Stock Trends Apparent to Traders Who Stop to Look

The stock of MF Global, which had been relatively strong in a weak market, promptly dropped 40% to an all-time low over the next two days. It's the stuff trading nightmares are made of.

Thankfully, most changes, both in life and in the markets, don't occur that quickly. Adjustments tend to unfold slowly over time, oftentimes so gradually that you don't even realize they've occurred until after the fact.

The best example can be found in the natural changing of the seasons. It's still quite cold here in Chicago in March, but without much difficulty, one can easily observe the days getting longer, the air getting warmer and the snow beginning to melt. Yes, there will be one particular day in which spring will officially "arrive," but ahead of that day there were plenty of clues and fair warning.

Right now, the commodities story and increasingly the weak-dollar story have become front-page news all over the world as those markets have continued to boom. And as millions of investors salivate over the performances by securities such as StreetTracks Gold (GLD), PowerShares DB Agriculture (DBA) and CurrencyShares Euro Trust (FXE), it's worth noting that these picks didn't get hot overnight. Gold, oil and weak-dollar plays have been in bull markets for years. Although that may or may not be the case a few months from now, at the moment the trend is very much intact.

You can't say the same thing about utilities, a former favorite. Names like Great Plains (GXP), Consolidated Edison (ED), Exelon (EXC), Wisconsin Energy (WEC), FirstEnergy (FE) and Edison International (EIX) have slowly become among the market's worst names.

The investment game is especially competitive and efficient. To that end, there's an ongoing process of natural selection. Losing investments — and investors — simply get washed away.

We've seen that over the years with former highfliers like Alberto Vilar or Garrett Van Wagoner, or more recently with rogue traders Jerome Kerviel and the aforementioned Dooley. Indeed, if you've got bad discipline or a reckless approach, you simply won't last long.

But it's also true in investment themes as well, where only the strong tend to survive. Far too often a quest for a "bargain" leads to stocks the market is naturally trying to brush aside.

Case in point is newspaper stocks, among the weakest in a tremendously weak market. Newspapers have been lousy stocks for years, participating in a steady, sectorwide implosion. Yet many investors, especially those with a value bent, have bought the whole way down, ignoring a litany of indicators, most obviously the stocks themselves.