Why The Market Is Looking More "Normal"

The market may seem boring today, but look under the hood--something is happening. That "something" is rotation: traders are looking to buy some stocks and sectors, and sell others.

Huh? This is what they used to do, before the Lehman bankruptcy. Then it went away, as they sold everything indiscriminately. Now, normal rotation may be coming back.

Between the Lehman bankruptcy on September 15th and the market bottom on November 20th, it's amazing how little deviation there had been between techs, energy, materials, industrials, even financials--as volatile as they have been--are not far from the overall horrible performance of other sectors.

In other words, not much has outperformed or underperformed in that period. However, since the November 20th bottom, there has been the beginning of efforts to trade stocks as individual investments, rather than as a single asset class. This is very encouraging!

For example, while there was a rally in financials in early December, they have been selling off this week:

Financials this week

JP Morgan up 0.4%
PNC down 1.3%
US Bancorp down 5.7%
Regions Fin. down 6.9%

Symbol
Price
 
Change
%Change
PNC
---
RF
---
USB
---

At the same, commodity stocks are being aggressively bought.

Commodity stocks this week

US Steel up 28%
Freeport-McMoran up 32%
Alcoa up 24%
Smith International up 22%

Symbol
Price
 
Change
%Change
VANG SC VAL
---
FCX
---
X
---

This rally in commodities is helping to somewhat defray deflation fears, which have been very real recently.

More rotation: since the bottom of the market November 20th, money has been steadily coming out of most "defensive names" like consumer stocks.

Consumer stocks this month

P&G down 8.1%
Pepsi down 6.8%
Altria down 6.3%
Kimberly-Clark down 10.8% (new low!)
Campbell Soup down 12.0% (new low!)

Symbol
Price
 
Change
%Change
CPB
---
MO
---
PG
---

The bottom line: not clear if this is a bottom, but it certainly is looking more normal.

- The Dow 30 at a Glance

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