Jim Cramer has discovered a new pattern to the stock market, where entire sectors are under fire instead of individual stocks.
Typically in the first day of a sell-off, stocks under fire in a sector would get crushed. Buyers would then step in and sift through the rubble to decide what's worth buying again. Usually it would take days or weeks for this process to occur.
"I think it's because of the commoditization by sector that has gone on in the stock market," the "Mad Money" host said.
By this, Cramer means that every big capitalization stock is now part of a sector-based exchange traded fund, or ETF. That translates into the action from a group having more of an impact than an individual company in a sell-off.
In the old days, a company would report horrendous earnings or a gloomy forecast and sellers would dump the stock and anything related to it. But they would leave alone the other companies in the sector. These days, the entire sector is blown up.
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For instance, when Macy's reported a shortfall in earnings and cut guidance, the damage was felt in every part of the consumer spending cohort. Macy's sent down Home Depot, Ulta Salon and even McDonald's. The market did not distinguish why things went wrong, it just punished the whole category.
On Thursday the buyers rushed back into Ulta Salon as they realized it was a mistake to homogenize and crush everything in retail. Restaurant stocks were aided not only by a better than expected quarter from Jack in the Box but also by oil's rebound at the end of the day.
Large portfolio managers often regard higher oil prices as a sign that consumers are spending more money, thus money flowed back into retail again. Even Home Depot attempted to snap back at the end of the day.
Another pattern Cramer noted was that often the stocks providing leadership are those that are the subject of takeover rumors. News stories of a possible bid for Monsanto from two German companies ignited the chemical sector.
"It's the pattern of 2016 writ largem and if you aren't used to it by now, then it is time you came to your senses," Cramer said.