The Stock Market Has “Feelings”

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I am taken back to a time far away when “Feelings” was topping the charts.  

Since I am bogged down in self isolation, I decided to search youtube and give it another listen.   

It reminded me of this stock market.  

In fact, if the stock market had feelings it might sound like the song. 

 A feeling I might never forget….

Part of trading is getting in touch with the personality of the stock or index one trades.  

Those stocks have feelings, whims, and personalities all rolled up into the volatility of the underlying.  

AAPL is not the S&P 500, which is not XOM, which is not GE.  

Each name has a trading profile that is unique to the product.

I am looking at the past 50 days and wondering when things are going to feel like they used to….  Before anyone heard of the CoronaVirus.  

The market is still flying around and the S&P 500 is still WAY off the highs from January and February

While I may want to ‘bring back that loving feeling’ for the S&P 500,  the Covid19 hangover has it…gone…gone…gone WOH WOH WOH.  

What is truly different though in terms of ‘feelings’, the S&P 500 is not the movement, but the make up.  

The S&P 500 is more and more dominated by AAPL, GOOGL, MSFT and AMZN.  

It is also the touchstone for investor sentiment that is widely followed inside of Wall Street.  

However,  it now holds 20% of its value in just 5 stocks.  

Main Street looks at the Dow Jones Industrial Average.  

When folks talk about crazy movement in the market, they talk about VIX.

VIX is the child of the S&P 500.  VXD is the VIX of the Dow Jones Industrial Average (didn’t know it had one, did you).  

For main street investors, what is fascinating is the index that we used to ignore, the Dow Jones Industrial Average, has actually become the BETTER index…

If the investor cares about diversification.

Part of the reason the DJIA fell OUT of favor is that Wall Street saw it as poorly diversified.

What say you now Wall Street?  SPX feelings are way up and I don’t see them changing this week or next.  

In fact with the make up, in part because of the CoronaVirus, it is dominated by 5 stocks.  Maybe the feeling really is gone.

Or at least until folks think they can eat in a McDonald’s again.

Your only option,

Mark Sebastian

P.S. – I take advantage of the components of indices all the time as an extra way to gain even more bang for my buck in our elite program Sharp B.E.T.S Check it out here…

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