I wish the concept of the rolling bear market weren't so difficult to fathom. I keep getting pushback about how could we be in a bear market if the averages are so strong, or "you kept me out of the market with your bearishness."
But I have never seen anything like this scythe that cuts down a particular portion of the market and not others and, while others have said it is not a new phenomenon, no one has been able to say where or when they saw it last.
So let me go over what I mean. Take the cyber security stocks. They had been on fire. Then they cooled, but they were still gapping up on analyst pushes. But last week Growth Seeker portfolio holding Fortinet (FTNT) reported light billings, and now they are just cascading down. They are part of a roving, wild bear market.
As I searched for a reason why Palo Alto Networks (PANW), which reported such a terrific number, could be getting crushed, I realized that, of course, this is the ETFs doing the talking. We have rolling bear markets because people are blasting in an out of ETFs, and they are causing so much damage that they feel like bear markets but they are contained to the cohort.
Last week we caught a bear market in all things apparel. Mind you, not hardware -- Home Depot (HD) didn't get hurt. Nor interior design Restoration Hardware (RH). But companies that sold products like Skechers (SKX) and Under Armour (UA) and V.F. Corp (VFC).
The bear market was contained to them, but it roiled through as if a bear had been unleashed in a cage of retailers like Macy's (M) -- which is an unbelievably , bad acting stock -- as well as Kohl's (KSS), Nordstrom (JWN) and Action Alerts PLUS charity portfolio name Target (TGT).
Or how about last week, when the health maintenance organizations got hammered on hospital admission declines? Well, that's priceless. HMOs do better when hospital admissions are low. But did that stop anyone from selling UnitedHealth (UNH) down eight points, even as it might have been the principal beneficiary of the issue? Nope; too many concentric ETFs have them both.
Now, ETFs are here to stay. Another family of ETFs rang the bell yesterday. I think that in the time since I have been working at Post Nine on the New York Stock Exchange there have been more listings of ETFs and fund families creating ETFs than any other segment of the market. Most, I would argue, are unneeded. Doesn't matter; they get created, and they are so much more powerful than the individual stocks that make them up that they run over all of those involved.
I know people think it is investing, but when you are fooling around with those double and triple bull or bears one-day action affairs, you know that has nothing to do with investing. That was just the SEC blessing any old financial engineered product, and many people probably have no idea what they are doing when they buy or sell them.
Before the ETFs, people would simply sell the bad and leave the good alone. Now everything gets sold and then sold again -- remember it is a bear market within a bull market -- until the stocks come down to some level that, at last, brings out no more sellers and those who have sold short the ETFs revisit and close out their positions.