, here goes:
1) Because I am on vacation;
2) Because I GET TO CHOOSE MY OWN AGENDA — not you! You ain’t me editor, and you ain’t me wife!
3) What value-add is posting front page news? The prime market ,over of the day is fairly well covered. Does repeating it here really increase anyone’s vision, understanding, thought process?
4) Its very troll-like to post “Why don’t you write about (off topic subject) X?” I find it a rinky-dink way to argue with ME in MY house.
5) I have a finite amount of time to blog each day — despite my prodigious output, its really not my day job. AGAIN, THISE GOES BACK TO ME PICKING WHAT I WANT TO WRITE ABOUT
6) As my Australian mates would say, If you dunna like it, *GSYOFB, bloke.
*Go start your own fuckin’ blog.
I didn’t say his outlook is unbiased; this site would be pretty boring to me if it were. But conveniently positive news has been getting much better coverage in the past several years, and it seems the press has been ignoring a number of disconcerting trends. The media most certainly loves a good disaster and we may very well see some soon, but they’ve done a pitiful job of covering the slow-motion slowdown, because frankly it wouldn’t sell.
You want to discuss the manufacturing data? Start your own blog, I’ll read it. Barry may too, and if your insight goes deeper than mainstream talking points, he may even cross-link it.
Start a blog? Manhattan Guy won’t even give us his email.
As a techie myself, I would love to see the tech market doing better. It would be great to see more innovation. But as soon as a company is doing well, it seems to be purchased by Google or Microsoft or whoever. Part of this is the venture capital structure we have come to rely on, where the only way to profit fast enough for the venture crowd is to sell out the company.
It takes a good seven years to actually mature a comapny – yet today most are expected to be an instant success in the tech world. And if the field is profitable, it is entered or bought by one of these big players who then either cannibalize or destroy the niche.
I would have loved to start an educational software company after I got my MBA a few years ago, but Microsoft had ruined the profit margins for everyone, as I found out while writing up my business plan, so I didn’t pursue it. Today most of the great educational software companies are gone, and instead of raising bright kids who are technically strong we’re raising game players. Every kid I know wants to work for the game companies. Even my husband works at one!
America is too busy entertaining itself to be innovative anymore, it seems.
A reason the ISM is inching upwards may have more to do with dollar weakness than U.S. economic strength.
I think it pays to keep in mind that the U.S. is not a manufacturing driven economy but a debt driven economy, and it is access to credit that will either sustain, slow, or cripple the market.
All the talk of narrow leadership etc. etc. is meaningless as long as the big money is buying. The COT reports suggest the big money is buying heavily. I wouldn’t expect a fall until they start selling. I publish the COT reports every week on my blog. They were selling prior to the Feb. fall and they were selling prior to May of last year. Just follow what the big money is doing. http://www.garyscommonsense.blogspot.com for any who would like to check in and see what the big boys are doing.
Winston,
“A reason the ISM is inching upwards may have more to do with dollar weakness than U.S. economic strength.
I think it pays to keep in mind that the U.S. is not a manufacturing driven economy”
Perhaps the weaker dollar makes us competitive. GE, Cisco, Intel, and Cat are prime examples. Business loans exploded this month…to replace the soaked up inventory. You’ll see.
Cherry Picking in Data Analysis
There is a type of research that is especially dangerous for individual investors. The researcher takes current data and makes a statement like one of the following: If you avoided the ten worst trading days over the last five years….
This is an easy one-
Check the SP500 in 1998 and you’ll see a very similar divergence. If you didn’t own Coke, Gillette, Pfizer (early) or the 4 tech horsemen (later) you made no money.
Hey Clarke,
I was just about to ask about the example you cited. Do you have the data (or know where tot find it) to show in detail how much of S&P’s advance from 1998 to 2000 was due to the 7 stocks you listed? I don’t want to have to reinvent the wheel by calculating it myself.
Thanks.
to your point on the deteriorating breadth in the NDX:
On Tuesday (7/3) the NDX was up 11 pts, A/D line was 49 up, 50 down, 1 unch.
Today (7/5), 60 down, 37 up
Great analysis.
I updated the analysis through today midday to include the big moves since the 6/28 date.
The stocks AAPL, GOOG, RIMM, and INTC account for 54% of the 15% move in the NDX.
The narrowness is narrowing further.
Is it possible to do the same comparison for the Australian Market? If so how and what is the process and results?