The Bounce That Fizzled
Well that certainly took the steam out of the bulls' sails, at least for now. The market started to selloff in the last hour, and by the close had given up fully all of its gains and then some.
Maybe the negative reversals I highlighted in my last post were good "tells" of what the overall market was heading towards. Semis led the downside, shedding -1.6%. Housing and energy stocks held up the best, including commodity stocks, which were mostly higher.
Volume ran below yesterday's levels, so it wasn't a distribution day. Breadth was slightly negative, and this will only serve to push the markets deeper into oversold territory. When this market finally bounces, I think it could be suprisingly strong.
I am still looking for a strong follow-thru rally this week. The put/call ratio was again above 1.0, pushing the 10-day moving average to multi-decade highs. I don't know anyone who is paying much attention to this. Some of my colleagues are saying, "It's just hedging, as opposed to outright bearish bets."
Regardless, those option plays represent real money. And when and if they start acting like dead weight in portfolios, their unwinding will create upside pressure on the market.
Can't happen soon enough--