Growth Leaders Got Hammered

This market has been feast or famine, where things move up quickly and then implode with equal speed. That has made it a very risky market.

Many leaders have stalled out over the past few days and they got hit yesterday on massive volume, causing them to break trendlines and moving averages. William O’Neil (IBD) teaches that massive selloffs on massive volume normally mark the end of a rally.

Cloud Computing
You know when Microsoft wants in that the move is probably over (at least temporarily). Take a look at some of the names related to the space –

F5 Networks (FFIV), Salesforce.com (CRM), VMware (VMW), Citrix (CTXS), NetApp (NTAP)



Apple was hit last week with some massive selling early one day. It was attributed to a “rumor”, but after seeing the pounding some leaders too yesterday, it was probably some real institutional distribution.

Other leaders that got hit hard –

Riverbed (RVBD), TIBCO Software (TIBX), Open Table (OPEN), Red Hat (RHT), Rackspace (RAX), Acme Packet (APKT), CTrip (CTRP) and a whole bunch of others were down 4% or more.

Now obviously, the way the market has been trading lately, these stocks can all recapture all of yesterday’s losses and move to new highs, but yesterday’s action was at least a warning shot and shows you the dangers of buying extended stocks.

All of this damage went on while the Dow and was up some yesterday. The key will be if money flows out of leaders into the less risky stuff. That may mark the second phase of the topping process for the recent rally.

Corn
Here is another example of how much you can get hit if you buy at the wrong time. Corn (ZC Z0) was down over 14% in a week!



Which brings me to Gold (GLD)
Gold has now broken above its uptrend and has now gone parabolic. It did the same thing last November and got crushed. It is either now in a parabolic Bull move like the NASDAQ did in late 1999/ early 2000 or it will soon regress violently back towards the 50-day (Black Line).



After looking at Corn and some of the hot stocks, you can see how potentially risky it is to buy Gold here. There are some Gold Stocks that offer at least a stop loss, like Barrick Gold (ABX) -



This move off the lows has all been about a crashing Dollar. The Dollar is now at some pretty significant support, so a bounce would not surprise me and it would not be good for risky assets. Remember, the S&P is still at significant daily resistance, with timing.