Don’t let the flat market fool you

The S&P 500 is almost utterly unchanged over the past three or so months, ending Friday just 0.2 percent above its closing price on July 11. But while large-cap stocks have been treading water, a host of important indicators have been on the move.

In that same time period, oil has risen 12 percent, the U.S. dollar index has climbed about 2.5 percent and the yield offered by the 10-year U.S. Treasury note has risen by 25 percent. Notably, the bond and dollar moves have come as expectations for a 2016 Federal Reserve rate hike have increased.

To be sure, it's not as if equities have forgotten to respond to changes in the macro environment. As Eddy Elfenbein of the Crossing Wall Street blog pointed out, the technology sector ETF (XLK) has surged 7 percent since July 11, while the utilities ETF (XLU) has slid by more than 8 percent.

"Even though the market is fairly placid on the surface, we're seeing a changing tenor to the market," wherein "risk-friendlier areas have done quite while" while more bond-like high-dividend stocks have fallen, Elfenbein said Friday on CNBC's "Trading Nation."

"There are a lot of different moving parts that are moving different aspects of the market," echoed Stacey Gilbert, head of derivative strategy at Susquehanna. "The S&P is flat, but the underlying components to it certainly are not."

Gilbert pegs these changes on investors' embrace of risk and shunning of big dividend payers, which occurred as the market's (and with it, perhaps the Fed's) post-Brexit vote fear faded.

And for her, the contrast between a placid market surface and swiftly shifting undercurrents holds important implications for investment strategy.

"This is not a market to just buy the S&P 500 and expect it to be up on the year. In a lot of ways, those days are over. Now you have to be a lot more sophisticated in terms of picking your sectors, picking your stocks," Gilbert said Friday on "Trading Nation."

"This is where it becomes a lot more important to understand the stories" that are driving sector and single-stock moves, she added.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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