A Positively Soporific Tape

 | Aug 12, 2013 | 1:33 PM EDT
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Boy, it's hard to find new leaders. You search through tech and you know that, with the white-flag run-up by BlackBerry (BBRY), and the endless decline in Dell's (DELL) sales, you simply don't have much to cheer for, save for telco spend.

Yes, the big telcos badly need to upgrade, especially at the Big Four in the U.S., which are now scrambling for 4G customers. But there aren't enough telco techs to get the averages going. I'm talking about ones like Xilinx (XLNX) or Ciena (CIEN) or Cisco (CSCO), the latter of which is due to report this week. Instead there's Intel (INTC) and Microsoft (MSFT), Oracle (ORCL) and Hewlett-Packard (HP), all of which seem either played out or dormant.

As for Apple (AAPL), the company's new iPhone iteration -- now expected out Sept. 10 -- is being unfairly viewed as same-old, same-old without anyone having even examined it. But everyone seems to have a propensity to proclaim that the mobile phone and the tablet are played out, especially since the peaking of Samsung and the destruction of the now-for-sale BlackBerry.

Still, the new heirs to the torch are none other than Google (GOOG), Facebook (FB), LinkedIn (LNKD) and Yelp (YELP), and I think they are all extremely positive for the group. So is Salesforce.com (CRM). However, this group simply has too much focus on personal computers and PC-related products for it to shine. No wonder this sector is no longer as big as financials when it comes to its share of the S&P 500

Let's now discuss the banks, regionals as well as internationals. These names are caught between a rock and a hard place. On the one end is a decline in mortgage refinancing and the sudden move against affordability of homes, and on the other is a yield curve that still isn't much good for the sector. That's one of the reasons that the momentum just isn't there.

The insurers still have some pizazz. However, the luster seems to have worn off for all of them -- except for the specialty insurers, after the price war that Travelers (TRV) hinted at during that downbeat earnings call. Only pseudo-financial MasterCard (MA) remains strong. That's a testament to an extremely well-run management team and the endless paper-to-plastic secular growth story.

The food and drug stocks almost all look as though they could be rolling over. Just take one look at the chart of Johnson & Johnson (JNJ) and you will see a stock that has peaked out. I feel the exact same way about Procter & Gamble (PG), which doesn't have enough to power higher. Only Hormel (HRL) and Campbell (CPB) seem to have strength, and they can't lead.

Meanwhile, Merck (MRK) has become the leader in drugs, and it's not clear where that will take up. As usual we're seeing incredible performance in the health-management organizations (HMOs) and the healthcare-benefit companies. It seems as if Humana (HUM) UnitedHealth (UNH) and WellPoint (WLP) shares will only come in if they turn bad.

Surfing momentum has always hard for me, but I can see why people do it. You take a look at ultimate momentum names like Express Scripts (ESX) and AmerisourceBergen (ABC), and you have to be blown away. Will they ever die? But they aren't leaders. They are things unto themselves. C.R. Bard (BCR) and Boston Scientific (BSX) are similar. The group, at best, is resting.  

Elsewhere, oh my, have housing and housing-related names gone bad. That one-time leadership group is flopping and chopping and losing footing by the day. The homebuilders doeth protest too much about how strong business is, but in the end we need to have more knowledge about how business had been before the mortgage spurt to two-year highs. I bet there are many buyers who walked away, and that cancellations jumped across the board. The related shares are stalled, too, except for those of Williams-Sonoma (WSM) and Lowe's (LOW), and these can't take up too much higher.  

We will see more, of course, from the other retailers this week. Gap (GPS) and Costco (COST) were punished severely last week -- I think too severely -- and I am anxious to buy back some Costco that I sold last week, a little bit lower, for the Action Alerts PLUS trust. I had thought Gap had been a total buy into the selloff. However, it was certainly telling that the stock underwent that selloff during what is an important month for retailers. As usual, J.C. Penney (JCP) looks as if it will continue to give up share to other retailers, notably Macy's (M) and Target (TGT). These two seem stalled, as well -- but, if anything, I think they can power higher, not lower.

I am not giving up on the group, though, because restaurants from Brinker (EAT) to Chipotle (CMG) to Wendy's (WEN) to AFC Enterprises (AFCE) and Buffalo Wild Wings (BWW) have all been strong. I think Panera (PNRA) will battle back, too. But let's not forget the wonder of declining food costs to the group, courtesy of a bountiful harvest -- too bountiful for the prices in the agricultural sector.  

The oils suddenly seem to have laid an egg, even despite the increase oil prices. Exxon Mobil (XOM) is still the leader, and you can't really follow it anywhere. We at the charitable trust keep waiting for Occidental Petroleum (OXY) to split up. But, in terms of growth, it seems like EOG Resources (EOG) is the only one that is shooting the lights out.

The utilities are trapped at these levels -- trapped because rates are expected to go up, and you can't own a group that historically goes down when rates climb. Same goes for the staggering in real estate investment trusts and master limited partnerships. This is totally nothing to write home about.

Transportation stocks confuse. Oil is too high for the airline stocks to run up, and this sector has turned out to be the worst regarding the federal government's sequester. Who would have thought that government travel was so important for government or airlines? Shares of rails, though, just don't come in at all, and the freight forwarders -- like FedEx (FDX) -- have been remarkable. It's a tough group to figure out, and one worth watching like a hawk. 

That leaves the autos, industrials, minerals, defense stocks and aerospace. All have been terrific of late, and I think they can, on their own, provide some oomph. But they are all too reminiscent of the situation in 2008, when these stocks were on fire. Autos need support from China in order to stay strong -- the recent numbers are very good -- and industrials to keep powering higher. Every single auto-related play was incredibly strong last week -- every single one! So were the stocks like CarMax (KMX). It's just been terrific action.

I know Boeing (BA) and the Boeing complex seem to be stalled, but I am not fretting. This group remains a jump-up-and-then-rest sector, and right now it's just resting. Defense stocks are those that still seem to be forcing die-hard shorts to cover. The sequester turned out to be too obvious of a catalyst, and the numbers have been too low. The analysts just hated the group too much. That's how a sector stays on fire. Can it continue? I don't know. The multiples are still too low, the dividends still too bountiful and the opportunities with other governments too good, for me to think that the move is over.

That, finally, brings me to the industrials, minerals and mining. For years, these stocks were being penalized due to the collapse in expectations in China and the outright collapse of Europe. But China seems to be stabilizing, and the financials are advancing strongly in Europe -- a sign of robust growth to come next year. These stocks led us out in the U.S. They will lead Europe out. Selected industrials, like Ingersoll-Rand (IR), Cummins (CMI), Emerson (EMR) and Johnson Controls (JCI), have been so strong. So have Illinois Toolworks (ITW), Jabil Circuit (JBL) and Pentair (PNR) I am blown away by the across-the-board strength in the Air Products (APD) group. Sure, Bill Ackman has taken a big position in Air Products, but why are Praxair (PX) and AirGas (ARG) rallying so hard?

The most remarkable resurrection, though, has been in mineral and mineral-related shares, including in the steels. These stocks have just forever been proxies for China, and they started turning last week. I don't trust the group, but I do trust the charts. The latter are signaling not only that all is well, but that all is just getting fired up.

It's a mixed group overall. I think that, when you take the sum of things, the market is lacking direction. It's dicey to take your lead from some mineral stocks and a smattering of industrials and autos. But you could do worse. If any of the other groups are revived, then you could see the rally continue.

Otherwise, let's just call it "stalled." Call it "marking time." You want to take some profits after this big run? I can't blame you. Others sure have. I don't want to abandon this market. I think it's too soon. But I also recognize a soporific tape when I see one, and that means there is no urgency at all. That's never a good sign -- but it's never a bad sign, either.



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