By now, you are no doubt aware that there is a major dichotomy occurring in today’s stock market. 2013’s big winners are suddenly 2014’s misery positions. Mo-mo has become a no-no. And many of the former leaders have been beaten unmercifully over the last two months.
You’ve probably seen the charts before, but again, a picture is worth a thousand words. So let’s review what has been happening in the momentum names lately.
First there is social media. You know, companies that most of the over-40 crowd has never heard of. Twitter (NASDAQ: TWTR), LinkedIn (NASDAQ: LNKD), Yelp (NASDAQ: YELP) etc.
The bottom line is that while these names were all the rage in 2013, suddenly it isn’t too cool to be invested in this space.
Global X Social Media (SOCL) Daily
While the damage is not nearly as severe, the once-hot internet stocks have also come back down to earth in a rather swift fashion. And although the decline of -18.3 percent isn’t an abject disaster, these stocks have clearly lost their mo-mo mojo.
First Trust Internet (FDN) Daily
Then there is Biotech. Once the darling of nearly every hedge fund and fast-money trader’s portfolio, this chart is the poster child for why ALL investors simply MUST have an EXIT STRATEGY for each and every position they own.
Biotech (XBI) Daily
And yet, the blue chip indices have been doin’ just fine, thank you. In fact, the large-cap indices don’t seem to give a hoot about the devastation taking place in so many of the former high fliers.
Take a gander at the chart below of the S&P 500. Now quickly compare the trend of the S&P over last few months to the charts above.
S&P 500 Daily
Now, for all you hot-money traders out there, take a look at the next chart. while trucking and airlines and package delivery companies aren’t exactly sexy, they DO seem to be working right about now.
Seriously, ask yourself, would you rather own Southwest Airlines (NYSE: LUV) or Twitter (NASDAQ: TWTR) here?
The Big Q: Can The Market Survive the Mo-Mo Meltdown?
The question on everyone’s mind – and the reason the review of the next 5 potential bear catalysts got put off again today – is can the broad market continue to simply ignore the momentum meltdown?
David Moenning is the founder and chief investment strategist for StateoftheMarkets.com, a website dedicated to investor education and portfolio analysis. Mr. Moenning is also President of Heritage Capital Management, a privately owned, investment management firm. Founded in 1989, Heritage is focuses on risk management and an “own the best and ignore the rest” equity selection strategy.
For up to the minute updates on the market’s driving forces, Follow Me on Twitter: @StateDave (Twitter is the new Ticker Tape)
Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.