The Bounce Fizzles

 | Nov 17, 2011 | 4:27 PM EST  | Comments
  • Comment
  • Print Print
  • Print

The dip buyers have had good results recently when they jumped in early following European worries overnight. Unfortunately, for the second straight day, the dip buyers were stung badly when the bounce fizzled and we breached the opening low. If you set tight stops, you were able to avoid some damage. But if you didn't play a little defense once things weakened, it got ugly fast.

What was particularly worrisome about the action was that once we broke the opening low, the dip buyers completely disappeared. We couldn't even manage a little bounce at the close.  All major sectors were red, breadth was poor at 1300 gainers to 4200 losers, and volume was heavy.

Technically, we fell back into the trading range that was in place from early August to mid-October. The breach of 1220 support on the S&P 500 was not a good sign, but we did manage to hold 1205, which is the 50-day simple moving average.

The big question now is whether two days of selling have killed this market. It has suffered some damage, but the wounds can be healed if those dip buyers regain their nerve and make a stand before flirting with 1200.

I definitely didn't like this action but I haven't given up on the idea of positive end-of-the-year action. I believe we still have the wall of worry in place, and plenty of underinvested market players anxious to rack up gains. It won't take much to get another Europe-is-saved rally if we see some positive news, but there is nervousness about the situation in Europe and it is going to take something meaningful to shore up confidence and bring in buyers.

The bulls have work to do as they are losing their grip. If they don't step up fast tomorrow, many folks will be looking to move to the sidelines. I expect it to be a bumpy ride.

Have a good evening. I'll see you tomorrow.

Columnist Conversations

Shares of SWFT are taking a major beating today. The trucking company is off over 15% on extremely heavy ...
The SMH gapped below support this morning and now the DJIA is testing the uptrend line of a nearly six month r...
El Pollo Loco (LOCO) debuted at the top of its range ($15) and then popped to more than $19 in early open mark...
KORS - Michael Kors calls are seeing interest ahead of a 7/31 Annual Meeting. With the stock up 40 cents to $8...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.