Blown Away by Transports, Drugs

 | Jan 10, 2013 | 3:30 PM EST
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What do you call a market that's led by the transports, the drugs and the financials? Most people would call it a bull market.

I have to tell you that I am blown away by the strength in the transports, even after a couple of huge downgrades of the rails because of the usual weakness in coal traffic. We actually have a sustained rally in the airlines, which I am blessing for a trade, especially Southwest (LUV).

As far as the drugs? I have spent a ton of time reviewing this group as part of my coverage of the J.P. Morgan Healthcare Conference. Between the growth offered by Celgene (CELG), Gilead (GILD), Regeneron (REGN) and Biogen Idec (BIIB) and the steady performance of owning Bristol-Myers (BMY), Abbott Labs (ABT), Sanofi (SNY), Pfizer (PFE) or even Eli Lilly (LLY) (which swore up and down to me that its dividend and earnings will not be affected by the huge upcoming patent cliff), you can understand the love affair.

The financials? This is a tough one. I like the regionals best and I think that Bank of America (BAC) represents a great call on housing. But Wells Fargo (WFC) reports tomorrow and while I own it for the charitable trust, I was hoping it would sell off ahead of the quarter so if it grows its top line but doesn't make a lot of money off its net interest margin, it wouldn't get crushed.

Didn't happen. The stock has rallied right into the quarter and, as I told Action Alerts Plus subscribers, that's a nasty setup.

I like the transports and the drugs right here. And there is always a chance, albeit a slim one, that Wells Fargo doesn't actually disappoint.

Still, I think you will get better bargains on Monday than you will tomorrow if Wells Fargo disappoints because you will catch a slew of downgrades next week. That will be your opportunity.

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