The inability of the market to bounce better is a very notable change in character. We've already had a big shift with the increase in volatility but now we are seeing a shift in dip buying. We have not had an oversold market that has bounced so weakly since January 2016.
Back in early 2016 the market underwent a sharp correction as the Fed took a more hawkish turn but market players were worried about weakness in the global economy. It was a reaction to what the market perceived as a mistake by Janet Yellen and it quickly resulted in coordinated action by central bankers around the world to fix the issue.
This current action is not the product of any one event. There are a number of issues that are coming together to create the pressure such as the Facebook (FB) privacy issues, trade wars and the technical patterns in the indices. The one thing that does not seem to be an issue at this point is the Fed. The yield curve is extremely flat but bonds are acting well and interest rates are not a major issue.
I have written many times during the market uptrend that we have to honor the price action above all else. We can't fight based on predictions about the futures.
When you are riding an uptrend, not fighting the price action isn't that hard. You just stay with what is working for as long as possible. When you are dealing with corrective action it is harder to just stand aside and not do much while you wait for better action. There is always a strong inclination to start picking at some buys when a stock is down substantially from a price point that seemed pretty reasonable a few weeks ago.
I am growing more optimistic about some better bottom fish plays as the downside momentum is slowing down. We have slightly positive breadth and the indices, particularly the DJIA, are positive but the pressure on big cap technology is keeping sentiment suppressed.
I will be working on refining a buy list tonight with names like Clearside Biomedical (CLSD) , and will be looking for entry points on some new names tomorrow. Don't forget we are closed for Good Friday this week.
