For virtually the entire month of May thus far, the bulls have been unable to sustain anything more than a quick, exuberant intraday bounce. This morning, it appeared that we would finally see a riveting short squeeze rally. While that may still materialize, as I write this I see we have suffered another heartbreaking intraday fade. As a group, technology and the Nasdaq are lagging the rest of the market, which is usually a sign of anemic risk appetite.
The biggest issue facing this market right now is that we appear long overdue for some type of obvious dead-cat bounce. However, just as we saw very little giveback during the first quarter rally earlier this year, we are seeing the flip side of that pattern now. As I have been writing for a few days now, in order to arrive at a better tradable bottom with more meat on the bone we might as well have a few bloody days where dip-buyers get so rattled they dare not even think about going long for the rest of the summer. At that point, you might very well have a concrete bottom.
Of course, I can only analyze the market that is actually before me. What I see right now is a slippery tape flopping around and searching for direction. If the bulls can get their act together later today, we might be able to get something going to the upside. Either way, I am able to take this action with a grain of salt, seeing that I have been in heavy cash since late-March of this year, when I alerted members of the 12631 Trading Service of the changing dynamics in the market.
The Facebook IPO is coming later this week, and my best suggestion is to not let it affect your trading one way or the other. The market provides distractions around the clock these days, and it is designed to punish you for the slightest mistake you make as a trader. I will be largely ignoring the Facebook drama, instead opting to focus on not becoming sloppy with my trading in the seasonally tricky portion of the year.
