I've heard mention of "Bellwether" stocks. How do you tell which stock is the bellwether for it's Sector/Industry? Are there technical criteria (like the highest average volume) or is it more of the ones that get the most press? Another publication just referred to AMAT as the Semiconductor Bellwether, but I hardly ever hear of it. Or, is there just a generally accepted list of Bellwethers for each sector/industry that more experienced traders know about? (January 15, 2002)

  There are key sectors in the economy. Within each such sector there are leaders in market share and innovation. When these companies experience increases or decreases in business, that can be read as having an impact on the sector and the greater economy as well. That would move those stocks as well as related stocks. Thus there are certain stocks that analysts and traders watch to glean information as to how the overall sector or market will perform. AMAT is a bellwether in the chip equipment manufacturing sector because it is the biggest in an important group. INTC is the bellwether in the chip sector. GE is a bellwether for the general economy. MSFT is one for software. There is no list of bellwethers that I know of (at least not an 'official' list; personal lists abound). Usually you look at the companies with the biggest market share and strength in an important economic sector.

Don't get too carried away with this. There are bellwethers after this bear market that are not leading the market. Indeed many of the bellwether stocks remain well off of their highs while a new group of stocks (e.g., NVDA, though not so new to us anymore) has led the market and is still charging ahead. Don't let an understanding of bellwethers make you abandon true leaders in good patterns. That is where you make the tremendous runs.

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