The Day Ahead: A Dose of Reality

 | May 24, 2013 | 8:00 AM EDT  | Comments
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tm

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shld

On Thursday I got to tour the NYSE with four pals. I have been down there numerous times over the years for business and segment tapings -- but, while on the floor, I am always looking for new historic fun facts about the building itself. Yesterday I learned the blue tape on the floor, separating the trading floor from trading desks dates, back to the good ol' days when a market maker couldn't enter the trading-desk area. Oh, and if you look up at the ceiling, real gold is used for ornamentation. Take that underground, New York Federal Reserve building!

Above all else, the visit reaffirmed that the market is just a big machine nowadays, and that the floor is a virtual ghost town midday. It frightens me, honestly, that a year of deep fundamental research could be destroyed with a flick of the switch or a cyber attack. (Side note: you should really be doing homework on Internet-security firms, and finding one or two names to hold longer term.)

Most important, though, I exited the heavy doors onto Wall Street adrift in thought, surmising that when everything seems grand and wonderful in the markets, it's best to consider the other side of the coin -- or, in other words, to be a contrarian. Since I've been feeling rather complacent on the market of late, only shifting my stance for short durations, here is a dose of reality to carry into the weekend.

• It took only took 66 days for the Dow to get to 15,000 from 14,000. Isn't that abnormal?

• The Dow hasn't suffered a three-day losing streak in 95 days. Isn't that very abnormal?

• It's been six months since the Dow has suffered a 5% drop -- and that is unlikely to change before year-end, given the market's reaction to even the slightest hint that the Fed will taper quantitative easing.

• The last 10% Dow drop took place in the summer of 2011.

• The S&P 500 is up 23% from its November lows -- and it's only May.

• In four out of past seven employment reports, the number of jobs created fell short of the increase in population.

• Right now there are 10 million part-time workers who work 30 to 34 hours per week. That's not enough hours, nor does it make for enough job security -- and, as a result, we are forced to hear concerns from Wal-Mart (WMT) and Target (TGT).

All that aside, if we zoom in to retail, we see that the bottom may be in for fiscal 2013 earnings outlooks here -- barring any economic calamity. I think executives are using weather-related April sales weakness as a means to set the bar low, heading into back to school and holidays. Watch how Gap (GPS) acts to test this thesis. The company has dropped its full-year outlook even though it remains a standout operational performer.

Elsewhere, rubber prices are plunging. While that's great news for Ford (F) Toyota (TM) and the like, the reason for the plunge may be slipping global demand. I have to dig into this more.

Finally, the quarter from Sears (SHLD) was embarrassing. I've said it before and I'll say it again: This company will not be in business by 2020.

As far as trading strategy is concerned, buy-the-dips are in play, so you can guess what the whales plan to do.

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