There are a lot of definitions of a healthy market. My top definition, my number one sign, is broad participation. Key to this analysis? We don't get the broad participation all at once. We get rolling good breadth.
That's how I see this retail and energy sector move. Both had been dormant to negative all year. Both are coming on, in fits and starts, with nice moves to the upside.
I think that the retailers are reacting to the broad adoption of e-commerce as well as better mall traffic because people are feeling better about their stock portfolios, their job mobility and their house appreciation. Those all add up to a holly jolly Christmas and a lot of short covering. Of course some never got hit: Home Depot (HD - Get Report) /Lowes (LOW - Get Report) , Burlington (BURL - Get Report) and Children's Place (PLCE - Get Report) come to mind. They each have a compelling niche that was hard to "Amazon." I can throw in Costco (COST) but that one is more of a club success and certainly Walmart (WMT - Get Report) which is an e-commerce ongoing success.
Even better is the comeback of Kohl's (KSS - Get Report) and to a lesser extent Macy's (M - Get Report) from the endangered species list. Let's add Footlocker (FL - Get Report) to the good mosh pit of retail, although it didn't have enough to pull Nike (NKE - Get Report) . The department stores, on the other hand, did enough to strengthen the hand of VF Corp (VFC - Get Report) and PVH Corp (PVH - Get Report) .
Oils? Simple: the price went higher and could be manipulated still higher by the Saudis to get a fabulous Aramco price. You know it is manipulation because we are pumping so much to go along with Iran and Iraq. Only a surge in business in China -- a la copper -- could otherwise explain this move.
Best bets? Schlumberger (SLB - Get Report) because of the Saudi drilling budget along with the high growth Permians: Concho (CXO - Get Report) , Diamondback (FANG - Get Report) (still) and club name Cimarex (XEC - Get Report) .
These groups are reminders of the dynamic, solid bull that's going right into 2018. I am reluctant to sell any of these in these cohorts even as an XPO Logistics (XPO - Get Report) , big e-commerce giant, has to be trimmed on a price appreciation goal.
Oil and retail -- hitherto incapable of going up together, excel here. That's strength and, at another time, would be regarded as inconceivable.
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