Monday's failed bounce, which trapped some overanxious dip buyers, was exactly what was needed for another bounce try. Sentiment turned very ugly on Tuesday, after the failure to follow through. That was a good setup for some contrarian buying that gained steam most of the day on Wednesday and was boosted by the minutes of the last Fed meeting, which didn't contain anything surprising.
Traders have been very anxious to catch an oversold bounce, and even Goldman Sachs said that the S&P 500 was overdue for a bear market rally. What we needed to help trigger some buying were less anticipation and more worry.
We have some earnings reports tonight from Nvidia (NVDA) , Snowflake (SNOW) , Williams-Sonoma (WSM) , and a few others that may trigger some reaction, but there is much new economic news on the agenda, which may allow buyers to build a little confidence.
At this point, no one is talking about a market bottom, because no one trusts a bounce to last. They simply are hoping for some relief from the unpleasant action. Sometimes these counter-trend bounces can generate substantial fear of missing out, which produces calls that the bottom is in, but we are far from that at this point.
Internal action is even better than it was on Monday. We have around 5,800 gainers to 2,400 decliners and around 325 new 12-month lows. The big difference is that the strength is not concentrated in the Dow names.
I continue to be quite encouraged by the declining number of stocks at new 12-month lows. This tells us that support is holding and that many of the hardest-hit stocks are producing relative strength.
As I discussed in my prior post, the macro-economic focus is starting to shift away from inflation and focus much more on recession. It seems like a particularly good time for a bear market rally, while that transition is taking place.
Have a good evening. I'll see you tomorrow.