We call it "the bid underneath." It's the amazing sector resilience behind this market's inability to crater on bad news days -- and I find it rather amazing.
Yesterday's bid underneath was anything retail. You got a couple of "not as bad as we thought" numbers from some bricks and mortar stores, and the next thing you know the group's off to the races.
Today it's the semiconductors. Every semiconductor company with Apple (AAPL) business has a raging stock. Skyworks Solutions (SWKS) , the radio frequency chipmakers with a stock that you couldn't give away a few months ago when we had them on Mad Money, is now hitting a 52-week high. The stock of Qorvo (QRVO) , another radio frequency chipmaker, which literally spent all of last year just bobbing and weaving, has barely had a day that it didn't advance this year.
Cirrus Logic (CRUS) , the key to Apple's sound system, cut guidance when it reported two months ago. That's right, cut guidance. But ever since the month of March, it's been a straight line up.
What drives me nuts about this kind of rally is that there is simply no reason for it to happen today.
Yes, we are hearing about a bigger build for the Apple iPhone 8 than expected, which is behind a lot of the strength in the biggest-capitalization stock in the world. But there is simply no real reason for these stocks to run on this particular day. It's just that some portfolio managers have been waiting and waiting and waiting for them to come down, bidding underneath, and they can't take it any more and they are reaching for all of them at once. There seem to be no sellers whatsoever even on a day when Syrian turmoil, allegedly tense Chinese talks and a weaker employment number have all surfaced at once.
Why does this pattern matter so much? I want you to put yourself in the heads of a large portfolio manager at a major mutual fund. This portfolio manager has been waiting and waiting for her favorite stocks to go down so she can buy them. But her wish is never granted. Either the sellers don't materialize or the overall market doesn't come down enough to bring these stocks with it.
So the portfolio manager finally can't take it anymore and decides, the heck with it. I am tired of being the bid underneath. I have waited and waited and now I have to reach and buy these stocks.
I think that the realization that "if we aren't going to go down on that trifecta of negative news then when will we go down?" provoked this insane, needless reaching for the Apple semis today.
I see bids underneath in all sorts of groups. There are bidders underneath in the housing stocks, constant bidders underneath in the railroads. Every day I see bidders in the potential targets for Kraft-Heinz (KHC) and now Unilever (UN) , companies like Clorox (CLX) , Kimberly Clark (KMB) and most definitely Colgate (CL) .
Periodically, impatience forces them to reach -- and that's how stocks go up one, two, even three points for what seems like no reason. They can't take it. They can't wait any longer even as there's no news that's going to propel these stocks that any of us can see.
The bid underneath coupled with the reach is part and parcel of a classic bull market. It's why I often say don't join the pajama traders -- those overnight panic-prone folks, like we had last night over Syria, who were betting the market would be down at least a percent -- because there are so many persistent bidders that there's no need to throw away stocks.
The bid underneath. Another reason panic never made a dime for anybody. Another reason why this market, for all its flaws, is a lot more resilient than it looks to the naked eye.