U.S. Stock Market Leadership - The Day The Music Stopped

Friday, February 28th, will be remembered by many as "the day the music stopped".

The S&P 500 Index and the New York Composite Index posted all-time record highs on Friday, February 28th, but the Russell 2000 backed off its record high from the previous day. The Nasdaq Composite Index posted a 14-year high on Thursday last week, but it too fell back on Friday. Both the Dow Jones Industrial Average and the Dow Jones Transportation Average have not matched the S&P 500 Index and have yet to advance above their January 2014 record highs. However, this bearish technical "non-confirmation" is not the primary reason for this column today.

The focus of today's column is market leadership. Classic stock market tops are often characterized by parabolic "throw in the towel" panic buying in selected stocks that led the advance. Here are several high-profile companies where the feeding frenzy has been noteworthy and whose shares have posted outrageous returns in recent weeks:

 

The average gain from intra-day bottom to intra-day top in the above market leaders over the last three months was 65.43%. And the average loss in the same stocks from their intra-day highs last week to their closing prices on Friday, February 28th was -5.48%. The incredible fact here is that these 10 market leaders have already corrected 5.48% from their highs in a backdrop where the S&P 500 Index and the New York Composite Index were both advancing to all-time highs as posted on Friday, February 28th.

Bottom Line: The music has stopped; there are no more chairs; and February 28th will be remembered as "The Top" in one of the greatest bull markets in history. Potential "Black Swans" are everywhere; the U.S. Federal Reserve fails to see the early signs of a major liquidity crisis; and U.S. stock market investors will soon pay the price for over-weighting equities at stretched valuations in their investment portfolios.