Many investors were hoping for some very aggressive Fed action on Wednesday. The Fed accommodated them with a hike of three-quarters a percentage point, and the market had an initial favorable reaction, but we have just too much uncertainty and too many negatives for any sustained buying.
Wednesday's buyers were trapped, and they helped to exacerbate another brutal day of selling. It was the third large gap down open in the last six trading days and was severe enough that the dip-buyers didn't even bother trying to catch a small rebound.
Breath was atrocious, with around 950 gainers to 7400 decliners. The Nasdaq 100 (QQQ) had only three stocks up and 98 down. Worst of all, new 12-month lows expanded again and hit 2840. There were 3,000 when there was massive liquidation on May 12, and we are now seeing that again as the Russell 2000 and Nasdaq make lower lows.
Technically charts are breaking down and taking out a little support that did exist. It is classic bear market action. The Dow Jones is the only index that has not yet succumbed to the bear, but a drop of a little less than 400 points will do the job.
The biggest positive is the extreme gloom and pessimism. Even the contrarian buyers are giving up as they have been unable to time an oversold bounce during this waterfall selloff.
Friday is not only a triple-witching day, but also the day in front of a three-day weekend. I believe conditions are good for some sort of bounce, but if you aren't a very short-term trader, then pay no attention to that at all.
Longer-term investors should not be in any rush to buy right now. It is going to take some time for technical conditions to improve, and there is no value in tying up a lot of cash.
We are trading in a bear market right now. That means staying patient and keeping time frames very short if you are going to trade. The good news is that there is a slew of potential opportunities developing for those that can stay patient and maintain a positive frame of mind.
Have a good evening. I'll see you tomorrow.