Since bottoming on March 5, the Nasdaq-100 index has been on a tear, gaining 12.77% through yesterday's close.
Yet, if you break things down and analyze the performance of the index's constituent members, it paints a slightly disconcerting picture. Despite upbeat talk from bulls about the health of the market and the rally's sustainability, the advance so far has been narrowly-based.
Apple Inc. (NASDAQ: AAPL), for example, has played a major role in boosting the index, accounting for more than 20% of the upswing. Rallies in three stocks -- Apple, Google Inc. (NASDAQ: GOOG), and Intel Corp. (NASDAQ: INTC) -- comprise nearly a third, while seven stocks are responsible for just under half the gain over the past four months. Finally, only 13 out of 100 stocks, or 13%, account for two-thirds of the overall advance.
While this heavy lifting by a small number of shares doesn't mean the Nasdaq-100 can't go higher still, history suggests that rallies lacking widespread participation sometimes lack long-term staying power.
Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.
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Reader Comments (Page 1 of 1)
6-30-2007 @ 7:00AM
KR1070 said...
Great article! I'd love to see how RIMM's earnings announcement on June 28 affects the data based the massive dollar change in the stock.