MINNEAPOLIS ( Stockpickr) -- They say animals can sense natural disasters long before they arrive. Can humans predict the same when it comes to the market?
For those with a sixth sense or intuition perhaps it is possible to see trouble coming before it hits. Some may scoff at such a notion when it comes to stocks, but I would suggest that signals of a correction or worse do make themselves apparent to those listening to the winds of the market.
We are witnessing such a moment now. Stocks have risen almost uncontrollably and without pause since Labor Day. Gains for 2010 are now solidly in double digits, and many predict
even bigger gains for 2011
Within such predictions, there is trouble brewing. Perhaps it is the avalanche of bullish behavior itself that suggests that a correction is on its way, or maybe such a correction can be seen by examining the charts or some other technical indicator such as the volatility index or VIX.
Stocks to Lead the Market in 2011
On a micro basis, there are some troubling signs for stocks, at least in the near term. Aside from the basic premise of the market's being overdue for a correction, a few individual stocks look to be tired.
(AAPL - Get Report)
appears to have hit an exhaustive peak despite having product sales success on a mammoth scale. And what about the selling in
(NFLX - Get Report)
Beyond those too large and important names are stocks such as
(NKE - Get Report)
(CALM - Get Report)
. Both of those names released earnings recently that included warnings about future performance being negatively impacted by higher input costs.
With companies unable to charge higher prices on the retail level, higher production costs eat away at profit margins. Smaller profits result in market selloffs of individual names noting such an impact, as we saw with both Nike and Cal-Maine.
I do not believe the current situation indicates that a massive selloff is lurking, but I do think a correction of some sort will be forthcoming. Add in recent economic data that showed housing prices slipping for the fourth straight month or lower-than-expected consumer confidence, and the stage is set for some sort of across the board selling.
Here, then, are
three names to consider selling
in advance of a correction.