In a market downtrend, bounces fail and the prior lows are undercut. That is what we are seeing in the S&P 500 this morning. After a bounce that lasted two days, the S&P 500 rolled over and is now right at the lows it hit on Wednesday and Thursday. It also has some very precarious support at the 50-day simple moving average.
This corrective process has been playing out for a couple of weeks now, and the best thing that could happen is that the S&P 500 fails to hold support and accelerates to the downside. That would expedite the corrective process and would help move the market more quickly to a healthy support level. This current support at the 50-day will likely fail by the end of the day, and that will accelerate the selling.
Despite the obvious negative action in the indices, the underlying action isn't that bad right now. Breadth is 2 to 1 negative, and there are 94 new highs to 66 new lows. That doesn't reflect any great panic, but the big danger is some acceleration into the close.
Today is also the day when options and futures expire, so that will contribute to some instability due to the inclination for stocks to be pinned to key strike prices. Watch for some increased volatility at the close.
Pockets of momentum are much slower right now, but speculative traders are still looking for opportunities in some of the de-SPAC names like Ginkgo Bioworks (DNA) and Helbiz (HLBZ) .
As I've been discussing for a while now, there has been a two-tiered market with the correction action in small-caps and many secondary stocks going much deeper than what has occurred in the indices and many big-caps. I believe that the overall market pressure will force some of the small names that have already corrected deeply down even more, and therein lies some great opportunities. An example of one that I started to rebuild today is Ammo, Inc. (POWW) . I've discussed this many times in the past and feel confident that its stellar fundamentals will be eventually recognized.
There are a number of other names I'm watching, but as I've been discussing, I don't think this corrective action is over yet, so I'll be patient.