After a decent start this morning, it looked like we finally were going to put together the long-awaited oversold bounce. We had strong action and good closes overseas, it was the beginning of the week, which tends to be strong, and we were oversold enough that we could run a bit before hitting resistance levels.
We did manage to rally for the first 30 minutes of the day, but then we trended down until the final hour of trading, when we had the usual late-day computer games. We ended up with gains in the major indices, but breadth was negative and the small-caps lagged badly.
What was particularly sad about the action today was that it was the best action we have seen since June 15. A year ago, this sort of day would be deemed a negative, but now our standards are so low that even this pathetic bounce qualifies as a positive.
The inability of this market to bounce sooner or better simply enforces the fact that we are in a downtrend. During the uptrend off the March low, we constantly would bounce immediately and go straight up. The character of this market shifted at the end of April, and not only are we not seeing V-shaped bounces, we aren't seeing any decent bounces at all.
Too many market players try to fight this sort of action, and they lose a lot of money in the process. Today was another fine example of how dangerous it can be to try catch a turn in a downtrending market. If you are tempted to play, just make sure you are staying very disciplined and aren't buying into the notion that we have seen the lows. There is nothing at all in this action to indicate that a bottom is being formed. It is possible, but I don't know too many people who make good money fighting a trend.