Rough-and-Tumble Bull Market

This market's struggling with valuations and struggling with earnings. It doesn't seem to know what multiple to put on a Kohl's (KSS - commentary - Trade Now), say, or a Target (TGT - commentary - Trade Now). It only knows that the multiples are too low on retail, so it blows through one multiple point to a higher one on nothing. Literally nothing. Just a typical mutual fund Monday.

Or Deere (DE - commentary - Trade Now) and the fertilizes. Two weeks ago, the Wall Street Journal wrote off the farm equipment sector with a piece about strapped farmers not buying equipment. Then, the next day, Deere reported a good quarter but crummy guidance. Then on Monday, the market forgot the guidance and just focused on the quarter? How else can you explain the rally in the best farm equipment maker in the world? Simple: it shouldn't have been as low as it was. And there are so many others like that, especially the two I really pushed hard here, Bucyrus (BUCY - commentary - Trade Now) and Joy Global (JOYG - commentary - Trade Now).

All traditional valuations are being suspended because most stocks were selling at depression prices at a maximum and severe recession problems at a minimum, and the world economic outlook has gotten too positive to stay too negative.

Same with anything oil or natural gas. All we seem to know is that they went too low and were factoring in oil going to $25 and natural gas to $2. When neither got there, the market lost its bearings and didn't know how to value them until China started importing oil like mad, the dollar fell, the shorts had to scramble and the estimates stopped coming down. Natural gas is down today, it will be interesting to see if the buyers relent for even a minute in this red-hot group, a total one-way play if there ever were one. Plus, hedge funds run ahead of the commodities buyers these days with inefficient ETFs that have to go into the actual markets to buy. Some of that's behind the gold run, and I am sure some of that is behind oil, too.

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