Tuesday, February 24, 2009

Losers have a day in the sun!

I think I mentioned earlier today that many of the weakest stocks, GM/Alcoa, etc had an explosive day today. Many were up 10-25% on no news.
The best theory that I can come up with is that some smart technical analysts warned of a potential sharp bear market rally in the near-term. If this were the case, many shorts would rather lock in their gains than watch them get eroded by a huge (albeit short-term) rally. The chart above shows that the 50 worst performing stocks in the S&P 500 this year were up 13% today. In the best of times, that's a great year, not the sort of return you'd expect in a day!
I think I've said it before, but it bears repeating - healthy markets do not suffer violent swings (up or down) like this. The markets are clearly confused and being driven by the gamblers.

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