I had been writing about this theme since last week, but it is really starting to become obvious now. Simply put, the weak intraday bounces have not been accomplishing much. While it is not always the case, in this particular market we would be better off having a trend day lower or two, with no dip-buyers in sight and some real emotional selling into a bloody close. At that point, you might actually get some selling exhaustion, which would be a better sign of a tradable bottom than what we are looking at today. In addition, despite the bulls looking for contrarian evidence pointing towards a bottom every second of every session, I believe the true consensus amongst traders is that “they” simply will not let the market fall in front of the Facebook IPO coming soon, which is another reason to think that these weak bounces are fruitless.
At any rate, there is not much to do in this type of a market other than watch, observe, and protect capital. After the initial gap down this morning, the action has been lethargic. It is always tough trying to identify when the sellers have truly exhausted themselves and strong buyers are moving in, and this market is no exception.
As we move through the afternoon, I am watching to see if the dip-buyers finally give up the gig, which would likely see us finally getting a close on the lows after an opening gap lower. At certain times in life and in the market, things need to get worse before they can get better.
“At certain times in life and in the market, things need to get worse before they can get better.” lol