'Buy the Dip' Action in the Stock Market Is Failing

 | Dec 06, 2017 | 1:04 PM EST
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We have a good illustration this morning of how the "buy the dip" pattern is starting to change. The gap down in the Nasdaq this morning was a classic setup for the "buy the dip" crowd, but they are now inclined to sell into the bounce rather than ride it for me. This is what happened yesterday and there are signs of the bounce fizzling out again today.

Another issue is that the senior indices are not benefiting from rotation any longer. The S&P 500 ETF (SPY) and the DJIA ETF (DIA) are down for a second day without any sign of a bounce so far. There is still underlying support, but it is weak and if there isn't some upside soon, I expect to see the bears press.

Breadth is running about 2400 ups to 4050 downs, but most interesting is that the number of new lows is around 70, which is higher than the number of new highs. That is a stark illustration of how momentum has collapsed.

The rotational bounce covered that up for a while, but the issue now is that there isn't any great leadership. We had financials, oil and some retails leading this past week, but none of these groups has been very good at producing the sort of sustained momentum that technology produces.

Individual stock action on my screens is very poor. I am not seeing any good long setups right now. The stuff that is moving is a mishmash, with some cryptocurrency and blockchain names showing up but no really dominant sector action taking place.

The market is losing confidence in the dip buyers -- and that is a problem.

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