The trading was extremely choppy on Thursday.
Bulls made several attempts at an oversold bounce that failed and had the indexes at the day's highs with an hour to go, but the buying collapsed again, and stocks closed in the lower end of the range.
All the indexes finished with losses, but breadth remained positive as many small caps outperformed.
For much of the day, the S&P 500 and Dow Jones wallowed at new 12-month lows, but what was most interesting about the action was that the number of stocks at new 12-month lows did not spike. At the close, there were only 625 new 12-month lows vs. over 3,000 last week. I mentioned this on Wednesday, and it continues to be the most important aspect of the current action. It indicates that many stocks may have already seen capitulation and are now slowly finding support.
This action is making me more optimistic that small caps and secondary stocks may hold up, but I'm increasingly pessimistic about the ability of the indexes and big caps to find support at this point. The problem is that it is tough for small caps to buck a downtrend as selling is often more correlated when conditions really turn ugly.
I remain convinced that we can't even begin to talk about a bottom in the indexes until the S&P 500 is in a technical bear market. It is an arbitrary level, but I believe it will have a significant psychological impact that will advance the corrective process.
There is some OK action in individual stocks on my screens, but it is impossible to trust that upside momentum will build at this point. We just have to stay patient and vigilant and let things develop further.
Have a good evening. I'll see you tomorrow.