MorningWord 6/26/15: Lose Lose Choices Abound $NKE $SPY

by Dan June 26, 2015 9:47 am • Commentary

If you are looking at the recent new all time highs in Disney (DIS), Facebook (FB), Nike (NKE), Starbucks (SBUX) and of course Apple’s (AAPL) 15.5% year to date gains to glean the health of the U.S. economy (and most importantly the U.S. consumer) and surmise that U.S. stocks are in a good spot then you may be focused on the wrong group. Last Fall I dubbed this a portfolio of U.S. Consumer Teflong™ stocks and suggested that this group would likely be the last battle fought of this epic nearly seven year bull market.

In early May I took another look at this group (read here) and noted that all of these stocks had been trading at highs into their Q1 reports in March/April, and all had given back their earnings gains, and failed to hold the breakouts to new highs. That was obviously a fairly premature observation as all but AAPL have made new highs since, but I would add that the failure of the S&P500 (SPX) to follow suit and establish a new range above the prior highs could be a demonstration of exhaustion.

My main takeaway at the moment is simple. This is a very special group of stocks that reflect the health of the high-end consumer and an increasingly aspirational lower/middle class consumer, at least for certain brands and services. But if you want to look at the nuts and bolts of our economy then the performance of cyclical stocks that could be anticipating the “slack” in the U.S. economy (that the Fed has referred to) should be acting a lot better.

I am not even gonna get into the disaster that is the Transports (read our ongoing debate at the, but Industrial stocks like CAT, CMI, JOY, NAV, UTX act downright awful.  Autos, stuck in the mud despite registering new monthly sales records all year.  Aside from the dollar stores and the recent bout of merger mania, mid range retail is losing two horses of the bull market COST and WMT, down 12% and 20% respectively from their 52 week and all time highs made earlier in the year, and I am not going to get into teen apparel (all they want to do is Snapchat).  Utilities are a disaster, but understandable given the move in rates, Commodities/Energy/Materials, ugh. Two of the largest stocks in our markets CVX and XOM are making new 52 week lows. Banks act well but may have pulled forward some performance. Agriculture stocks, yuck, have you seen MON and POT lately?? Consumer Staples, nasty (PG, KO, MO).

You say Healthcare stocks are blowing the doors off? Well, the merger mania in big pharma and hospital stocks isn’t healthy. We will look back and remember these mergers as a sign of a top. And lastly Technology, the largest weighted sector in the SPX.  The recent weak results from JBL, ORCL and now MU paint a blah picture for PC and Smartphone demand in the second half of 2015.

Frankly, I just don’t see the value proposition to committing new money to equities before we get some sort of re-set.  I have said that all year. And frankly, unless you are in loaded up on the most beloved U.S. consumers stocks then it has been a tough year to outperform. Of course, all of that could be easy if the entire market became a bubble like the late 90’s. But that’s not what we’re seeing now. We’re seeing some bubble like sectors and others that are signaling weakness.

I’ll leave you with this, a Tweet this morning from Jim Cramer  in response to a viewer question ‘is it too late to join the NKE party?”

This is the sort of equity market we are in, with plenty of lose-lose choices.