But like carnival mirrors that make people look overly tall or wide, focusing on IPOs alone may distort your view of the market. In a bull run, brand-new issues can soar in price following their initial public offerings. In the previous bull market, some tech names rose threefold, even sevenfold, above their IPO prices on the first day of public trade. In previous years, it might take months, even years, for great growth stocks to double in price. But when the market nose-dives, the IPO market implodes.
Companies postpone or cancel their market debuts.
Others slash their offering prices. The dour news on the IPO front can discourage growth investors from moving into the market, but this could prove costly in terms of lost opportunities. The general market itself may be gearing up for a new advance. But the Nasdaq sparked a new rally in late May, led by a fresh crop of leading winners. When this occurs, hunt for stocks breaking out of sound price bases on heavy volume.