In the stock market, it can be said that there are two subsets of stocks ... Leadership stocks and Broad Market stocks.
Their interaction behavior is much like the scenario between the battalion leader, and his troops. In a battle, if the strength and confidence of the Leader is strong, it will effect the battalion in a positive way propelling them into battle with the fervor needed. In the stock market, it is not much different.
In today's Leadership Ratio chart, we measure the strength of the Leadership stocks and compare it to the strength of the Broad Market stocks. We then divide the two numbers and create a Ratio that shows if the Leaders are moving forward or retreating relative to the troops (the Broad Market stocks.)
So what is the Leadership Ratio saying now?
- That the Leadership stocks have been gaining momentum.
- That the Leadership stocks are now close to the Neutral/Positive line that could give the market an upside thrust.
- But, there is a Caution warning at the same time. The current Leadership Stock Ratio is -1.48 and when the ratio got close to the neutral line in early November, it stalled and headed right back down taking the market with it.
The bottom line is that Leadership stocks are gaining momentum, but they are not "out of the woods" yet. One plus that didn't happen in early November: The NYA Index never made it above its trend line, yesterday it did.
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