Wednesday saw those short hedge funds signal the turn to the downside on an intraday basis. Most of those short hedge funds had completed their covers early on with the market slightly green at the open. In the end, the DJIA closed down 101.47 points at 16613.97 after being up slightly at the market open. That green open was enough to push the DJIA closer to the extreme overbought condition that I mentioned in Tuesday's article. The S&P 500 closed down 8.92 at 1888.53.
The Nasdaq closed down 29.54 at 4100.63 and the Russell 2000 closed in the red, down 18.02 at 1103.14. The Nasdaq loss could have been much worse if it were not for the momentum stocks such as Netflix (NFLX), and Yandex (YNDX). Those stocks were able to close on the upside. Facebook (FB) was up most of the trading day before closing in the red and Apple (AAPL) closed in the green fractionally after being much higher intraday.
The momentum tech stocks were the last area for the short hedge funds to cover their positions. This was very entertaining to watch if traders and investors have an understanding of what to watch. Those same technology stocks are now in overbought territory and, in some instance, extremely overbought.
Leave it to the hedge funds that work in unison to cover at the highs. I suspect that we will now see those tech stocks head to the downside on Thursday or Friday at the latest.