The question the market confronted today was whether or not bad earnings news from Apple (AAPL) and poor economic news in the form of the ISM had been already discounted to some degree by the very poor market action over the last three months.
The answer to the question was a resounding "no." Apple failed to attract bargain hunters and closed very close to the lows of the day. The major indices managed a late morning bounce but rolled over and end up at the lows by the time the closing bell rang.
Despite these two big negatives the action under the surface was not as bad as we have seen on other days with massive losses in the indices. Breadth was around 2,500 gainers to 4750 decliners and there were only 135 new 12-month lows. That isn't terrible compared to other recent "washout" days.
Many stocks are already deep into bear markets so they are not falling as aggressively. There is still support at the December 24 lows and if that holds we could see some decent charts develop. However right now we are dealing with the potential of a failed bounce and the focus should be firmly on defense and capital protection rather than bottom fishing.
The S&P 500 had a very classic oversold bounce starting on December 26. It was a big move and convinced some folks that maybe we had seen the lows. That is exactly how bear market bounces tend to act. Unfortunately bear market bounces also tend to fail and with Apple providing a catalyst that is what happened.
The big concern now is whether there are other companies that will follow Apple's lead and issue negative earnings pre-announcements. Hopefully they will get the bad news out so this market can eventually find some support.
Have a good evening. I'll see you tomorrow.