Swing, Swing, Swing

 | Aug 05, 2011 | 4:52 PM EDT
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If you just look at the close today, it sure isn't impressive given how hard this market was hit Thursday. But if you consider how far down it was this morning, before news of a possible European Central Bank rescue of Italy and Spain, the intraday swing was impressive.

Volume was huge today, which some see as an indication of capitulation selling but others see as a ramp up in computerized and high-frequency trading that feasts on volatility. What was particularly interesting about the huge surge of volume was that a big chunk of it was in exchange-traded funds. Market players used those vehicles to play the volatility and had little interest in individual stocks. There were relatively few individual stocks with big surges in volume although some of the 'go to' big-cap names like Google (GOOG) and Apple (AAPL) were more active than usual.

Action like today's is great for traders who like to play volatility, but it is not a good market for stock pickers. The key to making money today was dancing around as the indices moved -- and it didn't much matter what vehicle you used to do that. Many individual stocks continued to act quite poorly while the traders pushed around the ETFs.

The bulls took quite a pounding this week, and it does not make for a pretty picture. The most positive thing you can say is that we have overacted to the downside and are likely to see some sort of rebound, but you have to wonder how many folks are going to be looking for exits into strength. The charts are broken and it is going to take some effort to repair the damage.  

I suspect we are going to seesaw on developments out of Europe next week. It is not a simple matter, and any plan is going to have substantial obstacles. Hopefully, we'll stabilize and the charts can rebuild. Keep in mind that it will be a long process.

Have a great weekend. I'll see you on Monday.

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