The Daily Dose: Is the Market in Love?

 | Jan 21, 2014 | 11:30 AM EST
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A friend of mine who is convinced I need a female presence in my life offered this endorsement recently when presenting a potential blind date candidate to me: "She's energetic and enjoys long walks on the beach."

"What the hell does that mean?"

"It means take a damn break and have drinks with us," she answered.

Maybe I will, but more likely, I won't. As I ponder my course of action, I vaguely remember that walking on the beach at sunset with someone usually hints at a state of love -- sort of like the stock market right now.

Despite numerous companies completely failing at hurdling over earnings-per-share estimates that were shaved heading into earnings season and silly weak guidance that is punishing those who communicate it, the broader market continues to chug along from the Dec. 18 low on the S&P 500.

As a reminder, the "January Barometer" dictates that as the S&P 500 goes in January, so goes the year. The indicator has registered only seven major errors since 1950 for an 88.5% accuracy ratio. Every down January on the S&P 500 since 1950, without exception, preceded a new or extended bear market, a flat market, or a 10% correction.

Believe me, I'm searching near and far for red flags other than an elevated level of insider selling being played up on bright charts in assorted influential Twitter feeds. The only thing I am finding, however, is a stock market that is in a love bubble that deflects any badness. I suppose tapering isn't tightening -- that is until Janet Yellen slips at a forthcoming highly publicized event (and I believe she will).

Small-Cap Stocks vs. the Dow and S&P 500

All retailers have basically issued horrific holiday-quarter results and refreshed guidance ranges. I remain concerned about the outlook for retail-sector jobs in 2014, as February will bring significant store closure announcements, particularly Best Buy (BBY), recently downgraded by Belus Capital Advisors.

Source: Yahoo! Finance

Consumer Staples vs. Dow and S&P 500

The input-cost outlook for consumer staples is favorable. But that, along with an onslaught of bad first-round earnings reports, has not sparked a rotation into the high-dividend consumers-staples sector.

Source: Yahoo! Finance

Semis vs. Dow and S&P 500

Intel's (INTC) report should have at least set off a few alarms among the herd of strategists that entered 2014 very overweight tech. It didn't ... yet. Next test for the tech thesis? Texas Instruments' (TXN) earnings later today.

Source: Yahoo! Finance

Reminder: Over the past three months, fourth-quarter 2013 consensus earnings estimates were cut in eight of 10 S&P sectors.

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