The bear market continued this week, although it was briefly interrupted on Thursday with a very sizable bounce after a higher-than-expected CPI report. There wasn't a good reason for the swift reversal Thursday, but a combination of extremely negative sentiment and poor positioning created a technical reaction.
Many market players were hopeful that the big move on awful news was the start of something significant, but the action reversed to the downside on Friday, and the indexes ended up close to where they were before the CPI news hit on Thursday morning.
The market had another very dismal day on Friday, with breadth running about 1,400 gainers to 6,700 decliners, but new lows contracted after spiking to around 2,500 on Thursday due to the gap-down open.
Earnings season is now underway, and a couple of the large banks reacted positively to their reports, but the overall market didn't care much. We have a slew of earnings reports hitting in the next few weeks, and it is going to be very interesting to see what sort of reaction there will be if there is decreased guidance due to the economic storm we are confronting. While there have been some estimate revisions, the fear is that there is quite a bit to go on that front.
The technical picture remains terrible. The indexes hit new multiyear lows this week, and there is very little support on the charts. The bulls keep hoping for oversold bounces, but strength seems to produce aggressive selling rather than fear of being left out.
The good news is that many exceptional opportunities are developing. Still, there are no indications that they are ready to start trending higher. Patience and capital preservation remain the name of the game.
Have a great weekend. I'll see you on Monday.