The indices are seeing some minor support that is preventing downside momentum from building. However, the action does not indicate that market players are still extremely anxious to buy the dip. One of the keys to the market action for months was the aggressiveness of the dip buyers. Quite often they were so eager to buy pullbacks that they never materialized. That is key to the market and is shifting.
While there are still dip buyers out there, they look more like strategic traders that are inclined to flip quickly. We also have our friends the computer algorithms, although the buy-the-dip programs have been shifting. The big shift was rotation into new groups and out of technology rather than the standard buy-the-dip approach.
I consistent preach that the way to deal with the market is to react to the price action as it shifts rather than try to predict the future. The price action I am seeing looks quite poor right now. There is some bounce in the FAANG names that gives the illusion of some strength, but the great bulk of stocks are not bouncing well.
One of the most significant things about the action today is that there are only 80 new 12-month highs and 100 new 12-month lows. New highs and lows tell us a lot about a momentum. When there are pockets of strength the new high list will be very strong. The current ratio is what we'd expect to see as corrective action starts to build.
Breadth is also poor as it approaches two to one negative. The bounce in a few FAANG names is covering this up but most of those stocks are technically damaged now.
To put it in simple terms, this doesn't feel like a market bottom. That doesn't mean that there won't be more bounce and rotation but this kind of action demands a higher level of cash and stronger defense so that we can be in position for better entry points down the road.