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It is often said that choppy and inconsistent action is an indication that the market is forming a top. If that is true, then we have something to worry about. It has been an extremely chaotic market this week, with peculiar rotations, odd selloffs and unusual strength.
Even the most notable news events -- the Russian annexation of Crimea and Janet Yellen's first press conference as Fed head -- produced chaotic action. We rallied to start the week on the Russian news and then danced around as pundits debated whether Yellen made the mistake of being too clear when she talked about when interest rates might rise.
What really sealed the deal for oddball action was leadership from old technology names like Microsoft (MSFT) and Hewlett-Packard (HPQ). The explanation given was that money was moving to safer names after a little too much froth in the IPO market, speculative biotechnology and lots of junk China and small-cap names.
That probably is a good explanation, but the problem is that those stodgy technology stocks and financial names are not going to provide the sort of leadership that takes the market higher. Funds buy those stocks because they feel they have to stay fully invested. Aggressive traders and hedge fund managers will go to cash or even short rather than load up low-beta big-caps.
I've been complaining for a while about how we have not had good leadership. Names like Tesla (TSLA), Facebook (FB) and Google (GOOG) have lost energy and we need new growth names to emerge to act as leadership. Plus, the speculative sectors -- biotechnology, solar energy, China Internet and alternative fuel -- have lost their energy.