With so many stocks down and out, you have to ask yourself why does anyone regard this market as being any good at all? Why does it have even the most remote of bullish connotations, given that the industrials, the transports, the oils, anything auto, most of the financials and techs and even the utilities are getting hammered endlessly?
First, I think the selloff has gone on so long that we just accept that there are many "no fly zone" sectors that we just stopped paying attention to months and months ago. Anything that sells overseas is pretty much doomed, and has been for ages. The best you are going to get with a big international company, away from the drug business, is basically a flat performance, and that's going to be because it sells food.
Second, takeovers have so populated the landscape that we know if we get too negative we run into the M&A buzz saw, or at least the activist's knife, which is almost always positive. The takeovers in the health care space have come so hot and heavy and the names are so visible ¿ Aetna (AET), Humana (HUM), Cigna (CI), Anthem (ANTM), for example -- that they create a rosy coloration in their own right.
The sheer numbers of deals in the cable area or the medical device or biotech regions just create such a false level of confidence, especially as related to those that don't get taken over, whether they be in entertainment in general or also-ran junior biotech, that you just don't sense the carnage.
So where do the bull markets remain? Nothing to date has dented the thesis that housing's in an uptrend, and you can buy anything that goes into a house and anywhere you buy those goods -- with the exception of lumber. But now that the Fed is going to raise rates, there are chinks in the armor here. Home Depot's (HD) up big but Lowe's (LOW) is down. Despite excellent commentary from both chains about appliances, Whirlpool (WHR) is down for the year. So's PPG (PPG). Both have substantial operations, however, away from their domestic washer, dryer and paint businesses.
We have some recession-proof stocks that are shining away from the drugs: Constellation Brands (STZ) is emblematic of the bull market in vice. Electronic Arts (EA) is representative of the bull market in video games. The auto parts companies, which have been stalwarts for so long because they allow you to keep your car longer, just won't quit: AutoZone (AZO) and O'Reilly Automotive (ORLY) are the template.
There are the big cap biotechs that have worked: Gilead (GILD), Celgene (CELG) (although much less than the old days) Regeneron (REGN) and BioMarin (BMRN). The rest of the cohort, however, has been pretty much blown to smithereens.
We have these odd non-bank financials, like MSCI (MSCI), Equifax (EFX), Global Payments (GPN) and always charmed Visa (V) and MasterCard (MA). But the major banks have pretty much all given up their gains for the year.
Finally, there are the smattering of techs, as defined by FANG ¿ Action Alerts PLUS portfolio holding Facebook (FB), Amazon.com (AMZN), which is being held in the Growth Seeker portfolio, Netflix (NFLX) and Google (GOOGL), another Action Alerts PLUS holding -- coupled with some long-ago peaked cyber security stocks and some equally-late-in the ¿tooth cellphone derivatives, like Avago (AVGO) and Skyworks (SWKS).
This pastiche of winners allows us the illusion of a bull running through this market. To me, though, the real takeaway is that after last week not even these stocks are safe. Which again, is a sign that the damage already inflicted is so great that we must just accept that a rate increase -- if not many -- is getting built into the market regardless of what percentage of investors tells us that it might be the September or December meetings or no meetings at all.
