Was Today Just A Light Volume Bounce?

The market looked like it was going to rollover today, but a late day rally kept it in positive territory. If you just look at the closing figures, today looked like a somewhat dull day. But intraday, it was anything but.

The financials were down, then up, then down, etc. Ditto for oil, which opened higher, reversed into negative territory, and then rallied late in the day. The big winners on the day were anything energy related. Nat gas, infrastructure, agribusiness, and steel stocks all bounce strong, anywhere from +3-7%.

But as the chart above shows, the bounce in the S&P 500 didn't even fully erase yesterday's losses. Volume ran on the light side, and breadth was flat. That is not really the kind of action that speaks to sustainability, so I am staying cautious.

I added some hedges today, including the financials. I would have thought that the Fannie/Freddie news would have weighed on the financials more, but they rallied today also. Maybe that was just short covering, who knows. The trend in the XLF still looks lower in the near-term, and that is what I am keying off of.

The chart above shows how oil is doing, and the small 2-day bounce it has enjoyed. It looks like oil is trying to find support above its 200-day average (in red). You can see how it has been rounding out in a basing formation.

Additionally, the stochastics at the bottom of the graph, and the relative strength index at the top show how oversold oil has become. I think a lot of the oil bulls have been shaken out of their long positions, and that this bounce should carry a little higher.

But again, I would use future strength to lighten my exposure as I think the oil bubble has popped, and a slowing global economy could make for softer demand.