Early Wednesday morning the mood was looking gloomy but President Trump backed off on restrictions related to Chinese investment in the United States, which caused a very quick reversal in market sentiment. The bears were caught leaning and underinvested bulls (like me) were forced to try to find some ways to quickly put money to work.
Poor positioning is keeping bids under the action but it isn't that exuberant of a move. Breadth is running 3,700 gainers to 2,500 decliners and we have about 70 new 12-month highs compared to more than 120 new 12-month lows. Momentum stocks are acting better but they aren't being chased with much vigor so far.
As I discussed in Columnist Conversations this back-tracking from an aggressive position is typical of the president. The market has come to expect it, which is part of the reason we have such tenacious dip-buying when there is a negative headline.
This time the market was not as certain that Trump would relent and that is what has caused pressure the last few days. There is still a lot of confusion over trade and the issue cannot be repaired as easily as other matters. Therefore, it isn't going to go away due to the decision regarding China investment this morning, and the market is still concerned about the longer-term ramifications.
Tuesday I mentioned oil as likely to be a key sector to watch. I'm having good luck with a number of small oils such as W&T Offshore (WTI) , Legacy Reserves LP (LGCY) and Pioneer Energy Services (PES) .
One other oil name I'm looking at harder is Solaris Oilfield Infrastructure (SOI) . SOI provides a delivery and storage system for special sand and proppants used in fracking. The company has a 108 patents protecting its system and is currently manufacturing eight systems per month.
The company is expected to grow earnings for 2018 to $1.75 per share versus $0.41 in 2017. The current EPS estimate for 2019 is $2.74 and the stock's trailing P/E multiple is 22x.
Technically, SOI stock has been struggling recently but seems to have found some support around $14. I am adding shares today.