After the most aggressive selling in months on Wednesday, the indexes managed to bounce back Thursday, but it was not impressive action. The Dow Jones managed a gain of 1%, and breadth was good at around two to one positive, but that was about the only good thing about the action. New 12-month highs collapsed to around 175, small caps (IWM) lagged with a loss of 0.32%, and the indexes closed poorly.
The short-squeeze drama continued with most of the heavily shorted stocks reversing sharply today after brokers shut down trading in some of the key names. Many small investors were outraged by the action as it seems that all the increased regulation is going to do is to put further restrictions on the ability of small traders to make decisions.
All the drama associated with this short-squeeze issue has messed up the market momentum. Money that was busy chasing hot sectors was diverted to these short-squeeze plays, and then there were many big funds that were forced to liquid longs to cover short selling losses. The market lost its mojo and now needs to reset and focus again on stock picking.
One particularly interesting issue today was that there was so little talk about earnings. After big reports from Apple (AAPL) , Facebook (FB) , and Tesla (TSLA) , there was limited discussion in the business media. All three stocks traded very poorly, and that didn't help matters much.
The market needs to do some work to restore its mojo. I think that will happen in the next few trading days, but currently, we have some messy and random action, and it is causing some consternation.
Have a good evening. I'll see you tomorrow.