I cannot, for the life of me, figure out how much of this rally is short-covering. Today I am watching the apparel companies and I am thinking it's short-covering aplenty.
Deckers (DECK), which has been languishing seemingly forever after a bunch of misses, has now stabilized and is gapping up nothing, a sign that this perennial short may be worrying the bears.
PVH (PVH), Ralph Lauren (RL) and V.F. Corp. (VFC), three names that have been in the cross-hairs of shorts because of their European exposure, now seem to be in orbit now. That feels like beleaguered shorts who have just thrown in the towel. The same goes for Fossil (FOSL), which is going crazy to the upside.
Even Coach, which "blew" it, has a feel of "time to cover." Only Nike, which has everybody freaked out has been able to buck the bullish trend.
Or how about the Zynga (ZNGA)/Groupon (GRPN) world? The law of small numbers precludes Zynga and Groupon from being home runs. It is time to cover. Plus, the whole group is getting a boost from Facebook's (FB) bounce, which now comes under the category of something real and something animal-spirited.
There had been a sense that the high-growth restaurant names peaked post-Chipotle (CMG), but the other day a boutique research firm said that Panera's (PNRA) numbers could be stronger than expected. The group sustained a jarring upward move, although today Chipotle's giving up some of the Panera-inspired gain.
Watch these patterns -- they are often gains made at the later end of an advance. The powerful rally yesterday on top of day-after-day of increases means, to me, that it is time to cool off, because now these gains are the froth that comes from the Johnny-come-latelies and the hedge fund coverers.
This is not a reason to sell but it can help us understand why the market may stall out now after its remarkable advance. You can only be led by these stocks for so long before the rally becomes very long in the tooth.