Time to sell? Not yet, but watch these patterns
They may explain why this market may stall out after its remarkable advance.
I cannot for the life of me figure out how much of this rally is short covering. On Friday I was watching the apparel companies and thinking it's short covering aplenty.
Deckers (DECK), which has been languishing seemingly forever after a bunch of misses, has now stabilized and is gapping up nothing, a sign that the perennial short may be worrying the bears.
PVH (PVH), Ralph Lauren (RL) and V.F. Corp. (VFC), three names that have been in the cross hairs of shorts because of their European exposure, seem to be in orbit now. That feels like beleaguered shorts who have just thrown in the towel. The same goes for Fossil (FOSL), which is going crazy to the upside.
Even Coach, which "blew" it, has a feel of "time to cover." Only Nike, which has everybody freaked out, has been able to buck the bullish trend.
Or how about the Zynga (ZNGA)-Groupon (GRPN) world? The law of small numbers precludes Zynga and Groupon from being home runs. It is time to cover. Plus, the whole group is getting a boost from Facebook's (FB) bounce, which now comes under the category of something real and something animal-spirited.
There had been a sense that the high-growth restaurant names peaked post-Chipotle (CMG), but the other day a boutique research firm said Panera's (PNRA) numbers could be stronger than expected. The group sustained a jarring upward move, although Chipotle gave up some of the Panera-inspired gain on Friday.
Watch these patterns. They are often gains made at the later end of an advance. The powerful rally last week on top of day after day of increases means it's time to cool off, because now these gains are the froth that comes from the Johnny-come-latelies and the hedge fund coverers.
This is not a reason to sell, but it can help us understand why the market may stall out now after its remarkable advance. You can be led by these stocks for only so long before the rally becomes very long in the tooth.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust, and has no positions in the stocks mentioned.
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What does this mean? Should I sell because the "shorts" at MSN MONEY are losing money on apparel stocks? With kids wearing pants sagging to their knees and girls looking like hookers, what made you think there would be a huge rush on school clothes this year, Cramer? The kids outside the walled subdivision where you live are future homeless. Bad play. Why is it every single time this market is on the cusp of a breakout to the upside the damned middle easterners ruin it for us? And why are their shenanigans always carried by our news services? If the cameras were turned off would they go home? Would the market go up? I thought it would be an easy ride to the top before December then a huge sell-off because the religious fanatics in our do-nothing Congress will recess in mid-December and leave us holding the bag. But maybe the smart money is getting out now. Who knows, as usual Cramer only predicts yesterday or earlier today, not the future.
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