It is certainly true, after the massive rally off the June 4th lows on the senior indices, that quite a few leading stocks may be a bit extended here. With this morning’s mild consolidation, yet again, the issue then becomes whether the broad market can withstand some of the leading stocks correcting or grinding sideways. For that to happen, you are likely looking for a “lock and roll” rotation down to other stocks setting up nicely behind the leaders. Moreover, that continued theme of benign consolidation on the major averages versus the violent whipsaws we saw earlier in the spring and summer would likely need to continue for bulls to claim that the rally is unscathed.
Specifically, AAPL KORS MLNX have all been exceptional performers in recent months and now are correcting or at least cooling off a bit. And yet, the overall market is barely down, with quite a few stocks on my watchlist and actively-traded portfolio inside 12631 in the green. Thus, as long as the market can keep holding the line while leaders take a pause, I will keep walking the line with my longs.
