If anyone had any doubts that this market is ill, the pathetic bounce attempt we've seen today should remove any question. We started the day looking like we were oversold enough to ignore some of the negative news out of Europe, but the buyers just couldn't gain any traction.
The few folks brave enough to jump in out of hope to catch a little upside found themselves trapped and quickly hit the exits. We are now back in the red and trying not to finish the day with another lower low.
The biggest problem is that there just isn't any positive news to use as an excuse for the buyers to jump in and ride the action a bit. The Greek news keeps sounding worse and worse and the negative mood that has developed seems to be feeding on itself.
The market is too beaten down already to justify pressing shorts, but it is so lacking in any upside momentum that you can't do much buying in anticipation of a bounce. It makes for a pretty lousy trading environment.
All you can do in conditions like this is to continue to monitor the action and wait for something to develop. The potential for a spike is there, but we need something to spark it. Market players are even more out of position for upside now so the potential for a good size bounce is growing.
One of the primary points I've been trying to hammer home recently is that we need to respect the fact that we are in a downtrend and not get caught up in trying to time the ultimate low. We can do a little counter-trend trading with very short-term time frames, but just make sure you respect the very obvious fact that this market is in very poor shape.