Once again, the market continues to see extremely aggressive dip-buying. With Europe down this morning and no positive news on the wires, it looked like conditions might be ripe for selling. We did gap down, but within 15 minutes the dip-buyers went to work, and within two hours the market was back in the green.
While the dip-buyers have been very aggressive, they tend to fizzle out as the market moves back to even. The underlying support is very strong but there hasn't been much momentum once in positive territory. Today, for example, the major indices were close to flat, but the action felt positive because of how hard we bounced after the weak open.
Despite the big bounce, breadth was flat and we didn't have any big movement in key sectors. Banks and chips were up a little but oil, gold, coal and steel saw minor profit-taking.
Intraday bounces back to flat can make for decent day-trading action if you are quick and happy with fractional gains. But the real dilemma is that it is extremely difficult to build up new positions since we are so extended on light volume.
The market presents us with a particularly challenging balancing act because it has such obvious underlying support but isn't making much headway. We are lingering around the highs, which may end up being a good foundation for an eventual breakout, but we aren't seeing the sort of energy that suggests a powerful move is coming.
I certainly don't want to be bearish as the market continues to do nothing wrong, but being big, bold and bullish is not easy when the market has had so little rest and is technically extended.
Have a good evening. I'll see you tomorrow.
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