Volatility continues to run at extremely high levels, but the good news is that it was mostly positive Monday. There were some crazy algorithm games in the final hour that took the indices off their highs but it was an impressive day of gains on very strong breadth.
The action in final hour indicates that the short volatility trade and some of the other complex hedging strategies are still being unwound. Still, at least we saw some return to stock-picking today. Stocks are being jerked around by index plays but there was a level of bargain-hunting taking place today. Quite a few names that were technically broken came back and acted much better.
As I've been discussing extensively, this corrective action has been unusual in that it occurred so abruptly at the highs and was caused to a large degree by structural issues. Most individual stocks have not had any change in fundamentals but have been just badly beaten down. There are some real values out there assuming forward estimates remain intact.
I've been trying to pick at some of the best stocks I see and have not been overly concerned about the indices. There is no way to game these crazy swings and it is very likely there will continue to be more action like we had in the final minutes today. The best form of safety in this market is selective stock-picking and strong trade management. Focus on that and you will be in good shape.
Have a good evening. I'll see you tomorrow.