Gloomy news and weakness in European banks have helped to create downside follow-through in the market this morning. I suspect that the ISM services number popped us off the lows but the bounce is already fading. The key now is to hold the early lows.
Breadth is running weak but big-cap names are leading and that is helping a bit. There's a bounce in biotechnology, and metals are still attracting momentum money. There aren't many new entries on my screen right now as speculative action is muted.
The great difficulty this market presents is that even if you feel confident making a market direction call, you still have to deal with the short-term volatility created by the algorithms. The action can easily spike for no apparent reason. The business media will always find some fundamental explanation, but the reality is that much of the upside action, like the Brexit bounce last week, is simply due to the machines doing what they do.
A few things on my screen are working, such as Tesaro (TSRO) and Amazon (AMZN), but it is random otherwise. I've made a couple minor sales as stops were hit, and I'm still holding the Direxion Daily Small Cap Bear 3X ETF (TZA).
My feeling is that strength should not be trusted to last. The price action still is good but the mood and the news flow is the worst it has been in a while. I am very skeptical that a bounce will last for long.