Wednesday, January 20, 2010

Can Google (GOOG) Change the Tide for Hedge Fund Momo Stocks?

We are starting to see some weakness among the hedge fund / mutual fund "momo" (momentum) growth stocks  i.e. the go to stocks for "beta".  If this is an ominous warning signal or just some consolidation after huge moves in latter 2009 is unknown at this point.  Google's (GOOG) earnings report tomorrow should be telling - so far we are seeing quite a bit of "sell the news" in stocks that are 'beating' the number.

We have stocks faltering below the 50 day moving average in Google (that can change in a heartbeat tomorrow) (PCLN)

....and (AMZN)

Baidu (BIDU) was in big trouble until the Google / China controversy last week; the news event changed the complexion of the chart but it was faltering until that moment.  Hence I am going to exclude it - it was actually the leader of the breakdown among the momo stocks...

Leaving only the most popular stock in the world - Apple (AAPL) with no fleas.   But perhaps a "double top".

The last time Google was under the 50 day moving average was July 2009... if you recall that was the last true hope for the bears.  For you technical folks, we were just about to form a "reverse head and shoulders" on the index and the bears victory was about 24 hours away - then Meredith Whitney talked up Goldman Sachs (GS) on CNBC, Intel (INTC) smashed their estimates and aside from 2-3 weeks in October 2009 we have never looked back.  Other than 2-3 days in late October 09, Priceline likewise has not been below the 50 day moving average since July 2009. - not since early September 09.

Something to keep an eye on (I'm stroking my virtual beard in deep thought); a breakdown of these names en masse could pose a lot of trouble since they are incredibly crowded trades and anyone who lived through 2007/2008 knows what happens when hedge funds try to crowd out all at the same time.  If the lemmings jumpover the cliff en masse it could be the thing that takes us back below S&P 1120 and redact the "breakout" on the indexes.  Reviewing these charts has me looking at the Kool Aid in my glass and wondering ....

Should make for a very interesting rest of the week.  I don't like when the 'generals' of the market start looking sickly.  That said, the ever present (not so) invisible hand is quite a powerful opposing force which seems to be distorting everything....

Long in fund; no personal position

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