You don't need a weather man to know which way the market blows. You just need to follow certain stocks that are the key to this market.
On still one more nasty day I need you to understand how to recognize if the market's changing its mind and breaking out of its current mode, which is, in this case, a very bearish one.
You need to have at your fingertips the prices and charts of a half-dozen stocks that can tell the tale of what you need to know about a possible change in direction.
I developed this technique years ago, before cellphones, when I worked at Goldman Sachs and would be on the road beating the hustings for new clients. I would pull up at a pay phone with a stack of nickels - Gen Yers a pay phone is something you put money in and then speak, not text, but speak, to another human - and I would call in to see what's going on.
There was no time to chit chat, we were always very busy. There was no time for even the most remote of necessities let alone chatting about dress codes and neckware.
It was all lightning round: pick six stocks you could ask about to be able to get the total coloration and direction of what would happen not now, but in the next few days. Sure I could ask Walter, my partner, about where the Dow and the S&P were, maybe the Nasdaq but then it was off to stock races.
And without further ado, here is what I would have asked about today.
First we have a gaping hole in this markets and it is the transports. They have been incredibly nauseating, down for 10 straight days, pummeled by relentless selling. I could ask about the index but it is filled with flotsam and jetsam.
So instead, I would cut to the chase and ask how's FedEx (FDX) , the stock that is most emblematic of what's happening right now. Not only has this stock fallen off a cliff and not capable of even an iota of stabilization, let alone a brief respite from sellers, but it reports in two weeks and it is obvious that there's a tremendous FOBS going on here, Fear of Big Sellers who will bolt when the company reports because of a supposition of a weak number and a guide down.
But here's the thing. I am not using this as a referendum on the fundamentals, I am using it as a plebiscite about the possibility of a recession. FedEx is a global shipper, touching everything from supply chain to China to e-commerce from brick and mortar retailers. Why am I not more worried about a recession? Because Fed Chair Jay Powell has our back. This decline is rearview mirror. He saw the slowdown coming and he changed his tune.
FedEx is being plastered by shareholders who think that it doesn't matter, it's too late for Powell to avoid a recession. I think things are much better than that. However, as long as this stock keeps going down I know that the sellers think I am dead wrong. Before I would make a big commitment to this market I need to see FedEx reverse direction which would signal that a slowdown is finally priced in and the market de-risked and ready for a swing.
Next up, Micron (MU) . This maker of commodity semiconductors, with a stock that has been at the vanguard of the entire semi move, has anticipated a turn in the cycle back to one of growth. This stock has risen from $29 to $42 before hitting a retaining wall that was invisible for all given how inexpensive the stock is. It's now fallen back to $37. If this stock doesn't bottom it's because sellers are anticipating a huge guide down when it reports on March 20th. I can tell you it is VITAL that this one not keep going down because the semis are fabulous leaders and when they rally that's a sign that global commerce is picking up and there's a need for more semis than they are pumping out. A nice couple of point rally in Micron would ignite this entire market.
I would ask for a Workday (WDAY) quote because when it reported its terrific quarter it sold down anyway. That was the brutal beginning of a hideous selloff that hasn't let up one bit. I would not trust any high roller until this stock bottoms and reverses.
Speaking of black holes, the stock of Dow stalwart Goldman Sachs (GS) has to be followed like a hawk, actually a redtail hawk because I think those are good luck. Goldman climbed out of some incredible chasm not that long ago and it's been hanging on right at its tangible book value where you could close the joint and receive that amount, no different from leaving a card table and cashing out your chips. The stock of Goldman exaggerates every move and is a terrific bellwether, even better than JP Morgan (JPM) because it trades so erratic. You aren't going to get a rally in a group that amounts to about 20% of the S&P without Goldman pointing the way, especially given that the CEO David Solomon will be testifying in front of a hostile House committee led by bank nemesis Maxine Waters.
It has been ages since I have seen a group acting as terribly as healthcare and related stocks and the worst, by far, is one I like but has been so abysmal that I feel like I am taking my life in my hands just mentioning the things. The stock? CVS Health (CVS) , which is now an amalgam of Aetna the health insurer, a pharmacy benefit manager and the drug store chain itself. A couple of weeks ago the CEO of the company told analysts that their numbers, their forecast, was too high. The stock was at $70. It then collapsed and has been going down 11 of 12 days. It's incredible because if CEO Larry Merlo were to simply come on the air and trace out his vision, I think the stock will reverse direction. I don't know what else will do it, though, because its emblematic of a sickness in this market, where sellers just reload and reload and simply don't care about price. That's a deadly co-shareholder and anyone who doesn't care about how well they do when they sell can't destroy a stock and even a group given all of the ETF pressure, and that's just what's happening. Don't touch healthcare until you see two up days in this puppy.
This market had a leader not that long ago and the leader was Facebook (FB) . It was leading because investors thought that the ethical gaffes were behind them and the higher margins because of less spending were in front of them. But today we read that Facebook intends to create groups that seem to be closed off to advertising causing people to wonder if the revenue growth will slow some more. Unless Facebook can shrug off these newfound sellers there will be hell to pay in the FANG group.
There you go, the big six, FedEx, Micron, Workday, Goldman Sachs, CVS and Facebook. You ask about those six and you will have a real good feel for what's going on both now and the future.