After the pounding the market has suffered over the last three days, it was due for some sort of oversold bounce. We got a bounce, but it wasn't the sort of energetic snapback that traders were hoping for. The Dow Jones industrial average didn't even make it into positive territory, but the Nasdaq managed a 1% gain.
Stocks faded into the close again and breadth was an anemic 4,500 gainers to 3,750 decliners. New 12-month lows came in around 2,500, which was a slight improvement over the 3,000 on Monday, but there is a huge number of stocks unable to find support.
The market remains oversold and stretched to the downside, but it is a technical mess, and the recent poor action has created a large number of folks that just want to escape the misery. We see some capitulation, but that is a process that will take some time, and it is dangerous to try to time a bottom on that basis.
Wednesday morning all eyes will be on the consumer price index report. It is going to be another sizable number, but the hope of bulls is that it will be less than the last number and create a narrative that inflation is hitting a peak. That could give us some support, but we will have to wait and see how the market reacts. It is going to be tough to gain strong upside momentum right now, given how buyers are acting.
Keep it firmly in mind that this is a bear market, and you can not approach it like you would a normal environment. Stay patient and protect capital.
