Stocks bounced Monday as quite oversold conditions created an atmosphere that any half way decent news would lead to some progress to the upside. There were some comments overnight by an EU minister that Spain is open to asking for a bailout which pushed futures firmly in the green. However that gap up was sold off similar to how it had been on numerous days last week, but this time stocks reversed later in the session and held their gains. A decent retail spending report also helped matters but STTG readers will realize this is mostly a technical move as the S&P 500 fell almost poetically right to the bottom of the ascending channel it has been traveling in since June, and bounced off it both Friday and today! Coincidence?
The NASDAQ continues to be a messy affair, bouncing along with the S&P 500, but has a lot of repair work to do.
Let's take a quick look at the smaller cap focused Russell 2000 - which much like the NASDAQ is what usually leads when "risk is on". You can see the chart has a very similar look the NASDAQ - both falling about 5% from their peaks in mid September before today's knee jerk bounce.
While today was an exception Bespoke Invest has an awesome chart showing the hour by hour performance of the S&P 500 since this correction begin. You can see how most of the gains have come from the overnight session and opening 30 minute sprint, and then most of the sales have come late in the day. (Today was an exception of course for the latter point) Here is what Bespoke says about this situation:
The “smart money” indicator suggests that the dumb money trades at the open each day while the “smart money,” or institutional money, trades at the end of the day. During a lot of corrections, you’ll see big declines at the open and big declines at the close. This time around, we’re only seeing declines at the end of the day, suggesting that this selloff has been driven by institutions.
For the rest of the week the focus should be on the big bellweather earning reports we highlighted Friday. Citigroup (C) started off this week with a good bang.