Behind a boring stock market, there are great signs for investors

The Merrill Lynch bull, statue and corporate symbol, outside the Merrill Lynch Denver Meridian complex
Cyrus McCrimmon | The Denver Post | Getty Images

Stocks: Where are we now? Forget the narrow trading range, low volume and low volatility. Beneath the August doldrums, stocks are moving.

  1. The advance / decline line is at new highs, so more stocks keep advancing each day. Nearly 75 percent of issues are in an uptrend (the highest reading in about 18 months), according to ISI.
  2. Breakouts: More stocks are emerging from trading ranges or are bottoming following bear cycles, such as Energy.
  3. Downward earnings revisions are not aggressive: Six out of 10 S&P 500 sectors showed EPS revisions to the upside in August.
  4. Market is showing healthy rotation into growth and cyclicals and out of defensive utilities, telecom, consumer staples. New highs in big industrials such as United Technologies, Illinois Tool Works, Dover, Eaton, Lockheed Martin and General Dynamics are especially notable — as is the strong outperformance of many technology stocks like Microsoft. And with oil at $45, Energy stocks are again emerging as market leaders.
  5. Recent IPOs are outperforming. The , a basket of roughly 60 of the most recent IPOs, is outperforming the S&P 500 this month — up 9 percent vs. the S&P's 4.5 percent.
  6. Ex-energy and financials, S&P margins have held up not far from record highs (10.4 percent), Deutsche Bank said in a note this morning. If oil averages $50 to $55 in 2017, energy margins should rise from near 0 percent now to roughly 4 percent. This would boost overall S&P margins into record 11 percent territory.

It's not all great news. For example, sales growth remains anemic: It will be fractionally negative again this quarter. True, health care is a bright spot and has been a key driver of revenue growth. Consumer discretionary has had decent sales growth thanks to autos, but that is now leveling off. A few key tech stocks are seeing sales growth — particularly in cloud and semiconductors. But big sectors like industrials and consumer staples — particularly those tied to the global economy — are showing little or no growth.