Window dressing never goes out of style

Historically, the last day of the quarter sees markets post constructive price action as portfolio managers mark their positions to the closing price of the last trading day of the period. This highly predictive occurrence is referred to as “window dressing.” Quarterly performance is based on it. So is job security. Wednesday was no exception. Wednesday’s gains, though modest relative to our recent selloff, effectively improved performance metrics for portfolio managers even if it was actually simply a function of the calendar.

“Window dressing” aside, markets did have other reasons to take a breather on Wednesday. Technically, all three major equity market indices markets have violated the 10% correction threshold with our recent selloff as we know. When markets find themselves between correction (-10%) and bear (-20%) territory, further price compression becomes increasingly more challenging in most market cycles. A continuation of the trend lower needs to be fueled by themes that over power technical support and over power opportunistic traders/investors. Ultimately a move into bear territory requires the validation by thematic trends that speak to a re-ordering of investor outlook.
In my opinion, it is entirely too early to call for a bear market and it is equally unrealistic to call for a meaningful  rebound in equity prices.  Themes that have fueled our move into correction territory are very much still in play. We will be reminded of that now that Wednesday’s window dressing is out of the way.
Photo credit Curtis Cronn