The indices finished the week with a late rally and a close at the highs of the day, but the trading was some of the most chaotic since the COVID crisis meltdown a year ago.
The action was dominated by rotation, rebalancing, and what looked like some liquidation. There were some huge trades dumped in names such as ViacomCBS (VIAC) and iQIYI (IQ) as rumors circulated about the possibility of a liquidation of a major Asian fund or something media focused. In addition, that ARK ETFs (ARKK) were under tremendous pressure again as traders bet against a rebound in some of the high-beta technology names held by those ETFs.
Despite these pockets of tremendous selling pressure, breadth was quite strong at around 5,700 gainers to 2,100 decliners. There were also 350 new 12-month highs, which isn't a bad recovery after the meltdown earlier this week.
What is going on is a rebalancing between equities and bonds as well as rotations in and out of value stocks, growth stocks, small-caps, and a variety of other sectors. This action has nothing to do with stock-picking, which is what can make it so frustrating for traders that have enjoyed some great speculative stock picking until the past month.
Market corrections tend to be driven by the movement of large baskets of stocks. Stock-picking is thrown out the window as allocations are made. We still have a few more days in the quarter, so there is the potential we will see more of this, but eventually, the flows created by the whales will subside, and we can then start focusing on those stocks that offer the best value.
This is a process that occurs on a regular basis, and eventually, it will lead to another great upside run. I don't know when that will be but with the economy quickly ramping up again, there is a good likelihood that market players will be looking for those names that benefit once this end-of-the-quarter nonsense is finished.
Have a great weekend. I'll see you on Monday.