foxex: Braving the Storm

The Market Sum | INVESTOPEDIA

Insight after the bell

By Caleb Silver, Editor in Chief

Thursday's headlines

1. Markets rally through the Blizzard

2. Chart of the Day: These 5 Stocks are Flying High

Markets Close

Dow
25,289.27 +0.83%

S&P
2,730.20 +1.06%

Nasdaq
7,259.03 +1.72%

VIX
19.98 -5.98%

Bitcoin*
5,480.73 +1.51%

EUR/USD*
1.1332 +0.37%

*Currency markets and Bitcoin trade 24 hours, the figures here indicate movements between 9am and 4pm ET

#1 Markets rally through the Blizzard
The first blizzard of the season is smacking us in the face up here in the Northeast, but it seems to have a brought a little market rally with it. There is no rhyme, reason or catalyst that prompted the buying, although we in the financial media will try as hard as we can to come up with some.

Was it:

Buffett is adding more Apple and bank stocks, so it must be safe to start buying again
Trade tensions with China are actually thawing, as the FT reports
Forget FANG stocks and focus on the semis: CNBC
Stocks are oversold according to some mysterious technical indicators, so start buying!
The cash on the sidelines is freezing… we better use it.
More buyers than sellers today

I always vote for the simplest explanation outside of real market-moving events like rate hikes, major company news or a Black Swan type of event. More buyers than sellers today.

That said, it is 13-F season, that fabulous time of year when hedge funds have to report their holdings to the SEC for the prior quarter. It's a great window inside the portfolios of the biggest investors in the world and it provides a sense of the companies and industries they have been favoring.

Here are a couple articles to bring you up to speed:

Appaloosa's Tepper dumps Facebook, adds Apple

Q3 Roundup: What the biggest hedge funds bought - Benzinga

Why it Matters: I write it often, but it is worth repeating. Institutions like global banks, pension funds, endowments and hedge funds actually move the markets. Individual investors like you and me try to draft behind the whales and feed off of their leftovers. We don't have to eat what they eat, but our portfolios are heavily influenced by the big decisions they make about asset allocation and risk. If institutions are favoring large cap tech stocks, they will rise. If we own them in our own portfolios or through our retirement accounts, we will benefit.

This is not to say that we can't make our own decisions about asset allocation and risk tolerance in our own portfolios. We absolutely can and we certainly should. It's just that individual investors don't move the market. We adjust to it.

What's Next: It may seem hard to believe, but the S&P 500 is still positive for the year. The breadth of stocks that are positive versus those that are negative, however, is pretty weak.

Financial blogger and trader Dave Mabe took a look inside the SPY ETF. It's one of the original ETFs built to track indexes, and SPY tracks the S&P 500.

He points out that the median stock is actually DOWN 7 percent for the year, and there are more than twice as many stocks in negative territory than positive. But there are enough big stocks making big gains to offset the losses.

In fact, there are some notable stocks making 52-week highs now that are kind of surprising. James has that for you on our chart of the day, below.

Market technicians like James watch market breadth because it is a strong indicator of trends and sentiment. Breadth has been terrible since August, and it didn't get better today even though we ended up in the green.

We'll keep an eye on it and you should too. Bundle up!

Other headlines:

#2 Chart of the Day: Major S&P 500 stocks hit new highs amid still-shaky markets
Markets have regained some composure on Thursday after several days of selling off and weeks of sharply heightened volatility. Despite the recent market turmoil, it's heartening to see that not every stock has been negatively affected. In fact, there are currently dozens of major stocks in the S&P 500 that are either at or very near new 52-week highs (and some all-time highs) as of Thursday.

Some of the best performing of the stocks that are hitting new highs are featured on the chart below – Proctor & Gamble (PG), Verizon (VZ), Coca-Cola (KO), Starbucks (SBUX), and McDonalds (MCD). The chart highlights (on the y-axis) the 6-month percentage performance of these stocks, each of which has far outperformed the nearly flat S&P 500 index in the past six months. It's interesting to note that all of the highlighted stocks are dominant brand leaders in their respective industries, and all of them have enjoyed substantial double-digit returns from half a year ago up to today.

What does this tell us about the current market environment, if anything? While the major indexes that represent the overall market are still on very shaky ground and market breadth is not encouraging, it appears to be much more of a stockpicker's game right now. This means there are many opportunities to choose and potentially profit from high-quality stocks that are able to resist the downward pull of market volatility.