Maybe Irma and Harvey were perfect storms, perfect in that they knocked out the algorithms that had set this market on tenterhooks going into September.
That's right, it's almost as if the stocks that are now winning were on some sort of list to short against others -- and the two hurricanes busted the shorts.
As I perused the stock charts this weekend, I couldn't help but admire a couple of groups that had really created tremendous downward pressure on the market for ages.
First, you had the auto complex, stocks like that of BorgWarner (BWA) or Dana Inc (DAN) or Magna (MGA) , or even General Motors (GM) itself. These had been horrendous stocks for months and contributed to an overall concern about an economy that was losing steam. But flush insurers and a wealthy populace where the storms hit -- as opposed to where Katrina fell -- are leading to a much-larger recovery for trucks and cars than anyone saw coming.
The storms also put a spur into the stocks of construction and material companies. Some, like Terex (TEX) , saw its stock boosted by an activist presentation at the Delivering Alpha conference. Caterpillar told a good tale at its analyst day. United Rentals (URI) remains the single best way to play the intermediate-term rebuild, as the purchase of equipment to clean up after a storm and rebuild is strictly one for the United Rentals' of the world.
Waste Management (WM) , which has been held back by a lack of construction in key areas -- it's real bread and butter of growth -- saw its stock soar, as it's dominant in Florida and Texas.
Home Depot (HD) and Stanley Black & Decker (SWK) are prime examples of what I am talking about. These two were among the most worrisome stocks in the entire market, because both companies reported terrific quarters -- both on the surface and underneath -- yet no one cared. It was total "last good quarter" thesis trading, and it sent shock waves through those of us who said that the Amazon (AMZN) threat was overdone.
Now, though, the charts have gone from bad to good -- and you have to wonder how far behind Lowe's (LOW) stock might be from that of Home Depot's.
I think the spotty nature of what's going to be needed most after the storm has obscured the patterns here. Concrete and aggregates performed poorly. But wood demand has soared and so have the stocks. The selectivity has bedeviled traders. But the demand is clearly there.
And, of course, the rails had a fabulous week, again owing to auto inventory rebuilds, no doubt, as well as a re-stocking of chemical plants that had been idled by the storms.
I think the storms are behind the resurgence of both the refinery stocks -- West Texas Intermediate shot up and gasoline prices got jacked up with it -- and the oils, which reacted positively to inventory declines and rig count softness, even as the dearth of inventory and the rig count weakness are probably both aberrant. In other words, like the auto/rail component, this group had been headed south. The storms changed the direction of the machines that were sending them that way.
Perhaps it doesn't matter, though, that it might be temporary, because when you look at those oil and gas charts, they show a very big turn, one that is long in coming -- and I don't think easily erased IF oil can take out $50. Big IF. But each day that it hangs around up here has to be, again like the autos, a threat to the shorts.
Oil and auto, home and home-related, two weak sisters of this market have become the drivers. These groups had been emblematic of what had been wrong: peak oil, peak auto and peak home. They were conspiring with some softer tech numbers and a decline in the banks to send the market into what looked like its usual August-September tailspin.
But the storms weren't in the algos. And the shorts became longs without the machines learning of it until it was too late to cover without some horrendous losses.