Navigating the Market Crosscurrents

 | Mar 27, 2014 | 2:15 PM EDT
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The sheer number of crosscurrents right now is making this market very difficult for anyone attempting to fathom it. Let's count them down.

The mineral and mining stocks are doing incredibly well. I look at stocks that have been in prolonged downtrends, like Freeport McMoRan (FCX) and Vale (VALE) and I say, OK, they are bouncing. But why? Another rumor of big stimulus in China? Isn't it time to give that a rest? Nothing really explains it at all, especially when you see interest rates going down. That's the kiss of death for this group. Caterpillar (CAT), uniquely a part of this sector, continues to rally even as we don't know anything about how it is really doing. It is 100% conjecture. Alcoa (AA) is having its best day in ages, yet I see only the briefest of analyst pushes about the way the London Metal Exchange accounts for aluminum could be a positive.

What's driving oil here? Is there about to be some sort of embargo somewhere? These stocks have been rallying relentlessly on absolutely nothing that we know. Does that mean something's lurking that we don't know?

I know the banks ran into the Comprehensive Capital Analysis Review (CCAR) by the Fed, but didn't the best ones deserve another day? I hear that they aren't going up because the yield curve no longer favors net-interest-margin expansion. But that's been the case for a week. Why does it suddenly matter?

How can we explain, with commodities ripping, the strength in consumer-packaged goods? We hear vague takeover rumors on Colgate-Palmolive (CL). Clorox (CLX) had at one time spiked two bucks to $90. Procter & Gamble (PG) is acting terrifically even as I can't think of a single thing that might be happening to merit those gains.

Then there are the high-multiple stocks. I know that money is rotating out of these growth stocks into value. Is it because of all of the initial public offerings are causing people to sell old and buy new? Look at Trinet (TNET), the personnel and human resources outsourcer that handles payroll and tax administration online as a Software-as-a-Service (SaaS) business. This deal came at $16 and jumped to $19. It would be a natural thing to sell Workday (WDAY) or Cornerstone OnDemand (CSOD) to buy this one. I get that you need capital to get into Trinet if you are a hedge or mutual fund, so it is natural to sell the others, especially if you don't want to give up the gains. Workday was at $61 last year, now it is at $91 -- well off its high. But who wants to give up that gain? Cornerstone was at $33, now it is at $45. However, it traded at $61. Do you kill two birds with one stone, taking profits in Cornerstone while buying Trinet? Sure makes sense.

What doesn't make sense is the silence of the analysts. On the way up, these stocks were the greatest ever. On the way down? There's very little support chatter. It's as if they don't want to hurt their banking prospects for future SaaS companies that might do IPOs.

The silence is deafening with Google (GOOG) and Facebook (FB), too. Facebook was an earnings story, but these last two deals have turned it into a murky story and the analysts seem reluctant to pound the table. They loved it at $70 but hate it at $60? Where are the analysts who would normally say you are getting your chance, take it? Maybe they will come out tomorrow because of the intraday turn. That wouldn't shock me.

How about Google? We know it's in a price war with Amazon (AMZN) for cloud services. It's a small part of the firm's business. The stock is not expensive on earnings, selling at an astoundingly low 17x earnings for 2015. Not sales, but earnings. But the adherents, the people who love the stock? They are hiding. Or they are gone. Disappeared. No one's defending it.

Yet Twitter (TWTR), which has no earnings and no valuation parameters I can come up with, is soaring.

Oh, and to be sure, it isn't as if a little analyst push would mean nothing. Yelp (YELP) is going up today because an analyst at a very small firm most people have never heard of said good things about its Yahoo! (YHOO) partnership. That's what gets it going?

Plus, plenty of stuff that should be getting hammered is going in the opposite direction.

Take GE (GE), for instance. Here's a company with a billion-dollar business in Russia. What's to keep the Russians from expropriating it if sanctions bite? They did that to BP's (BP) Russian properties and BP hadn't even done anything wrong! The huge move in Alcoa shows the market is not the least bit worried about Russia, even though it has two important facilities in that country. Ripe for the Putin picking I'd say.

How about Lululemon (LULU) doing a subpar number, nothing special at all, yet going higher? I didn't like that earnings report at all. A dead-cat bounce? Beginning of a new run? Or just if you cut numbers low enough and make them, then investors fall in love with you again?

Normally, I could say, "Tough market, hard to figure." But when there are this many crosscurrents, I tend to think there is something that is about to happen that I don't know. Something is lurking. But why is gold, which usually senses your concerns, going down, not up?

Perhaps what is happening is that we are bottoming and everything's about to go higher, as is fitting for the end-of-the-month and end-of-the-quarter rally. Perhaps there are funds propping up the winners and selling this year's losers to fund the prop-up. Or maybe, just maybe, the incredible rotation is running its course and the last part of value, the miners and minerals, are having their day in the sun.

I believe we will have some things that are predictable shortly. Herbalife (HLF) is up to $55 from $49 with the addition of more Icahnites to the board. You have to believe when we have those moves that Bill Ackman, the nemesis out to destroy Herbalife, is going to strike momentarily. A hedge fund that wants to put a company out of business is a dangerous opponent.

It's also a given that Citigroup (C) gets clobbered as it once again flunks the CCAR test to return capital. Those of us who follow the bank were led to believe that the issue was former CEO Vikram Pandit, that he didn't put in enough controls. But current CEO Michael Corbat has come in and you have to presume that he had been working with CCAR to be approved for a capital return. It made me wonder if CCAR doesn't want Citigroup to raise capital to take against bad loans, like the ones in its Citi Holdings division. The company claims that the feds have repeatedly said it has enough capital. So what are we supposed to believe? And what regulator wouldn't want to raise more capital?

Yes, it is one confusing day and investors don't like uncertainty. Maybe it resolves itself in this session and tells us what's on tap for the rest of the quarter. Or maybe it is one of the most confounding markets I have ever seen, which will make anxious investors sell into any rip -- that is if we can get one.

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