December 06, 2012 at 11:29 AM EST
Industrials Holding up Better Than Technology Stocks —the Consolidation Continues

Technology StocksThe stock market is pretty much on hold right now, and investors are making no real commitments, due to negotiations regarding the fiscal cliff and the U.S. debt ceiling. What’s clear, however, is that the stock market’s previous leadership, mostly among technology stocks, has vanished. Any material upside in share prices is going to be difficult without participation from these stocks.

The big one that stands out among technology stocks is Apple Inc. (NASDAQ/AAPL), which has really lost a lot of momentum. After hitting a high of $705.07 in September, the stock plummeted to below $530.00 a share. It bounced back last month, but it is struggling and may yet retest $530.00 a share by the end of the year. Apple’s stock chart is featured below:

AAPL Apple Nasdaq Stock Market Chart

 Chart courtesy of www.StockCharts.com

Technology stocks have been leading the broader stock market for the last couple of years, but leadership also came from the industrial sector, and Union Pacific Corporation (NYSE/UNP) is a benchmark Dow stock that seems to be rolling over. (See “Another Warning—Stock Market Leaders Are Turning!”)

Union Pacific is an important company to follow; it’s been a great performer up until now, and the railroad industry is often the canary in the coalmine for the rest of the economy. Technology stocks get all the headlines, but railroad stocks are truly the backbone of the U.S. economy.

Similar to Apple, Union Pacific hit a high on the stock market in September, reaching $129.27. The stock pulled back to $118.00, then made a decent recovery throughout October. Now, the stock is struggling to stay above $120.00 a share, and it needs to turn around soon before a further breakdown. Other railroad stocks within the group are down significantly. Union Pacific’s stock chart is below:

UNP Union Pacific Corp Chart

 Chart courtesy of www.StockCharts.com

The stock market isn’t going anywhere until there is more certainty on fiscal policies. The marketplace needs this certainty soon so it can worry about other things. Technology stocks are the key to the broader stock market, and positive trading action is required from the group if any new uptrend is to begin. Apple, Amazon.com, Inc. (NASDAQ/AMZN), and Google Inc. (NASDAQ/GOOG) are the key leaders among technology stocks.

One of the best sub-indices since 2009 has been the NASDAQ Biotechnology Index. Biotechnology stocks have been performing even better than brand-name technology stocks, and they should continue to do so.

Right now, you might say that the stock market itself is just sitting on the sidelines. Expectations for earnings growth are modest, but this market will move higher on positive economic news from China. I see no particular reason for stock market investors to act in this market. Dividend income remains king.

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