Nasdaq Assumes Leadership Role – October 1, 2013

Recently the NASDAQ has assumed a leadership role, outperforming the S&P 500 over the past month or so.  The NASDAQ is tech-heavy, meaning it has a significant weighting in technology stocks – as goes tech, so goes the NASDAQ Composite index.  This means that in the past month or so, technology stocks have begun to outperform.  This is a healthy sign for the stock market, as one would expect to see technology – the highest growth area of the economy – lead the stock market during an economic recovery.  The question is: Will this trend continue?  With so many potential negatives – government shutdown, tapering, high valuations, rising interest rates, sluggish economic growth, high unemployment, et al – I am still not convinced that stocks can avoid a major correction.  Today is October 1st, so we have to get through at least the next 30 days to get past the red zone, before I can gain any confidence that a correction can be avoided.  If we can get through October unscathed, especially if the Fed begins tapering this month, I will have a lot more confidence in the potential for further upside for stocks.

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