For months, I've been telling you that the markets are headed higher.
A side effect is that they would likely take some of our targeted brick-and-mortar retail losers higher as well, making those crappy stocks appear ripe for a real turnaround.
That's exactly what we've seen – an across-the-board rally that's inflating the stocks we know are headed south.
Today, I want to take a deep dive into the market rally, tell you why some crappy retail stocks are going along for the ride, and show you why they will not continue to rise with the rest of the markets.
Let's get started…
Why the Rising Tide Is Lifting These Sinking Ships
Generally, market rallies are led by a handful of so-called "leadership" stocks that get a lot of attention and capital thrown at them. As benchmarks go higher and higher, they are led by leadership stocks, which can consist of a group or a couple of groups doing the heavy lifting. Since November, they have been the big tech names and bank stocks.
Along for the ride, a lot of the ugly-duckling and left-behind stocks start to look like bargains compared to the big names.
What eventually happens is something called a "rotation."
Investors rotate into "cheaper" stocks when their allocation into leading stocks looks a little too fat. That happens when the prices of the winners leading markets higher rise; the relative weight of those holdings in a portfolio makes them look heavy. There's a lot riding on them.
Institutional managers start looking for cheap stocks, or "value stocks." While there's a difference between cheap stocks and the real value stocks, what matters to investors is their potential to get drawn into the rally.
In a rotation move, cheap stocks get bid up, hopefully enough to draw the attention of other investors who see them on the move. Those investors buy them, believing that as the market continues to rise, those stocks will continue to attract capital until they are no longer cheap.
That's just how a lot of long-running rallies play out. It's what we're seeing now, and why some of our favorite short targets are getting bid up. They're looking better these days, regardless of whether or not these companies deserve it.
But it won't last…
The Rally Is Showing Some Weakness
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.