Look for Stocks to Climb Wall of Worry, Price Headley Tells CNBC

Posted by jbrumley on April 10, 2017 11:16 AM

"The reaction was after we had the airstrikes, after we had the nonfarm payrolls that were about half of what they should have been, you would have thought the market should have been down - the Dow should have been down 150, maybe 200 points on that kind of news - but it was only down a hair, and it finished barely red. I mean, virtually a flat day for the Dow Jones Industrial Average, the NASDAQ and the S&P 500. An incredibly positive reaction to what should be bad news."

Those were Price Headley's, founder and chief of BigTrends.com, words this past weekend, accurately noting stocks didn't unravel on what at one point in time been terrifying to investors.  Those non-threatening events were the announcement that only 98,000 (net) jobs were created last month, versus expectations of 180,000. That news was posted on the same day news surfaced that the U.S. had delivered a major missile strike military targets in Syria... news and events that at a different time and in a different situation could have sent stocks sharply lower. Headley went on to explain, "That's the definition of a bull market... it goes up on good news, but it doesn't budge that much on bad news."

Indeed, the bad economic news may not have been nearly as bad as the raw headlines would have implied, perhaps explaining why the market didn't react. Headley observed "Yes, a lot of the jobs shortfall was blamed on the big department stores in the United States, like JC Penney (JCP) and Macy's (M) that were closing a lot of stores, so people were out of jobs from those store closures, but obviously that's a potential one-off. We'll see. The retail sector in that regard has been hurting... at least on the bricks and mortar side. "

Price remains confidently bullish about the near-term too. He told CNBC this weekend "The bottom line is that the stock market's not hurting. I think we're going to see this be a blip on our way to new highs for the Dow. I'm still targeting we get to 21,500 and 22,000 before the year is out, and maybe even before we get through the end-of-July earnings cycle. I think there's still a lot of people on the sidelines, a lot of fear."

The Dow had little trouble moving to and then past major XX,000 milestones in the recent past.


The distinct dislike of newly-picked President Donald Trump at first glance seems like it could serve as a stumbling block for stocks. Headley conceded "We know the approval ratings of our President are the lowest since they've been tracked for a new President." He goes on to note, though, "That's very bullish. Again, the wall of worry because there are a lot of people doubting our President, and yet look at what President Trump did. He took a hard line to basically say his policy is not accepting chemical weapons. He's not going to accept things that maybe were accepted in the past administration. I think it shows a lot more strength, and the fact that the stock market rallied back up [on Friday] and finished about flat is actually very, very bullish."

Nothing speaks louder than people's voices than what those people do with their money. To that end, Friday's non-selloff and Monday's buying make it clear most traders simply aren't concerned about the troubling headlines of last week.

And yes, there are people still on the sidelines providing the fuel to keep the bears-turning-into-buyers engine spinning. He went on to explain:

"You look at... the institutions drive the train, right? And if they're behind [for the year] , if money keeps flowing into stocks as it has and basically they're behind, they've got to put that cash to work. So that's why I think you're seeing the leading sectors keep leading, like the FANG stocks. I own all of them - Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google, or its parent company Alphabet (GOOGL). The bottom line is, I own all of them, and I bought some Microsoft as well this past week, because technology is driving the train to the upside."

In fact, BigTrends.com is so convinced about the FANG stocks' trade-worthiness -- both up and down (up right now) Headley has developed a new options-trading service centered entirely around this top tech names.

And he's right about their recent relative strength. Apple shares are up 24% for the year. Amazon and Facebook are up 20% and 21%, respectively. Netflix and Alphabet aren't up nearly as decisively, but both have indeed fared better than most since the market began to struggle in mid-March.  

Bottom line? Headley plainly concluded, "What that tells you is, money managers who are behind on the year are staring to go into the higher beta, more aggressive stocks, and that means you're seeing a lot more money flow into those names and they've held up incredibly well again on this recent little dip in the overall market since the beginning of March. I think this is a healthy little pause, but you still want to own leaders. You don't want to try to buy the dogs. You want to own the ones that are already driving to new highs."

To see the entire video interview with CNBC's The Rundown, visit this MSNBC page.