(This is Part 2 of the article: "The Best Charts in the Book Are All in Breakout Mode")
NEW YORK (Real Money) -- The second-strongest group doesn't jibe with the strongest: Health care. You should be a hard seller of these stocks if rates are going higher. Someone's wrong here.
Or, it is just possible that portfolio managers never lose their ardor for stocks like Valeant (VRX), Bristol-Myers Squibb (BMY) and Abbott Laboratories (ABT) on the drug side, Aetna (AET), Anthem (ANTM) and Cigna (CI), in the health maintenance group, Cardinal (CAH) and the ever-so-loved McKesson (MCK), in the cost containers, HCA (HCA) for hospitals and Regeneron (REGN) in biotech, although I think that Gilead's (GILD) finally making its move.
There's always one beloved device company, and the one that's been seized on in this environment, now surpassing Edwards (EW) for love, is St. Jude Med (STJ), which showed me on "Mad Money" its incredibly small heart device, which is now shipping in volume and will be huge.
I don't know if portfolio managers will ever leave these stocks, no matter how high rates go -- something I didn't think I would ever write, but it's been so long since a rate hike, who knows how well they will behave?
Two other groups surprised me for their strength: Foods and housewares. In the foods you have Archer-Daniels-Midland Company (ADM), Tyson (TSN), Mondelez International (MDLZ), J. M. Smucker Company (SJM), ConAgra Foods (CAG) and General Mills (GIS). I can't explain these moves other than the fact that they simply had somewhat better earnings than expected. I say "somewhat" only because the real surprise is that only Mondelez truly delivered excellent earnings, and that was more bottom line than top. This strength surprises me and made me think that there could be more imminent consolidation in the group.
The tobacco stocks are all running precisely because of that consolidation. I was truly surprised to see General Mills up on that list, given that cross-town neighbor Target (TGT) has decided to cut back on the promotion of sugary cereals. Again, it just feels like consolidating.
Everything that goes into a house acts well: Jarden (JAH) and Newell-Rubbermaid (NWL) for housewares, Stanley Black & Decker (SWK) for tools, Mohawk (MHK) for carpet, Sherwin Williams (SHW) for paints and Leggett & Platt (LEG) for bedding. Noticeably absent are Masco (MAS) and Whirlpool (WHR). But the group is strong enough for me to believe that Home Depot (HD) and Lowe's (LOW), when they report this week, will be just fine.
It will be a tug of war, though, between apparel retailers -- almost all of which were terrible -- and the hardware guys, although they are on different cycles. You certainly feel more bullish about the two big-box chains because of the action in these suppliers, and a circle back to Costco (COST) remains warranted.
Technology seemed very stock-specific. The networkers, namely Ciena (CIEN), Cisco (CSCO) and Juniper (JNPR), look great. I think that's because people keep expecting a return of the service providers -- they have really cut back -- and because there's the possibility of better-than-expected Asian orders, as well as continued strength in Europe. I say stick with Cisco.
There are the takeover names, namely Xilinx (XLNX) and Altera (ALTR), as they've been floated as targets of late. Adobe (ADBE) and Akamai (AKAM) both had amazing quarters, so they are running. Broadcom (BRCM) acts the best of the pure semis. And IBM (IBM) is turning hard, I think because it is a terrific weak dollar play and because the company is, once again, reinventing itself.
What's really surprising? If the dollar truly is getting weaker, there isn't much of a move toward an industrial breakout yet. Honeywell (HON), Roper Technologies (ROP), Textron (TXT) and Ingersoll Rand (IR) are the only standouts. This group could have a monster run if things are just beginning, given how few of these stocks are truly breaking out.
Everything else seems dramatically one-off or, special sit, as we would call it: Williams (WMB) on the takeout of its MLP. Yum! Brands (YUM) on activist pressure, Danaher (DHR) and eBay (EBAY) on breakup, Electronic Arts (EA) on a breathtaking earnings surprise and Netflix (NFLX) on Chinese possibilities.
Two others that "feel" odd are Cabot Oil & Gas (COG) and JetBlue (JBLU). They are the only ones of their gigantic sectors that act well which, to me, screams "something's up here that is worth pursuing."
The bulk of the rest of the charts are truly in flux. The ultimate takeaway is that you can throw darts at the financials and the health cares and hit bull's-eyes.
But in pretty much everything else, you could miss the target entirely in the vast majority of stocks.
Posted on Real Money at 8:16 a.m. EDT on Monday, May 18, 2015
Editor's note: This is part 2 of 2. Click here for part 1