The most interesting thing about the stock market in the past month or so has been the strength of individual stocks while the indices have corrected and gone nowhere. If you have been focused on buying the momentum leaders and ignored the market-timing pundits, you have likely done well.
Good markets have a group of key leadership stocks that often tell you more about the health of the market than the indices do. In this market, the message has been that astute stock-picking is far more important than the big-picture arguments touted by the media.
The time to worry about the market is when leadership stocks start to stumble. So far, they have held up remarkably well. But if these stocks stumble along with the broader market, that indicates a change in character that requires a more defensive approach.
If we continue to see good underlying strength, most of these stocks will be good buys on dips to key support levels. The trick is to buy when upside momentum is still strong but experiencing momentary weakness. Once the trend is broken, it will take time to repair the damage.
Watch these stocks and you will have a good feel for the overall health of the market. Here are charts for my top 10 big-cap momentum picks, including the best spots for entries on pullbacks.
Qihoo 360 (QIHU)
Under Armour (UA)
Michael Kors (KORS)
All charts by TCNet.