Safety stocks have run enough
Recession-resistant shares like Merck and ConAgra are due for a rest. Look for them to hand over the lead as the 'roving bull market' trend continues.
The most standout performers are the companies that can be described only as extremely recession-resistant, whether it's tobaccos or the pharmas or the medical devices or the plethora of grain-buying food companies.
Meanwhile, techs, oils, industrials and banks are silently rolling over and causing some real underperformance.
In fact, if it weren't for the terrific performance in utilities, I would just say "Look out, double dip is here." I write "if it weren't for this," because in the Great Recession we used so little energy that utility stocks came totally unglued. Now stocks like Dominion (D) and FirstEnergy (FE) -- the latter always thought to be a complete dog -- are generating tech-in-its-heyday-like performance.
At the same time, it is breathtaking to see the collapse in mineral and oil stocks. They are all rolling over in hideous fashion. Industrials are taking their time, but they are going down, too. The devastation in financials, in stocks like Morgan Stanley (MS) and Bank of America (BAC), are signaling that trading is drying up and housing is in even bigger trouble than bearish investors realize. Plus, the regulatory juggernaut that is Elizabeth Warren is going to give some real scrutiny to those showing too much return on investment in the banking group.
Tech? People keep focusing on Apple's (AAPL) moribund performance, but it isn't like the others are showing anything worth writing home about.
OK, that's all the bad news. Now let me give you some good news. The pattern with this market has been that when any group -- cyclical, noncyclical, oil, banks -- gets overbought the way a Colgate (CL) or a Merck (MRK) or ConAgra (CAG) is, there tends to be a reversion after a couple of weeks of outstanding performance. This is that "roving bull market" concept I am always talking about.
That would mean we are due for a sea change here after this amazing outperformance by stocks that typically don't have this kind of oomph, even as they are signaling a total collapse of the commodity markets. If commodities do not collapse, we are going to see the old trend come forward. But even if they do, I think we will see people chatter about how the soft goods are already factoring in the commodity correction.
Now, what's most amusing about this rotation to me is how out of whack it is with what's going on with the dollar. Most of these stocks thrive on a weak dollar. But they are going up anyway, perhaps as a function of lower interest rates, perhaps as a function of a recession that is lurking that I, for one, can't see.
Either way, I think the anti-cyclicals have run enough and it is time for them to rest. That kind of hand-off in leadership has been what's happened ever since the second leg of the bull market began last summer, and I think it is about to happen again, real soon.
Look for an intraday reversal to make it happen. That's typically how they come about.
At the time of publication, Cramer was long Bank of America and Apple.
Follow Cramer's trades for his Charitable Trust.
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