If there's one thing I have learned since the Dow Jones average was at about 1000 when I got in this business, it's that I hate days like today when we breach a millennial mark. Whenever we do, we seem to be jinxed and sellers come out of the woodwork, just as they did today.
Maybe it's the Dow 22,000 hats I saw broken out on the floor of the New York Stock Exchange today, maybe it's the faux hoopla that I see and hear. Hey, maybe it is the president's admonishment that the mainstream media -- as opposed to our niche media - don't pay enough attention to these milestones.
This time around it seemed even more acute because the move up in the Dow from 21,000 to 22,000 was really the work of just a handful of stocks, actually just four of them -- Boeing (BA) , McDonald's (MCD) , United Health (UNH) and Apple (AAPL) . So it is not even a true tell of what's going on in a larger sense.
The S&P 500 and the Nasdaq are solid indices, the Dow not so much. Doesn't matter. They don't break out S&P 500 hats and none of the important levels they take out matter all that much, except when the Nasdaq recently crossed above the fated level we hit in 2000 before the crash when lots of bears emerged from their lairs and suggested we'd quickly have another. None of those people ever came forward when we didn't, but they surface on down days and make a lot of panicky but stentorian noises. You can only imagine how horrendous the chatter would be if Apple had finished down today after its stunning beat-and-raise of the numbers.
And you know what? That's a pretty good place to start on what today meant, if it meant anything at all.
First, many of you may not be aware of the concept of the sell program, but that's what we saw today. A large fund came in as a gangbuster seller of all things Nasdaq almost on cue with the rally in Apple and the breaching of the Dow 22,000 market. That's not unusual; I have seen it happen at countless breached benchmarks.
At the same time, a lot of that money went into non-tech stocks, particularly the industrials, but also I would call the boring S&P 500 names. That means what we would call plain vanilla names like McDonald's and 3M (MMM) , which I recommended last night as a buy because it has been so weak.
That's not an unusual pattern either. But it was wildly accentuated by the collapse of the stocks of so many companies related to the amazing Apple performance, companies like the parts-making suppliers Skyworks Solutions (SWKS) , Qorvo (QRVO) , Texas Instruments (TXN) and Cirrus Logic (CRUS) , which should have been up huge but had muted reactions and at one point were down and down hard.
Some of what I bring to the party here is that I know how these programs work. I have been at this so long that I can spot this stuff with my eyes closed. No, I am not a human algorithm, but I have always been able to recognize this kind of unnatural across-the-board selling for what it is: a serious repositioning by a large fund that wants out of tech. I have a nose for it. The people who used to follow me when I traded for a living thought it was one of my signature traits.
Look, I totally get why an account would sell; we've come a long way. Fund managers don't want to give back profits. But today's reversal -- like last Thursday's intraday turndown -- inspires lots of people to recall what happened at that moment of truth back at the aforementioned legendary top in March 2000 when we got the same exact same scenario we had today: The large-capitalization techs fell apart at the same time that the plain vanilla names caught fire.
I mention that because I keep harping on what seems to be the futile notion that, unlike 2000, the tech companies with stocks that are doing fabulously are, like Apple with its more than $261 billion cash hoard, insanely profitable and in many cases downright cheap.
No, Amazon's (AMZN) not a cheap stock. Nor is Netflix (NFLX) . But Alphabet (GOOGL) and Facebook (FB) are very cheap when you go out more than one year, and now that we are in August 2017 that's a reasonable thing to do. Pay close attention and you will hear lots of firms now going out with 2018 numbers because when you are six months away from a new year, that's what happens. Many of the semiconductor and software companies are also cheap, except perhaps the cloud companies, but that's always been another story. (Apple, Alphabet and Facebook are part of TheStreet's Action Alerts PLUS portfolio.)
Yesterday I wrote here that if you couldn't handle the heat of this market -- and it is hot -- that you should get out of the kitchen. I said that because of days like today where there are programs that knock stocks down, programs -- and remember that is just shorthand for a big firm selling a lot of stocks -- that tend to be a staple at this time of the year.
I wanted you to raise cash because if you don't, psychologically you are liable to fall prey to those who grab the mike and talk about the year 2000 -- they are everywhere, lurking, because they are probably not beating the averages and they need the stock market down.
So you have an awful and deadly combination of stocks coming down and commentators "reverse" cheerleading stocks, accentuated by the Dow 22,000 nonsense, which they can say shows "toppy" action.
Yes, all of this seems to occur around these round numbers and it is a real head-case game that gets played out to your disadvantage, unless you have some cash to do some buying.
OK, now step away from these near-term shenanigans and focus on the real matter at hand: the fundamentals.
First, Apple, the world's largest company -- with a stock that sells actually well below the average equity in the S&P 500 even after its monster 36% move and an $822 billion capitalization -- reported a fantastic set of numbers, which, unto itself, given the average price of its cellphones (north of $600), is a terrific tell of the world's economy.
Second, the new economy, the "stay at home or have an amazing experience-, film it and run it on Instagram and watch it at home along with Netflix while you shop on Amazon" economy is trumping a lot of what's out there. Please see my morning piece for more on this.
Third, the economy at this very moment is all over the map. Housing is strong, but not enough homes for sale. Autos are weak, too many for sale. But truck building is incredibly robust. Retail, except for Apple and Amazon sales, is rather weak. Office construction is strong. Aerospace is out-of-its-mind fantastic. Manufacturing is strong. Health care spend is outrageously positive, but that's on the back of the federal government. Tech spend is magnificent. Oil and gas are awful. Fast food is booming, nicer dining out is weak.
All of these add up to a definitively mixed to positive picture oddly mirrored by the stocks in the Dow that have taken us from 21,000 to 22,000, namely Boeing, which is responsible for 387 points, McDonald's, 175 points, United Health, 170 points and Apple, 135 points.
How worried should we be about this narrow action?
We must always be skeptical. We want a broad-based rally led by the banks and the transports, not a narrow rally led by those four stocks. We sure didn't have that in this session.
The good news about today? The transports, which have been horrendous, the worst performers and an amazingly negative lead tell for the economy, are actually up today. Given their outsized role in making us concerned, I find that outperformance heartening.
Finally, one more word about Apple. With its cash coffers brimming and gigantic installed base, I have to admit that we may be at a moment where this company has become its own category. It is driving so much of the economy that it is no longer just anecdotally important. If Apple had been weaker, I have no doubt that today could have been a really tough day, except for one reason: We would never have hit Dow 22,000 without this key component.
Which brings me full circle: Sure, there is a round-number curse, has been for 21 of these crossed thresholds that I have seen in my lifetime. What matters is that there are plenty of companies out there that see their stocks brought down and laid low by these programs, and when that get brought down by them you will not hear opportunity knock, you will just hear the sirens of panic, the ones I am hell-bent on making you listen to but not act on except in a rational and reasonable way.