You always want to know what to focus during a given day. I like to look at how stocks are reacting to earnings: Cracker Barrel (CBRL), PVH (PVH) and Dollar General (DG) say full speed ahead.
I like to see how stocks react to secondaries. The big one right now is Blackstone Mortgage (BXMT) and that's staying above the print, or where it is priced at.
I like to look at interest rates, if only because this market likes it when they go higher because it means that the banks, a huge part of the S&P, can rally. That's exactly what's happening.
But most of all, I like to see how the dollar is doing because the superfreakin' dollar has become crucial to whether we are going to have up or down earnings next year.
We are almost to the point where we will be looking at 2016 earnings -- that happens in July and we know that if the dollar can go down and the euro go higher against it, then we will have revisions upward and the S&P 500 won't seem that expensive on 2016 numbers.
Strength in the euro is dependent on three things, European Central Bank bond buying, inflation and Greece. If inflation is coming back, as some of the numbers indicated out of Europe today, then part of the mandate of the ECB's bond-buying program is getting met. That makes it harder to keep the euro down. If Greece is resolved either way, that makes for a stronger euro, which again, is good.
So when I saw the euro get stronger this morning but the S&P 500 going down, I realized that there are still plenty of people who DON'T know how to weigh the body of the current evidence, which is that you underweight the power of interest rates -- after all, they are good if they go higher for so much of the market -- and you overweight the importance of the euro, because our industrials and our consumer packaged goods companies need that euro stronger.
When we get it, or when we get a hint of it -- which is the case today with PVH -- then we get something really remarkable, a real rally. (Thanks to my writing colleague Matt Horween for always reminding me that the superfreakin' dollar is what matters.).
Earlier this morning, I remarked that I cannot be negative when the dollar's weak. You cannot have a sustained advance without a weak dollar, because earnings revisions will be negative if the dollar stays strong.
So get your bias right and know what matters, and you won't be fooled by the moronic sellers of the S&P 500 who just don't know what matters.