Even as the market continues to slog further into a deep red abyss -- with the Nasdaq Composite Index fast approaching lows not seen since late May -- there are some market watchers out there who are trying put on a brave face and look ahead to more joyous days.

These optimists are busy identifying which stocks will be the market's next leaders, will rise steadily and will make new highs fastest when the market turns around.

The stocks most pros think will play the leadership role are in the data storage and fiber-optics industries. Both are relatively new businesses that sell technologies that expand the warehousing and communications capacities of the Internet.

In particular, money managers have tabbed

EMC

(EMC)

, Internet tech manufacturer

Juniper Networks

(JNPR) - Get Report

, data storage company

Brocade

(BRCD)

, fiber-optic company

Ciena

(CIEN) - Get Report

and e-business software company

Siebel Systems

(SEBL)

as the stock market's next group of peak performers.

These stocks were the very last to succumb to the Nasdaq's September freefall, a further indication for some that they are indeed the market's next true leaders. Most of them caved in only last week after a month of selling on the index, as investors sought shelter in names whose future growth prospects might protect them from what looks like an economic slowdown.

Many money managers also like fiber-optics players

Corning

(GLW) - Get Report

and

JDS Uniphase

(JDSU)

, though these have mirrored the Nasdaq's September weakness more closely.

The one stock that didn't fit into this paradigm, but which Wall Street pundits agree has been a consistent leader since late March, is essentially an Old Economy stock and a member of the

S&P 500:

General Electric

(GE) - Get Report

.

"GE is not new tech, but it is," said Howard Barlow, vice president and money manager at

WHB Wolverine Asset Management

.

"They don't have any sexy new cancer-curing compounds, but they do have some of the best medical equipment out there. They've chosen to be No. 1 or No. 2 in every industry they're involved in ... It's become a proxy for mutual-fund money managers," he added. "There aren't many like it."

Relentless Evolution

In some ways, determining which stocks are going to be the new leaders is a relatively simple exercise. Particularly in technology, the businesses yielding the most growth change as new technology evolves. And the individual leaders tend to be those companies which dominate the new growth industries with strong, forward-looking management.

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For a little bit of perspective, a map of leadership over the past 30 years looks a little like this: Mainframes were it in the 1970s, led by

IBM

(IBM) - Get Report

; PCs and semiconductors usurped their power in the 1980s, as

Microsoft

(MSFT) - Get Report

and

Intel

(INTC) - Get Report

took the lead; and networking surfaced in the 1990s with players like

Cisco

(CSCO) - Get Report

heading up the effort.

Like a brand-new pair of jeans, the old leadership businesses take their time to fade, however. The old technology doesn't just disappear. It simply becomes more obsolete, as new technology saturates the market. In fact, Microsoft continued to hit new highs with the Nasdaq until late December of last year. At that time, it succumbed primarily to fears it would be split into two by the government. But it never recovered.

Throwing Its Shadow
Microsoft shadowed the Comp's all-time highs until late December.

"Companies positioned properly for each of these evolutions became leadership stocks, because they were leadership businesses," said Brian Gilmartin, portfolio manager at

Trinity Asset Management

. "These companies have really good management -- management that recognizes changes in the marketplace before anyone else," Gilmartin added.

Cricket Anyone?

Still, some market watchers were more wary about trying to hit upon which stocks would be the next market leaders. With consumer demand slowing, access to financing flagging, the euro in the dumps and oil prices high, the outlook for the global economy is uncertain.

The confluence of all of these factors makes it a lot harder to predict any sector's performance.

Peter Cardillo, chief strategist at

Westfalia Investments

, compared the exercise to dart-throwing.

Barlow of WHB Wolverine, meanwhile, said few people wanted to place bets so soon. "I don't think too many people know who the next leaders are going to be," he said.

Barlow was also concerned that the valuations on optical and storage stocks are already too high. Appraising these numbers leaves one feeling a bit like Bugs Bunny looking at the speedometer on a crashing rocket ship. Eventually, the numbers become just too large to matter. ("Incredible, ain't it?")

EMC currently has a price-to-earnings valuation of 153; Ciena is priced at 560 times earnings; Brocade is at 576 times earnings; Juniper is priced at 2,531 times earnings; and Siebel was trading at 693 times earnings. Corning, which was less successful at escaping last month's selloff, is lately valued at 155 times earnings. JDS Uniphase is still losing money.

"I think the optical group is overvalued across the board, but it's the most dynamic industry on the planet. The question is how much longevity a business has. The optical business is probably the most convincing for the next two years," said Barlow before the slide.

Gilmartin disagreed: "The concept of valuations has changed so drastically in the past 10 years. Now, some of them are at 100 times next year's earnings, like EMC. These companies demand a premium because they can deliver on the investment with their growth rates."

Follow the Leader. Then Stop.

So why were companies like Microsoft and Intel unable to maintain their leadership? If they were smart enough to get into hot businesses at the start, why can't they continue to do so?

Market pundits think it is an issue of size.

"Maybe these long-term leadership stocks become too large," said Gilmartin. "It's tough to turn quickly. It's like trying to turn a battle ship. The problem for EMC,

Sun Microsystems

(SUNW) - Get Report

,

Oracle

(ORCL) - Get Report

... they're going to become so big it's going to be hard for them to generate growth ... it's a numbers game."