Many Stocks Already Experiencing Their Own Market Correction

By Tuesday, November 6, 2012

Stocks Already Experiencing The S&P 500 Index pretty much has to keep above 1,375 or risk defining an actual stock market correction. The stock market has mostly been presented with good economic news lately, but the reaction of the main stock market indices has been very lackluster. This is clearly a market that’s tired, and a full-blown market correction in the near future is a real possibility.

The Dow Jones Transportation Index (or average) continues to provide no meaningful confirmation; the index has been extremely flat for the last two years and is at the exact same level that it was at in 2007. We’ve also had a meaningful breakdown among technology stocks and, to me, it doesn’t just look like a well-deserved selloff from the leaders; blue chip technology stocks have been trending lower since May. Intel Corporation’s (NASDAQ/INTC) chart illustrates the trend.

For many former stock market leaders, a market correction already exists and the only saving grace is a broader market that isn’t expensively priced. I don’t think a major stock market meltdown isn’t likely this year, even in the face of declining expectations for earnings growth in the fourth quarter. But there are a lot of issues coming down the pipe; the so-called “fiscal cliff” being one that policymakers really need to address for the good of the U.S. economy, to prevent a full-blown stock market correction.

Intel Corp Chart

Chart courtesy of www.StockCharts.com

But getting back to technology stocks, some of the largest of the group are now experiencing the same breakdown that others have been experiencing since the beginning of the year. Countless names within the group are feeling their own market correction. Some include Juniper Networks, Inc. (NYSE/JNPR), Broadcom Corporation (NASDAQ/BRCM), Microsoft Corporation (NASDAQ/MSFT), Dell Inc. (NASDAQ/DELL), F5 Networks, Inc. (NASDAQ/FFIV), and Hewlett-Packard Company (NYSE/HPQ), which is having its own market correction this year. The stock chart for Hewlett-Packard (HP) is featured below:

Hewlett-Packard Chart

Chart courtesy of www.StockCharts.com

While many of the most conservative, dividend-paying blue chips are only recently coming off their highs, among technology stocks, there is a lot of stock market underperformance. So, to me, the trading action proves that this is a market not worth buying. If the main stock market averages move into market correction territory, technology stocks will be even more vulnerable. There is some positive momentum in U.S. economic news, but the stock market has been slow to recognize the sluggishness among many industries and countries. I’m not bearish; just unwilling to be bullish, given the trading action.

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About the Author, Browse Mitchell Clark's Articles

Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »