A week ago, the market didn't look bad at all but we have since suffered five straight days of poor action and the mood has turned dark. This is supposed to be the time of the year when upbeat sentiment produces positive action, but there are no signs of positive seasonality so far.
To add insult to injury, the Federal Reserve issued a press release right at the close that it will stress test banks for exposure to European debt, and we sold off a bit more after the close.
What's most worrisome about the action today is that we were oversold enough for a potential bounce but market players couldn't get much going. Traders are happy to ignore the negative news flow for a few days if they can hammer out some good long trades, but we had few signs of that.
We did bounce momentarily on news of another European rescue plan, but that fizzled fast. Even some comments in the Fed minutes that were supportive of further quantitative easing didn't produce a reaction.
Market players didn't want to play and we ended up with dismal action.
Ironically, the biggest positive right now is that things look so bad and there is so little optimism. Market players are not well prepared for a bounce, which means we can move fast if we gain a little traction. Unfortunately, the bulls don't seem to have any juice lately. Will they find some during the slow trading in front of the holiday? That happens quite often, but it's going to be action dominated by short-term traders who have no plans to stick around for long.
