Why are the stocks that are connected with Anthrax Detection Systems consolidating now instead of forging higher? Specifically I mention both CPHD and NGEN. Early last week while most Nasdaq stocks were consolidating, these stocks were surging higher. Now that most Nasdaq stocks are strengthening, these stocks are consolidating. It would seem that with all the scare of Anthrax out there, that these companies would really be rallying higher.

This question was sent in before today’s action, but the idea is still there. What has been occurring over the last three weeks is overall accumulation in stocks. When that happens some hot sectors remain hot while some cool down as money is spread out over a larger number of sectors. Think of it this way: when things are rough for the economy and stocks in general, there is a move toward the defensive sectors. We saw healthcare and medical sectors perform well when much of the market was still floundering around. When the buying starts in other sectors, whether a one-day wonder rally or more sustained buying, we tend to see these leading defensive sectors slow in their gains or consolidate. If investors are willing to buy stocks in general, the money that was focused on a few sectors is diluted and those sectors slow down while the other sectors rise. As we saw over the last year, that reverses itself when the selling started anew.

That could be something of what is going on with these stocks, though we note they did not rally sharply today. Many defensive stocks rallied sharply and are now consolidating because they went up too far too fast. VISG vaulted higher, sold back to the 10 day MVA, bounced, but has spent the last there sessions again pulling back to the 10 day MVA. The moves are calming down more as the situation is no longer as ‘new’ as it was.