Small, midsize stocks strong in the market

Dollars & Sense

April 21, 2002|By Bill Barnhart | Bill Barnhart,SPECIAL TO THE SUN

A stealth bull market in small and midsize stocks, amid persistent troubles in big-name technology and telecommunications stocks, has been the silver lining to this year's uninspiring stock market.

Consistently in recent days, the number of stocks hitting new 52-week highs topped more than 200 on the New York Stock Exchange and Nasdaq stock market. On the other hand, a mere handful of stocks are reaching 52-week lows.

Yet the daily volume of trading in advancing stocks vs. trading volume in declining stocks indicates strong selling pressure in both markets.

That's no contradiction, said market analyst Paul Nolte of Hinsdale Associates.

The stocks getting hit - notably large-capitalization tech and telecom stocks - trade more shares each day, whether they're going up or down, he said.

In late 1999 and early 2000, the same volume disparity was evident, but in the opposite way. Big-cap, big-volume tech stocks drove major stock indexes higher. Small-cap, Old Economy stocks were ignored.

The tables have turned in the past two years. But a rally in small-cap, more thinly traded stocks is unlikely to alter greatly the trading volume statistics.

"It kind of confirms the fact that large-cap stocks are still out of favor," Nolte said.

In fact, diligent stock-pickers probably don't want to see the trading volume in advancing stocks pick up too much.

It could signal that the small-cap stock rally is attracting a crowd - a sign that the best of the rally may be over.

Bill Barnhart is a columnist for the Chicago Tribune.

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