Market Rally Goes Unloved And Underreported

Talk about a stealth rally. Not only is it unloved and underreported, but even as stocks power higher feeding on a bunch of stimuli, including the adage that new highs beget new highs, there is much doubt in the air.  There is another old Wall Street adage about climbing a wall of worry, but what about a wall of negative thoughts based on politics, not number-crunching?

All aboard

Every all aboard

Anybody want to take this ride’

Anybody want to ride

All it takes is a nickel or a dime

-Gap Band - “Party Train”

Uncle Charlie and the Gap Band were the best-selling R&B group in the early 1990s because of their unique funk and ubiquitous happiness in their music.

The market once again got stronger into the session and rallied to close at the highs yesterday, but there wasn’t any joy or happiness. The only ubiquity is the disbelief and the theories about why the doom-and-gloom theories didn’t work. And for the smartest mavens, this current leg higher is a part of the ultimate destruction prediction. I guess the higher it goes, the harder it falls comes into play. However, in all seriousness, I’m a little tired of the curmudgeons being right even when they’re wrong.

As a natural-born contrarian, I’m thrilled the experts are downplaying the rally because there’s a difference between hoping for destruction and coming to such a conclusion of fear or other emotional inputs. Toss in mainstream media, which has taken to the siren call of a recession - they use it for every report on the economy.

Did you see all the reports on more Americans without health care insurers yesterday?  Did you see any headlines on how many came out of poverty (a number remarkably equal to those that got off Medicaid), or the number of Americans working full-time jobs, otherwise known as the cornerstone of living?

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I didn’t think so.

Why They Make the Big Bucks

To be sure, some folks are looking for a big pullback based purely on research, but the loudest voices are all tainted by animosity, not bottom lines or valuations. Of course, it’s one thing to predict doom and gloom, but professional money managers must make their clients’ money…at some point.

Market breadth was good on Tuesday. Yesterday, it moved to a level that underscored a scramble to get positioned in something. 

Rotation & More

I think the rotation story got too much press yesterday, and money suddenly decided to test this market by finding stocks with the largest short positions. 

Semiconductors, coupled with Apple (AAPL), lifted Technology to the best performer by the closing bell. 

Watch the iShares PHLX Semiconductor ETF (SOXX) today for a potential monster breakout.

Approach

Also, Consumer Discretionary names were among the worst performers of the session yesterday. I sensed it was coming in part because the hype build-up was too fast. We asked subscribers to take a monster gain on Macy’s (M) even though the idea was only a week old and put on a new tech idea in the model portfolio.  

After the close, a couple of retailers Oxford Industries (OXM) and Tailored Brands (TLRD) took it on the chin and reminded us that oversold bounces don’t change underlying fundamentals even if they make for great trades.

It’s Happening…

Last night, President Trump reacted to a series of small Chinese overtures with one of his own, which sent equity futures higher.

Donald J. Trump @realDonaldTrump

Trump said the delay came “at the request of the Vice Premier of China, Liu He, and due to the fact that the People's Republic of China will be celebrating their 70th Anniversary...”

Donald J. Trump @realDonaldTrump

“...on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th. “