Yesterday was one of those sessions that all bull market rallies need from time to time to simply test resolve and shake out weak hands. The major indices closed off their lows, which suggest smart money went to work.

There are some delicious values being created right now, especially in technology, but high-Beta names are the worst to bottom fish for those with queasy stomachs. Heck, even those with cast-iron stomachs can move too early.

Of course, there are still some areas of concern. I’ve been pointing to market breadth for several reasons, including the fact that a broad rally is most desirable and has the most potential to continue. Yesterday saw more decliners and down volume than advancers and up volume, and the milestones were ugly.

  • NYSE: 49 new highs vs. 517 new lows
  • NASDAQ: 35 new highs vs. 183 new lows

The S&P is fractured as well, as 40% of the index is in the red for 2018. Moreover, there has been severe carnage in many stocks. Here’s an interesting note for those who are superstitious of looking for quirky investment approaches – staying away from any company that begins with a “W” has been wise.

Waiting for Revisions

After initially opening higher this morning, the market has trended lower following the all-important jobs report was released. The headline number fell flat of expectations and well below what I thought was possible.

That said, I think revisions over the next two months will take the September figure of 134,000 north of 200,000. Note that job additions in July were revised to 165,000 and August’s number was boosted to 270,000, which totals an upward revision of 87,000.

Goods producing jobs – or dirty fingernails jobs, as I like to call them – continue to grow even as the experts said they were gone forever.

  • Construction: +23,000, up 315,000 in the last year
  • Manufacturing: +18,000, up 278,000 in the last year
  • Mining: +6,000, up 53,000 in the last year

The biggest question now is how the Fed will interpret the 3.7% unemployment rate, as labor force participation increased at a slower pace than we modeled.

Through it all, though, there is no question the market has had a tremendous run. I came across a good piece in Bloomberg recently that outlined the mind-boggling outperformance of U.S. stocks versus a variety of investments, including returns for hedge funds and even venture capital funds. For me, the moral of the story is to stop underestimating how great American companies are. Stop guessing at market tops because the sad postscript to these facts is so many investors have missed the ride.

I’ve made sure that hasn’t been my subscribers, and I hope you have done the same. There are still a lot of factors to contend with as we begin to wrap up 2018, but I see plenty of opportunities brewing amid it all.