We had a good example today of the old saying that oversold markets can become even more oversold. Given the intense selling pressure last week and the high level of negativity, a number of market players were looking for a bounce, but once the early strength fizzled out, it was a sea of selling. The contrarians threw in the towel, and the technical traders, who have been playing bounces off the August lows, lost some confidence as well.
Breadth was extremely poor today at around 8 to 1 negative. Volume picked up as well, but what I found most troublesome was that almost 1,500 stocks hit new 12-month lows today. That smacks of downside momentum and is not indicative of a market about to make a lasting low.
When the number of news lows starts to contract, that will be a sign that some stocks are starting to turn up.
