The massive rotation that has plagued the majority of stocks the last couple days has come to an end. Small caps and high-beta momentum names are better but the big caps that have been untouched recently are still running up. Apple (AAPL) , which has more influence on the senior indices than any other stock, is up 1.7% today and jumped nearly 6% over the last nine trading days.
Breadth is much better with about 4000 gainers to around 2550 decliners. New 12-month lows exceed new highs by around 130 to 75 but the lows are slowing.
The trading the last two days has been extremely chaotic but what is most notable about it is that there weren't any obvious fundamental or technical reasons. There were no screaming headlines blaming trade wars or interest rates for the sharp sell-off in many stocks. Pundits have been scratching their heads trying to figure out what caused the big moves.
As I discussed in my opening post, it looked like massive rebalance by big funds out of small caps and into bigger names. Biotechnology stocks have been particularly weak. Dan Rosenblum of SharkBiotech.com hypothesizes that part of the pressure is due to concerns that the midterm election may shift some Congressional control to Democrats that are likely to advance price controls on drugs. With the third quarter in the books, funds sold down positions in stocks with pricey drugs like Sarepta (SRPT) .
Small caps are looking better this morning but the bounce action is uncertain. There are some holders who are looking to escape into strength and there are concerns that another bout of selling could erupt. I'm inclined to do some nibbling but will keep it very small.
There is an interesting shift in the semiconductor sector with Intel (INTC) regaining its leadership position after struggling for months. The stock was cut to underweight by Morgan Stanley on October 1 which seemed to be the trigger for a turning point. Intel is up as management believes it has solved manufacturing issues that have put it behind competitors. Its main competitor, Advanced Micro (AMD) , is reflecting the increased competitive pressure.
Overall it looks like INTC has found a good low but it still faces overhead resistance at the 200-day simple moving average around $49.63. The downtrend that has been in place since June is under attack but the stock still needs to do more work to be convincing. Intel's biggest problem is likely to be a cyclical turn in the semiconductor sector but market players are still hopeful that isn't occurring yet.