After a banner first quarter in the markets, quarter-end window dressing and subsequent selling by portfolio managers may start the second quarter off on a much different foot, warns Jim Jubak.

After a banner first quarter in the markets, quarter-end window dressing and subsequent selling by portfolio managers may start the second quarter off on a much different foot, warns Jim Jubak.

For the week ahead, watch.well, the end of the quarter.

It's a really strange time in most quarters, because you've got lots of people doing things to make them look better, lots of people being professional money managers. It's especially a strange time when you're coming off a quarter that's going to look so good. So think about it.

It looks like now that the S&P is going to finish the first quarter up something like 12%. Now, if you're a money manager sitting there and you're either up 12% or you're not, well, you really can't do very much about that.

But what you can do is you can make your portfolio look better. You can buy the stuff that's been going up this quarter, so you can say "See? I owned Apple (AAPL)," even if you actually only bought it on, like, March 25, and you didn't get any of the benefit out of the rise. Or, you can say, "I didn't own any oil stocks. They were going down, so we got out of those," even if you only got out, again, on March 25.

So, you get a lot of window dressing. It's particularly important when you've got a really big quarter one way or another, so money managers are trying to look good. What this does is it makes the week before the quarter closes-and then really the week after the quarter closes-extremely wacky.

You've got a lot of people adding stuff and detracting stuff before the quarter closes. Then you've got people reversing those bets, as in, "I really didn't want to own XYZ stock, but I put it in the portfolio for the end of the quarter and now the quarter's past and it really doesn't matter what I do until the end of the next quarter, so I'm going to get rid of it now because that's what I really wanted to do anyway."

So I think what it does in a quarter like this is that it tends to prop up the stuff that's done really well. People buy the winners, and conversely, they sell the losers.

So you get a lot of sort of trend continuation. Stuff that was going up will keep going up through the end of the quarter. Stuff that was going down will keep going down through the end of the quarter.

When you then move into the new quarter, all those trends go out the window. They really don't count. In fact, in many cases, you get trend reversal. I think that's what we're looking at here.

One of the reasons why I think the first week of April is going to be so hard to read, and so really important for what's going forward, is because then I think people will finally get to do what they really wanted to do, but didn't do before the quarter ended.

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