We had a little follow-through to Wednesday's big reversal and Thursday's selling, but overall it was an uneventful day. Breadth was negative but improved most of the day, and oil reversed after a very poor start, which helped matters. It was still a negative day, but the selling wasn't particularly energetic. It was more a market of disinterest rather than one of overt negativity.
Next week will present a particularly good test of the health of this market. As I've noted numerous times, the hallmark of this market is the aggressiveness of the dip-buying. Once it starts, we have tended to run straight back up without a pause, and that is what has caused such consternation for bears and underinvested bulls in this market.
Technically, such vigorous recoveries aren't to be expected, but they have been the norm for this market. So the big question is whether it is different this time? Will the technical weakness we have seen since the Fed interest rate announcement be what finally leads to a more severe correction, or is it just another trap for the bears, who have been caught so many times, anxiously awaiting the death blow to this uptrend?
As always, there are good bearish arguments for why this market is destined to roll over, but the folks who keep on buying weakness have been so successful for so long that they are likely to keep on doing their thing. It is when they falter and the whole dip-buying game loses some of its appeal that the real danger sets in. Next week, we'll likely be put to the test....
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