A Disturbing Lack of Calm

 | Mar 24, 2014 | 6:58 AM EDT
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Where will the selling strike next? What will be rerated down and relegated to the dustbin? Or will people just keep selling the same stocks until major gains are repealed and the exercise drives growth into value?

Last week was a huge week for the S&P 500, but the index was bifurcated to a degree that I haven't seen in a long time. The brutal selling of anything with consistent growth was shocking and swift. Anyone who watched the plunging of Celgene (CELG) knows this. We have been picking at the stock for Action Alerts PLUS, and it had been drifting down in a pattern that normally would have been viewed as a buying opportunity, given that the company has one big drug and two more on the way.

Then the roof caved in. Some speculated that it was because of a U.K. reimbursement ruling. Others talked about patent problems. But I think Celgene's real crime is that it has been a winner and that it is linked to Gilead (GILD), another winner. Gilead has been going down because some perceive the sales of the new hepatitis C pill to be disappointing, and others struggle with the comments made by Rep. Henry Waxman (D-CA), who said Gilead was charging too much for the drug.

Whatever it was, the selling in Celgene was relentless, with the sellers occasionally walking away to let it lift and then coming back with a vengeance.

Eventually you knew it had to spill over into the most sainted ones, like Biogen Idec (BIIB), which does have remarkable prescription numbers for its new multiple sclerosis drug. But those numbers just didn't matter. The selling virus even struck down Bristol-Myers Squibb (BMY), which has been loved beyond belief for its cancer franchise.

Didn't matter. Knock over that once-formidable long with a feather.

We know the same thing happened with the senior cloud-computing stocks. I have well chronicled the crushing of the group. You take your life into your own hands when you buy them right now. I figure they'll lift, and then the sellers will come back. They are so afraid of stronger growth in the economy that they are treating these as if they are high-multiple utility stocks.

Contrast that with some of the beaten-down S&P names that the market fell in love with -- such as Freeport-McMoRan (FCX) and Caterpillar (CAT), two companies uniquely leveraged to China with no real good news. These stocks had nary a moment of weakness. It seemed that there were buyers everywhere here, and in a market where we know very little new money is coming in, this is just money coming out of one section of the market and going into another. It is whippy and it is ferocious.

Someone stopped me in the supermarket last night, asking me what I thought about the market. She said I seemed abnormally worried. I said that she was right, because normally when the S&P 500 is hitting highs, there's an element of calm to things.

Things are anything but calm now. And a house dividend by froth and heavy rotation, where the good ones are slaughtered and the ones with uncertain earnings are loved, is not a house that can stay strong into the coming earnings season. Soon real numbers and forecasts will be revealed, and I don't think they will be anywhere near as good as the buyers of the subpar merchandise thinks they might be.

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