How do I like the market?
You know, we had a terrific live audience of TD Ameritrade clients last night, and during a break in the show one of the participants asked me that question.
I told her we had to retire the term "market." It just isn't as useful or descriptive right now.
That's because the sector rotations driven by frantic ETF purchasing have been so vicious that saying you like "the market" could mean nothing if you are in the wrong sector.
And if you are in the right one? Then, fundamentals do not matter. Bristol-Myers (BMY) , for example, has now rallied four bucks after some incredible disappointments with Opdivo, it's anti-cancer formulation. Merck (MRK) , which has had tremendous good fortune with a whole bunch of drugs, saw its stock to nothing for ages until this rotation occurred. Eli Lilly (LLY) hasn't had an ounce of good news from $78 to $84.
The buyers, motivated by fears of a Fed-induced slowdown or joy that there's no price regulation, come in right from the get go. As usual, if they weren't so voracious they would get better prices, but they don't even seem to care about that. They just want to buy, period. The ETF tide takes up all boats.
You want real stupidity? You don't buy the hospital stocks on this Senate bill, you sell them...unless what's really happening is that it is so patently obviously that the bill is too draconian to get through that these stocks are rallying because it is dead on arrival.
But then, let's say we were talking about oil. It doesn't matter which producer has the lowest costs or the greatest earnings power or is hedged the most, they will all drop in unison. There is not even a whit of differentiation, even when it comes to a dividend, say, in a master limited partnership. Those are all bundled in ETFs, too.
Both groups are in the "market", but if I told you I didn't like the market, you would miss this move in Regeneron (REGN) or Celgene (CELG) that is so bountiful. Of course, if I told you I liked Chevron (CVX) you could get crushed.
Now, I am sure some of you will be saying "isn't that rotation so irrational in itself that it signals we are about to have a big decline in the market?" Again, though, I come back and say that we could have said that so many times with so many different sectors already, that I don't know what kind of value-added I would have to offer by agreeing.
Now, it is true that if enough health care stocks go higher, we start seeing big equity offerings or IPOs, and if they don't hold we know that the health care rotation may have gone too far. Or, if we get some positive data on the economy besides employment, maybe that would matter.
However, here again there's something to learn. When the rotation ends, the stocks do not get hammered. They plateau and wait. We don't know if they are going to go up or down. While they are waiting, the momentum investors pile into another sector. Nevertheless, with that low risk and high reward, you can see why the rotations are overwhelmingly attractive.
So, I say, stop making judgments as if this is all about the S&P, which it had been until this year with the exception of the FANG stocks -- Action Alerts PLUS holding Facebook (FB) , Trifecta Stocks name Amazon (AMZN) , Netflix (NFLX) and Google parent Alphabet (GOOGL) .
It's about individual sectors and the bull and bear markets within them. That's what matters.
Not the market itself.