It sure is tiresome when the algorithms force a nonsensical market upon us. I am a huge believer that the economy has slowed again -- it's been stop-start repeatedly -- and that the hiring numbers, after hitting their stride not that long ago, now seem bogged down by some force or forces -- European weakness, Affordable Care Act? -- that nobody's been able to pin down beyond anecdotal musings.
But one thing's for certain: the bulls love higher oil prices. They don't care how they occur --lower dollar, embargo, turmoil ¿ somehow, more expensive crude is viewed as positive for all stocks.
There's only one sticking point: when I look at the canvas of what's going on right now in the United States, I see consumer spending that's being saved by, yep, lower oil and gas prices. Think about it: housing numbers are awful. I thought we were going to see more non-residential construction by now, but somehow that seems to have cooled. Many have written off the aerospace cycle, a huge employer.
Government spending remains tight-fisted. Big companies are still doing more with less, and other than a couple of outliers such as Alliance Data (ADS), Kroger (KR) and United Parcel (UPS), we are not hearing about big hiring sprees. I am not even sure that auto sales are all that strong, although I saw General Motors (GM) boosting its truck production. Could that be, though, just a pick-up from the lack of pick-ups from Ford (F)?
But we are algorithmic in nature and we know that a weak dollar sends oil up, which then shows signs of life to the economy, which then allows us to be in the industrials, which then boosts the Dow and in turn helps a lot of the S&P, including the approximately 88% of the companies that don't benefit from higher oil prices.
I often lament the linkage that drives stocks, because it obliterates the common sense of the market.
For me this ridiculous dollar-energy conundrum -- debunked entirely by our own energy expert Dan Dicker -- is so frustrating. But it must be gamed and accepted as gospel if you are going to make any money. For me, the first time I sensed the market could turn was when oil jumped a buck. It signaled all was well with the world and the retailers and hotels and entertainment stocks and restaurant stocks all jumped right after.
Sometimes I wonder if this isn't the most stupid market I've ever met.