Market Composition April 15 — Option Expiration Edition

• Posted by DynamicHedge
• on April 15th, 2011

Great performance by the most boring old-guard defensive names this week in the consumer goods sector (KFT, PG, HNZ, MO, PEP) and a miserable performance by the former leaders in the basic materials sector (FCX, AA, APA, OXY, SLB).  Does this tell us something about the personality changing in the market or is this just a knee-jerk reaction to bid up defensive stocks into downticks?  I still remain relatively bullish even though another defensive group, utilities, entered my radar late this week.

On the subject of leadership, I wrote this a few weeks ago:

The stock market looks for leadership and rides the leaders until the wheels fall off.  Then it rotates out of the old names and into new leadership until the wheels fall off again.  We’re still in a bull market, and once we get rid of the dead wood the market will pick a reason to rally, and poof, we’ll have the next “thesis.”

We don’t know who the next leaders in this market will be next week.  I’m thinking select basic materials (BHI, CVX, HAL, COP), industrials and tech could possibly regain leadership roles.  Also seeing strength in some utilities (AEP, ETR, SO, EXC) which may or may not be an ominous sign.

There is a surefire way for those with an agenda to push broad indexes higher and that is to buy tech and buy dow components.  If you can keep a bid in those markets we will not have more meaningful downside.  Financials (BAC, V, MA, AXP, C, GS) still look suspicious and of almost no interest to me still.

Leaders*:

Laggards:

*Defensive non-leaders

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