Another Warning—Stock Market Leaders Are Turning!

Another Warning—Stock Market Leaders Are Turning!Unless third-quarter earnings are strong enough to get institutional investors buying aggressively, I think the stock market is vulnerable to a correction in the very near future. With uncanny precision, the right shoulder formation on the S&P 500 Index is almost complete; and when you look at the chart (from 1995 to present), it looks incredibly ominous. It’s not what the index has been able to achieve in its two major recoveries over the last 12 years; it’s the pattern itself and whether it will mimic itself to the downside. The other major stock market indices don’t look as ominous. But as the most representative index among large-cap companies, the long-term trend in the S&P 500 Index looks downright scary to me.

One of today’s market leaders is breaking down, and I repeat my view that it’s a major red flag for this stock market. Apple Inc. (NASDAQ/AAPL) is continuing with its downtrend on the stock market and needs to turn around soon before other market leaders do the same. Other important market leaders that are keeping things alive among technology stocks are Amazon.com, Inc. (NASDAQ/AMZN) and Google Inc. (NASDAQ/GOOG). Their stock charts are below:

Amazon.com, Inc. Chart

Chart courtesy of www.StockCharts.com

Google Inc. Chart

Chart courtesy of www.StockCharts.com

Other market leaders worth keeping an eye on in this market are Oracle Corporation (NASDAQ/ORCL), Union Pacific Corporation (NYSE/UNP), Johnson & Johnson (NYSE/JNJ), and United Technologies Corporation (NYSE/UTX). to name a few. Most of the dividend paying, blue chip market leaders are doing well in this market and their valuations are fair; but the proof will be in the earnings.

The stock market had a really strong run this summer, and it wasn’t for any reason other than the third round of quantitative easing (QE3) by the Federal Reserve. I think the recent weakness in the main stock market indices is showing the pullback the stock market should have had after QE3 was announced. There is trepidation now among institutional investors and, as I say, it’s time now for corporate earnings to start carrying this market.

I’m worried about how the S&P 500 Index looks, as well as market leaders like Apple and priceline.com Incorporated (NASDAQ/PCLN). Apple, in particular, is breaking down on the stock market, and its recovery will be the key to further economic advancement; without Apple’s recovery, this market is toast.