A poor end to the month as key "long" trades unwind a bit.
Remember the three trades that have been the biggest winners this year:
1) long the dollar
2) long Germany
3) long Healthcare, particularly biotech.
These are what traders call "crowded longs," that is, a lot of traders have bought into these trades and are sitting on a lot of profits.
All three of those trades have come unwound a bit this week.
What happened? First, weak economic data in the U.S. has caused the dollar to weaken—the Dollar Index is down nearly 4 percent just this week.
That's one "long" trade that's not working.
As the dollar has weakened, the euro has strengthened. That's bad news for the German stock market, down more than 4 percent this week, because a stronger euro makes that country's exports more expensive.
That's a second "long" trade that isn't working.
Finally, some recent disappointments in earnings from several biotech companies, including leader Biogen, has caused a pullback in that space, with Biogen down almost 12 percent this week alone.
That's strike three: none of these three long trades are working any more.
As traders "lighten up" and pull money out of their winning trades to preserve profits, this is having an effect on other sub-sectors that were doing well.
For example, airlines were trading near the high end of their range recently, but are down almost 5 percent this week. Retail stocks were market leaders, but this week the group is down 4 percent. Same with home builders—market leaders coming into April, but down 8 percent for the month, 5 percent this week.
What to do? Maintain perspective. Today's economic data indicated the jobs market—and wages—are continuing to improve.
As for stocks, it's true some of the best performing sectors have had a tough week, but all remain up for the year. And the S&P 500—the benchmark, is only 1.6 percent from its historic closing high.
When was that? Why, it was last Friday. Seems like a long time ago, no?