A Tricky Failed Bounce

 | Aug 16, 2011 | 12:19 PM EDT  | Comments
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The market is holding up fairly well as optimism grows for something positive from the Sarkozy-Merkel press conference, which is due to start shortly. If it weren't for that news, this market would really be dead. The action is very slow, and breadth is still 2 to 1 positive, but the bears aren't having any luck gaining traction.

 

Like yesterday, we have a technical setup that suggests that the path of least resistance is to the downside, but it has been the nature of this market for a very long time to punish anyone who tries to fade bounces. Our oversold bounces always seem to have underlying support, even when volume is weak and the news flow poor.  

 

Even when the big picture looks quite negative, the single toughest trade in this market for the past couple years has been trying to time a failed bounce. It has been extremely tough to do, and I have to admit it keeps me from being aggressive with shorts. I'd rather just go to cash when I think we are due to roll over, rather try to short it, since the squeezes have been so prevalent.

 

I have a few things on my watch list, but the action is so slow right now that I'm doing little. Even if we do continue to hold up, there just isn't enough energy in the action to justify chasing things.

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