The essence of bear markets is failed bounces. It is the cycle of hope and disappointment that crushes optimism and produces wholesale liquidation. Why even bother trying to buy this market when the slightest strength is overwhelmed by sellers?
Unfortunately, it is a process we have to go through to eventually reach a tradable bottom. The market has to discourage the bulls and push all the marginal buyers to the sidelines. It is only when everyone has sold and thinks that the stock market is dead for good that the stage will be set for a new uptrend.
The reversal this morning was a particularly good example of bear market action. We went pretty much straight down and gave back a nearly 2% bounce in a few hours. Who wants to buy the market when you have that sort of action?
Some folks have been saying that it is a positive that we are still holding above recent lows. I disagree. I don't think this market has a chance of a solid bottom until we breach those lows and trigger another round of stops that are set there. It is just too obvious for us to hold at this support level, but another leg down would produce the sort of washout that will set the stage for a bounce, especially if we have some sort of positive news.
Other than the miners that I mentioned in my prior post, I see very little to do here. I'm going to stay patient and just wait for things to develop.