A lot of folks, including me, have been looking for an oversold bounce in this market. With the quarter winding down and the market selling off for the fourth day in a row, it was a fairly good setup for some sort of bounce, but the bulls just couldn't gain any traction, and when the early-afternoon push to the highs of the day failed, many traders decided to hit the eject button.
We are still oversold and we still have the end of the quarter and the Russell index changes to serve as upside catalysts, so I'm looking for the bulls to give it another try tomorrow. The important thing is to not let short-term trading blind you to the fact that the overall action is extremely poor and that we are caught in a downtrend.
What is most troublesome about this market right now is how negative sentiment has become over the macroeconomic situation. A few months ago, any mention of a double-dip recession was viewed as ridiculous, but now many people are extremely concerned that that is exactly what is happening. The economic reports have been very poor lately, and the Fed policy statement yesterday served as a vague confirmation that things are slowing again.
I'm certainly disappointed we haven't had even a brief bounce attempt, but today's washout just makes it more likely that some sort of relief bounce is coming soon. If we gap down in the morning, I'll be looking for the dip-buyers to step up with a bit more vigor.
Once we get past the end-of-the-quarter pressures, the bulls are really going to have their work cut out for them to turn this market back up. The bears are definitely in control, and they aren't going to go away easily......
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