Bull Tales

 | Sep 12, 2011 | 1:59 PM EDT
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The opening bounce sputtered fast and now the market is back to drifting around in negative territory. It's still holding above the opening lows but working on the third lower high. Breadth isn't helping much, with 1600 gainers to 3800 decliners.

The usual choir of hopeful bulls tells us the market will bottom out any minute, but there is little in the price action to support that view. I believe the August lows have to be taken out before putting in a solid low. A breach of that level would trigger plenty of sell stops, create even more negativity and give the sort of cleanout that would be a good setup going into the end of the year.

I wouldn't be surprised to see some sort of oversold bounce before testing those August lows. That would suck in some buyers, pump up hope and make an eventual breach of the August lows more painful.

This is a longwinded way of saying that I don't trust this market right now. Bounces should be sold, and the bottom callers should be ignored. The price action does not support any major buying.

My approach to a market like this is to stay out of the way. We are in a downtrend and I'm going to respect that until something changes. I'll play some countertrend bounces where I can and work on a shopping list of stocks to watch. But for now, I'm doing very little until this action improves.

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