We have a little bounce action here on Monday morning, but so far it hasn't gained much traction. Breadth is running at around 4,500 gainers to 3,500 decliners, but the best news is that there are only around 120 new 12-month.
There has been a positive non-confirmation of new lows in the three senior indexes as the number of lows has dropped substantially as the indexes sink. This is indicative of a rolling bear market and bodes well for stock picking in some of the worst sectors. The problem is that just because there may be some relative strength in sectors such as growth, small-caps and biotechnology it does not mean that they are going to move much to the upside. They just might not sink as much as the major indexes.
The thing that is most notable about the market action right now is how focused traders are on sentiment. The bulls are claiming that negativity is excessive and that the shorts will be painfully squeezed. The bears are claiming that there are too many traders looking for a snap-back rally and they are going to be trapped and feed additional selling pressure.
It is a good illustration of how difficult it can be to calculate sentiment accurately. There is no definitive formula, and it will shift quickly depending on news flow. From anecdotal evidence, I think there are many long-term investors who are just now starting to recognize how poor this market has been. I talked to several this weekend who were surprised by how hard their portfolios have been hit, and they are more scared than opportunistic at this point.
The longer the indexes can stay green, then the more likely some fear of missing out can develop, but I suspect there are plenty of folks looking for an escape into positive action, and that will keep the bounce contained.
My Stock of the Week is Enthusiast Gaming Holdings (EGLX) , which had a great first quarter and has good operational momentum, but it's a low-priced small-cap and there isn't a lot of appetite for that right now. I believe the downside is limited and that it will find good support soon.