The extremely strong bounce on Tuesday didn't lead to strong follow through or a quick failure. It led to a very chaotic and choppy session with weak breadth most of the day. A sizable dip in the morning was aggressively bought and a second dip following the release of the FOMC meeting minutes was also bought but the strong momentum that we saw on Tuesday was in very short supply today.
It isn't a huge surprise that market players had limited conviction today. As I noted the big bounce was just one of the steps needed to fixe the tremendous technical damage that has been done in recent weeks. The market is still stuck in a correction and the majority of stocks are in very poor shape technically.
In my review of charts today I saw hundreds of potential short setups and very few attractive long setups. The bounce on Tuesday was more of a short setup than a long setup for many stocks. That doesn't mean they will work but the path of least resistance is still to the downside.
There is nothing much of interest reporting tonight but that may be a good thing giving the inability of any of the major stocks to report so far to gain sustained momentum. Netflix (NFLX) looked great 24 hours ago but it traded down most of the day, although it finished up 5%.
The simple fact of the matter is that this continues to be a poor market and the bounce yesterday was not enough to change the character of the action. What is needed is a strong follow through day and some better leadership. Until that happens it is better to stick with short term trades and high levels of cash.
Have a good evening. I'll see you tomorrow.
