Final Jeopardy Category: Fallen Stocks. Answer: Twitter, LinkedIn and Yelp.
Question: What three social-media stocks have lost more than 25 percent of their value this year?
OK, not an easy one for even Ken Jennings, but the question may hold the key to the direction of the market in the months to come.
That's because while the S&P 500 vaulted past 1,900 last week for the first time in history, many of the market leaders that put the household-name averages into uncharted ground so far in 2014 have done so without the leadership of the so-called momentum stocks, and it's not just social media.
Amazon and Netflix shares have cratered more than 20 percent from their March highs, even as both companies announced double-digit price increases. As David Rosenberg of Gluskin Sheff explains: "We do indeed have a stock market with multiple personalities on our hands."
That's typically not a good omen. While it can be healthy to see the froth come out of the highfliers after a long bull run, a breakdown of the market darlings often presages further declines. Such was the case in 2000 when tech bubble 1.0 began to pop.
As tech stock maven Fred Hickey warns, stocks are vulnerable to a sharp pullback. He points to the Shiller cyclically adjusted PE ratio for stocks, which is currently around 25, or 50 percent above its historical average and a level only topped before in 1929, 2000 and 2008.
All this has some of the biggest money mavens getting out in front of the market with sell warnings. In the pre-Memorial Day conference rush that has become the Cannes Festival of investing, some of the richest hedge-fund billionaires have sounded the alarm.
Appaloosa Management founder David Tepper garnered the most attention after being correctly long and loud on stocks all last year. "Don't be too freakin' long," he cautioned last week at the SALT Conference of hedge fund hall-of-famers.
Meanwhile, Citigroup's Tobias Levkovich marveled, "The elevated broad levels practically appear miraculous."
Also troubling: The latest survey by Aon Hewitt shows that retirees have 66 percent of their savings in stocks, the most since March 2008, and up from 48 percent in the dark days of 2009.
Sell in May and go away? Reading the tea leaves of the momentum stocks, the old saw might prove the right bet yet again.
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