Marketview: Nightmares of the Bottom

The bear market of 2008/09 has left deep scars on the investing public.  Here we are at 1400 in the $SPX and people still feel like it’s 2008.  Consumer sentiment has not meaningfully improved since then.

Didn’t you ever hear that you should be fearful when others are greedy and greedy when others are fearful?  The public is scared and the world hasn’t folded in on itself despite what feels like hundreds of close calls.

The price action has been anything but easy.  The good news is that the tape is getting more bulletproof with every challenge.  From a purely statistical standpoint this week was almost flawless.  First, the NFP report was off the chart.  The tech sector was the top performer followed by industrials and financials, while utilities and healthcare lagged.  Plus, you have value outperforming growth, which is usually a hallmark of a sustainable rally.  $TLT continued to trade lower and peripheral yields are coming off their highs.  This has all the signatures of a liquidity driven risk-on rally.  We’ve seen them before and they are much more than a flash in the pan.  Will this fairytale story continue?  No.  The market will head-fake, cycle and the choppiness will likely continue.  The choppiness, however, should continue in the distinct direction of the upside.

As long as portfolio managers are still having nightmares of the bear market bottoms of 2008/09 it’s unlikely we will revisit them.  Once consumer sentiment is above 90 you can start getting nervous.

Winners: $AAPL, $CSCO, $QCOM, $MET, $MS, $BAC, $DOW, $UTX

Losers: $BMY, $UNH, $LOW, $HD, $MA, $AXP, $SO, $FCX

It can be hard to appreciate how big of a beat the NFP report was and why the market reacted so violently.  Do yourself a favor and get your excel game on and chart the NFP.  Forget the month-over-month.  Just chart the number.  The report was ridiculous next to the historical data (and it will definitely be revised).  The weather is too nice for me to do your homework for you.


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