After another day of punishing rotational action that was hidden by the major indexes, the pressure finally lifted this afternoon and allowed many badly beaten up stocks to bounce. A good example is biotechnology.
The biotech exchange-traded fund XBI (XBI) was down over 3% intraday, but managed to close near flat. Breadth was still negative at 3,300 gainers to 4,860 decliners, but well off the early lows. Cryptocurrency-related action was better, and cannabis stocks bounced as well.
It is likely that some of the afternoon buyers are anticipating the positive seasonality that occurs on the day before Thanksgiving. Over the past 61 years, the S&P 500 has been up 70% of the time in front of Turkey Day and has done nearly as well on the half-day of trading that follows.
I’ve been yammering quite a bit about the destruction that has taken place under the surface of this market, but when things become this stretched, they tend to produce a pretty good snapback. We had a little of that this afternoon, but conditions are good for a continuation tomorrow when traders are in a holiday mood.
This has been an extremely tough market lately, and it is easy to become discouraged when you suddenly give back a big chunk of gains. The best way to deal with it is to keep chugging along.
Have a good evening. I’ll see you tomorrow.