People are confused, and I think they are confused because the hottest stocks of the first quarter -- namely biotechs, medical-device makers and cellphone makers -- are now the weakest stocks and oil names are the strongest.
We are looking at extreme trading programs knocking down biotechs where supply is crushing demand. We are also seeing secondaries away from biotech, notably Mylan (MYL), and Burlington (BURL), the retailer, weighing on the rest of the market. Of course, Etsy (ETSY) and GoDaddy (GDDY) -- ticker GiDDY? -- are worrisome.
The difficult thing to do is to take the other side of the trade for the stocks that we know the market adores (namely, the winners of the first quarter) that are down hard. We are picking some of them up for Action Alerts PLUS because we like the defensive stocks given the slowdown, as articulated by the ADP employment number, which shows definitive weakness.
And the oils? They are down enough -- enough to handle the possible "welcome back" for Iran. That's why we have been loud about owning Schlumberger (SLB) and hoping for some relief -- none is in sight for both Royal Dutch Shell (RDS.A) and the incredibly cheap Dow Chemical (DOW).
No, I don't hear or see an all-clear, even after the Dow industrials have fallen 600 points. I would prefer to think of it as the "some-clear," particularly the collapsed pharmas where there are earnings.
Why can't I be more bearish? Always tough to be really bearish when rates are going down like this, because they are a signal that we don't have to think about the Fed for a bit, even as we are told to think otherwise. And, yes, a positive nod to Chairman Janet Yellen for, once again, recognizing that the data should tell them what to do and not vice versa. Smart, and keeps us from going off a strong-dollar cliff that could really put the kybosh on earnings projections coming next week.
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