The shorts aren't working. Who would have thought that would be the case given where we were two weeks ago?
Think about it. The big darlings, starting with NetApp (NTAP) and Salesforce.com (CRM), have been putting heavy pressure on the market. Then just last week we saw what looked to be the disastrous Lululemon (LULU), with everyone focusing on the high levels of inventory. Meanwhile Apple (AAPL) and Google (GOOG) couldn't get out of their own way.
Now look what's happened. We got an Apple number bump last week from JPMorgan, a bump that took the analyst from the middle of the pack to high man. The best part of the number bump? The analyst had factored in that iPad numbers may not be all that hot. Google, amazingly, is now perceived as a holiday play with a search kicker. It has truly broken out and my chartist friends are hailing it as the best pictograph in the book.
We got a takeover of SuccessFactors (SFSF) by SAP (SAP), which shows that you must have a cloud strategy to succeed in tech these days. The two most visible and heavily shorted cloud plays were RedHat (RHT) and Salesforce.com. Suddenly they have gone from being great shorts to being nightmares on the short side.
Lululemon was like something right out of the NFL. The stock plummeted, down 7, as the bears gloated and the bulls panicked about inventory levels. Upon further review the bulls came back and took it up. Why? Because Lulu might need that inventory because sales may be robust for the holidays. Why not believe in them? We heard that a lot of inventory was the right thing for Under Armour (UA) and Deckers (DECK). Why not for Lululemon?
Netapp? There had been worries about Europe. As there have been with IBM (IBM) and with a lot of other tech companies, including Juniper (JNPR) and EMC (EMC). Now that Europe has some glimmer of hope, again, the short side seems disabled here.
Some groups never quit. All last week we saw the dollar stores rally. Today, off Dollar General (DG) we see Dollar Tree (DLTR) hit a 52-week high. TJX (TJX) and Ross Stores (ROST), two reasonably priced retailers that are perceived as a tad more pricey than the dollar stores, hit 52-week-highs.
What did all of these stocks have in common? They were perceived to be the lay-up shorts, overvalued, often with European weakness and potential for downgrades and shortfalls.
You take that out of the equation, and without a definitive screw-up from Europe, these become pretty darned good places to be.