The Market That Couldn't Bounce

The early gains from this morning were wiped away and the market went down to new lows. The weakness in the financials has been amazing. I can't even remember the last time they bounced. Today, rumors about Fannie and Freddie weighed on the group from the get go.

Interestingly, several Nasdaq stocks have been in the green all day, including Apple (AAPL) and Google (GOOG). But little else is working.

I have mentioned over and over how oversold the market is, and today I have even more data to support this notion. But we need a catalyst to get things going on the upside. When this occurs, I expect a meaningful countertrend rally to unfold.

Here are some anecdotal datapoints on breadth and sentiment:

• Bears on the Investor's Intelligence survey have tied their higest level since Sept. 1998
• The bull/bear spread on the AAII survey (-28%) is back at levels from the March lows
• The bears on Ticker Sense's blogger survey have exceeded bulls for 8 straight weeks
• The Rydex Nova/Ursa ratio is back down to levles from August 2007 (0.61)
• The Public Short ratio has hit a new record high, at 71.8% (according to my data)
• The 10-day CBOE put/call ratio is back up to 1.07, a high level
• The Merrill Lynch "Net Tabs" indicator, which takes into account breadth and sentiment factors, is back to +5 (a level that usually signals a good buying opportunity)
• The VIX has surged +69% since the May lows; more than the spike in March
• The Lowry's buying power index vs. its selling pressure index has widened out to it biggest gap in its 75-year history!

The S&P has taken out its March lows, so I am not trying to call THE bottom here. But I am growing far more bullish for a short-term trade.

long AAPL, GOOG