This is the first of a four-part series on the market we find ourselves in as we wind down 2009. It originally appeared Tuesday on RealMoney. Click here for a free trial, and enjoy incisive commentary all day, every day.
Be sure to check back all day for the remaining three installments.
NEW YORK (
) -- September is now full-bore upon us and it is time to examine where the strength of this stock market lies and what it says about the direction of the economy in the coming months.
It is also time to reflect that many stocks are strong even as the chatter about many of the groups is negative. Mind you, I am not just talking about the endless negativity of
The Wall Street Journal's
"Heard on the Street" columnists. (Oh my, with the exception of Peter Eavis -- the best in print -- they are seemingly constitutionally incapable of writing anything but saturnine "insights.") I am talking about the wholesale fretting that is a given among almost all who opine on this market.
The following exposition is neither simple nor short. It is the work of a week of cogitation in which I wearied of defending my view, when my view is largely the outgrowth of what the stocks are saying. The stocks are speaking loudly and in unison. This makes them difficult to refute and has kept me bullish for so long. I have called for only gentle pullbacks, although we haven't gotten even one so far after a huge run into September. Taken individually, each stock seems like an aberration. Taken together, I believe they are irrefutable.
What I did was go through hundreds and hundreds of charts to spur my thinking. This methodical approach confirms why I am so tugged toward the bullish camp despite:
The horror of past Septembers. It is a very cruel month, right up there with and often exceeding October.
A real vacuum of news telling us where we are.
No jobs being created, something my friend Dan DiMicco at Nucor points out so eloquently after the release of the unemployment numbers.
The scary -- and I mean scary -- deficit numbers.
I am not blind to these worries even though my writing often might suggest otherwise. What is dazzling to me -- and I wish it were dazzling to others -- is the uniform strength in so many sectors that are supposed to be the biggest dampers, the largest causes of worry and the sources of endless shorting.
My results are clustered around 10 questions that are being answered loud and clear by stock action. If you think the stocks are all lying, then I can't help you. All I can say about that kind of dogmatic position is that it is reminiscent of the Nouriel Roubini/Meredith Whitney faction in March. Their thinking was pure, it was intellectually rigorous, and it lost you fortunes. As always, my goal is not to be intellectually right, but to make money, even if, short term, it feels like I am sacrificing rigor or even intellectual honesty. I hate to be wrong, which means I hate to leave money on the table. More importantly, however, I hate to lose, and these stocks tell me to stay long, not to sell and certainly not to short.
Without further ado, let's look at the 10 clusters that should bother the bears and provide comfort to the bulls.
Group 1: Tech
. We have seen lots of strength in the mobile Internet, as represented by the irrepressible
Research In Motion
. We also have seen the continual strength of
as well as the nascent movement of
, the latter in total breakout mode. By the way, this group continues to create opportunities as the action in
, the maker of touch screens, shows. It's a great buy under $10.
That's secular growth, and it merits continual mention as
thesis for 2009 and, more importantly, 2010, as smart phones go from being a single-digit noncommodity to something that will eventually encompass 100% of a 2 billion handset market. (That's not dollars -- that's actual phones.)
But what's far more intriguing to me, what makes this move so amazing, is the cyclical, not secular, growth plays that are leading the industry. We can see it from the movement in the Philadelphia Semiconductor Index, or SOX, particularly of late. But it is the individual tech components, not just the chip components, that are so telling.
Take the disk-drive stocks. These are companies with stocks that typically presage a roaring personal computer market, something that isn't yet confirmed by either
but I think will be very soon.
The spectacular action in group leader, but total commodity player,
is nothing short of amazing. I can't believe the strength in that stock. Now, one might think, as periodically is the case, that Western Digital is simply taking market share from the other players. I was concerned by that for a long time. But in the last few weeks
has taken off, a move verified by the incredibly large buy of Seagate stock in the market by Steve Luczo, the CEO who brought this company private in what seems like a generation ago. You don't get both stocks going up like this if it is simply a transfer of market share. No zero sum here.
Then there are the commodity plays that go into lots of discretionary toys and gadgets, everything from videogames to telephones to cameras to washing machines and TVs. The first I think of are two stalwarts:
. Does anyone recall when Texas Instruments reported that miserable quarter when the stock was at $12 to $13 in March and it didn't go down? Voila -- the proverbial double based on a realization that the inventories were clean, and more important, that it wasn't just restocking.
The latter point is an important one because this move was pooh-poohed by the bears as just something that happened when inventories got lean. We knew from another commodity player,
, that the follow-on ordering was not ephemeral and Texas Instruments' and National Semi's stocks are showing that to be the case. If you need more evidence, look at the lift in
which is simply a supermarket of electronic gizmos. The stock is in hyper-drive, a company that, anyone who is old enough to remember the great work of Tom Kurlak in his prime at Merrill Lynch knows, signals very strong orders ahead.
The stock of
, another distributor, which is much more heavily weighted toward Europe than most, is saying the same thing. A recovery in European tech would be huge and would end the endless chatter that without China we are nothing. It is true that for the longest time Asia's been a third of
orders, but Europe's almost as big, so using that yardstick you can see how important the Tech Data move is.
But it isn't just basic tech or proprietary communications tech that are running amok to the upside. Consider the incredible move in the long-moribund contract manufacturers. Once upon a time
were the classic bellwethers of tech. You gave them orders when you needed to farm out parts like motherboards or assemblage because you simply couldn't handle the work yourself.
I had thought these companies had simply died. But the charts show that orders are robust. These stocks simply could not get off the schneid for years because there simply wasn't enough business. We knew from Taiwan Semi's foundry orders that something was cooking, but to see this big three of contract manufacturing move is a sight to call into question why the
, the strongest index in America, isn't moving on par with Europe or Latin America or even Asia, which means much more room to run.
Now, let's get real down and dirty. The chips that go into the single most frivolous and downright total easily sacrificed machines are made by
businesses languish, Nvidia's on the move.
But that shouldn't take your breath away as much as the action in DRAM-maker
. You didn't read that wrong. The maker of the most basic of chips, a company that wasn't just left for dead but buried in vitreous glass, has resurfaced and is roaring and looks to go much higher.
What's left? What hasn't moved? I think it is time to get long the semiconductor equipment companies, the late cycle plays that do well when demand is so recognizable and so consistent that new machines are needed and almost every semiconductor company could use new machines.
reported a strong quarter. I like and have liked
, which took advantage of this mature, moldy market and consolidated many of the players in it, something that, had there been an antitrust department under President Bush, probably wouldn't have been allowed to happen.
All of those players on the move, all of those players extending their robust moments into September, the beginning of the seasonably strong period, and a counterweight to all of the September woes that we are well aware of.
Written by Jim Cramer in New York
At the time of publication, Cramer was long Hewlett-Packard. Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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