Even in this market, this nutty fabulous bullish market, there still has be a reason for stocks to go higher. There has to be some substance, some theory, some prop, something that makes you want to pay more than you did the other day for a stock.
Yesterday, there wasn't. Rates were going down, not up, and we need rates higher for the banks. The currency was modestly weaker, after being modestly stronger. Copper and oil were down -- the latter, down considerably.
That's just a castle-in-the sand scenario.
On Monday night, the futures were up about five, which measured to what we were seeing around the globe. But as the night went on, the futures exploded to the point that at 5 a.m. the Dow was looking up 250, but on absolutely nothing. We didn't even have an earnings prop as UnitedHealth UNH hadn't reported.
What we did ultimately get is a vicious upper cut to the plans to get Action Alerts PLUS charity portfolio holding General Electric (GE) on an even keel -- still a jury's out situation -- and a good, not great, number from another holding of the trust, Citigroup (C) .
Under what circumstances did that warrant such an up opening?
Now, I am and have always been a believer that you have to step aside when you have an opening that ridiculously extreme, just as I am drawn to openings where the market is hammered on nothing that's of great significance.
It's just been my way. If you go back and read Confessions of a Street Addict you can find several instances when I was selling when everyone was selling, and I gave away some really good merchandise at critically low prices, for no good reason other than fear.
Yesterday, if you bought the opening, you did so for no good reason other than greed. You seriously had to believe that momentum exists in a vacuum, and that people will keep paying up on the basis of raised price targets, even when the overall performance of the market is lousy.
It gets worse. As I wrote here, you had lost the transports by mid-morning. That's the group that has everything going for it, that has e-commerce and rising air fares and difficult logistics, and it's been nothing but net and it turned on the bulls by 11 a.m.
How in anyone's right mind would you not expect a reversal?
Now, the market has to mark time with a parade of bulls coming back as if by magic. We will hear that we have seen the top for the year. We will hear that, once again, everything is built in.
What we won't hear is that we did have an ongoing rotation out of drugs into cyclicals and with some good news from Merck (MRK) and a bounce in Allergan (AGN) and a rally in Johnson & Johnson (JNJ) and the fantastic number from United Health and that McKesson (MCK) move based on nothing, you had a rally that withstood a lot of selling.
It wasn't a total lost cause away from health care. The upgrades in the semicap equipment sector worked, as did the Qualcomm (QCOM) presentation.
Ultimately, though, now the market is in the penalty box, and when we get to those levels we saw at yesterday's opening, we will see sellers not buyers.
Once again, I blame the pajama traders and all their acolytes. They make more irrational, stupid moves based on nothing than I ever thought possible.
Thanks for nothing.