Thursday, January 21, 2010

What Does 'Leadership' Mean in the Market? Why It Is Important That The 'Generals' Are Saddling Up

Market observers often refer to 'leadership.'  What they are talking about is groups of stocks that are outperforming the rest of the market.  We want to see 'leadership' coming from broad and important groups like financials and technology.  These are sectors whose healthy price action has far reaching implications for the economy and thus the future prospects of the market.

One of the things that is giving me a positive outlook on the market is the fact that we are seeing strength develop and/or continue in three very important areas:  financials, technology, and healthcare.  Companies in these sectors are reporting, on balance, very good results. Their guidance for the coming year, while naturally and prudently somewhat cautious, indicates that they se more positives than negatives as we move forward.

It seems clear to me that we are back to the 'normal' ups and downs and confusion we always see in the markets.  Severe meltdown as a potential scenario has been taken off the table.  It will be important for investors to 'disenthrall' themselves from the still fresh feelings of trauma that 2007-2009 instilled in us all.  If we do not, we will miss the unfolding opportunities.

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