It was a very peculiar day of action, with the indices doing little, breadth quite positive and volume very heavy. The obvious explanation for the action is the Russell 1000 index rebalancing. Volume on the Nasdaq jumped about a billion shares as the blocks related to the rebalancing were posted, and that produced the highest volume of the year.
I'm not even going to try to explain how all the computerized programs worked to produce better than 2-to-1 positive breadth while the indices barely managed a gain. It is all a function of brokers trying to make some money as they provided index funds with the shares they needed for the rebalancing. Unfortunately, we are likely to see some of this artificial action reverse next week, so we will not be free of the machines.
Even though the indices held up well, there was some ugly action in big caps like RIMM, WMT, CSCO, MSFT, IBM and AAPL. Some of that action was probably caused by the rebalancing of the Russell 1000, but the selling seemed a bit too severe to be just that.
If we take a step back, the bigger technical picture remains quite negative. We still haven't had a decent oversold bounce, so maybe the end-of-the-quarter window dressing will give us some upside. After some sort of relief bounce, the bulls are going to have their work cut out for them if they are going to break the downtrend we've been in for two months now. We have had three failed bounces during that period, and I believe we are likely going to test the recent lows again in the next few weeks.
I'm optimistic that earnings season will make it more of a stockpickers market than a macroeconomic-driven one, but we still are a couple weeks away from the bulk of earnings reports. In the meantime, we will have to deal with headline economic news, which has been consistently negative lately.
long AAPL
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment