How watching Market Leaders called this…

The S&P hitting 3,000.

Back in March, 2019, I discussed the behavior of the market leaders, particularly Microsoft and the cloud computing industry, and noted that since those leaders were continuing to push higher — the market would as well.

I called a $3,000 price target for the S&P, with Microsoft leading the way… and we got that.

So let’s take a look at Market Leaders…

And for a quick recap, you can see me call the S&P 3,000 target here.

Normally when you look up ‘leader in the dictionary, you’ll find something like this:

leader

[ lee-der ]noun

a person or thing that leads.

a guiding or directing head, as of an army, movement, or political group.

Music.

  1. a conductor or director, as of an orchestra, band, or chorus.
  2. the player at the head of the first violins in an orchestra, the principal cornetist in a band, or the principal soprano in a chorus, to whom any incidental solos are usually assigned.

I’m going to add another one to this dictionary definition:

A visionary company, that exhibits consistent growth in their field, with strong technicals and fundamentals. The behavior of its stock gives investors hints on the overall direction of the stock market. 

What are Stock Market Leaders, and how do we use them to make money?

The stock market leaders are the companies you’ll find on my ‘Grandma Loves It’ list. These are the companies that are the top weighted, market moving companies within their sectors and industry groups. They’re the visionaries, the forerunners in their groups. 

It’s these companies, and the behavior of their technical patterns (held up by their fundamentals), that determine how strong or weak the overall market is.

Just by market cap alone, along with weighting within the sectors and indexes, they have a huge impact on the market. So, even just looking at the math and their impact… it’s huge! But, they also deeply drive sentiment.

Impacting Sentiment

Just think about it logically. If our strongest companies are doing great, how does that make you feel about the stock market? The economy? Investing your own money? So, when investors hear about great earnings revenue, and soaring stock prices, they’re more confident to place their money in the stock market. Thus, further driving up prices.

Looking at the Fundamentals

Now, when they back that up, fundamentally, with consistent quarter over quarter, and year over year growth — along with continued innovation within their space, they are pretty hard to stop. Not only does this make them excellent stock investments in the long term, it makes them prime candidates for options trading — particularly for the Run into Earnings.

But, don’t forget… their main use is using them to gauge market sentiment.

Here’s the market weighting, in numbers, showing the top 20 stocks within the S&P 500.

S&P 500 Companies by Weight:

How to Use the Leaders

As you can see, Microsoft, Apple, and Amazon hold the top spots. You’ll notice that in down days in the market, if these are holding on — the market will quickly resume an upward course.

However, on a down day in the market, when these leaders are down 2% or more — this is much more indicative of a pullback to come.

Watching the Market Leaders, and their behavior, is one of the most important aspects of my trading. Whenever I’m a little unsure as to if the market’s going to continue higher throughout the day, or rollover, I simply check my ‘Grandma Loves It’ list. 

Some of my Favorite Leaders:

  • MSFT
  • PYPL
  • ADBE
  • PEP
  • SBUX
  • NKE
  • AMZN
  • V
  • COST
  • HON
  • DIS
  • NFLX

These are a compilation of varying stocks from the hottest industries: communications, consumer staples, and consumer discretionary. Of course, technology’s always at the top of this list. But, don’t forget, there are opportunities in the market in multiple sectors… technology is only one! 

Current Price Action

Well, what’s happened now?

Microsoft has made new high after new high, and it has an upcoming earnings report in two weeks. So, while the technicals are incredibly strong, and I’ve been enjoying trading the Microsoft Run into Earnings, all eyes will be on the fundamentals. 

Regardless, this leader’s showing us which way the market’s going… and that’s up. If it starts to slip, that’s when I’ll start protecting more of what I have. But today, with the S&P breaking through $3,000, closing above it, and our leaders continuing to soar — I’ll stay long until I see price action that tells me otherwise.

3 thoughts on “How watching Market Leaders called this…”

  1. Danielle…

    Always “follow the leader ” as this applies to trading and most everything in life. The leader is usually dominant and is blessed with visionary skills that many do not recognize.

    Reply
    • Hey Stretch,

      Yes – this is absolutely true in life, as well as in the stock market!

      Have a great day –

      Danielle

      Reply
  2. Danielle,
    Just got a chance to read this. I’m surprised/questioning why companies like AAPL, GOOGL, FB are not included in the “market leader/grandma loves it” list?
    Thanks for your guidance. See you this Saturday for class. Can’t wait!
    VR/
    Dan C.

    Reply

Leave a Comment

Up Next...

A Sorely Needed Pullback…

Hey traders! The market is finally pulling back today after what has been a phenomenal run. While pullback days aren’t very enjoyable when you’re long, ideally, you’ve been taking profits on the way up and trimming positions at market extensions. As I was on vacation, I have been flat, minus a small position I entered … Read more

Read More

Top Hot Zone Tickers Today…

Hey Traders! I’m back from vacation and ready to locate some setups. Whenever I come back from a break, I have a regular process I do to identify spots to focus on. It goes something like this… Start with the major indexes (Nasdaq, S&P) and the Magnificent 7 stocks (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, … Read more

Read More

Happy 4th of July!

I hope everyone is enjoying their summer so far and looking forward to the shortened week! If you’re here in the United States, I hope your holiday is safe and enjoyable. I will personally be taking some time off this week to spend time with family and enjoy the holidays. I love cooking with my … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now
all-as-seen-on-logos