After a failed try on Monday, the market is trying to bounce again Tuesday but is unable to gain momentum so far. While the indexes are still in positive territory, and breadth is running nicely positive, the highs hit on Friday and the gap above that level are serving as technical overhead.
Interest rates continue to move higher, economic data is suggestive of more inflationary pressures, and Fed speakers remain hawkish. There aren't any great positive news catalysts right now, so the bulls are relegated to focusing on oversold technical conditions and extremely negative sentiment.
We will see if the bulls can regroup and push back to the morning highs, but the problem that they face is that it is not going to be easy to create fear of missing out (FOMO). With a hawkish Fed and so much economic negativity, there isn't going to be any great worry about missing out right now. If the market can put together a strong move that lasts several days, then there may be a wall of worry to climb, but the primary fear right now is more downside rather than missing out on a bear market bounce.
The good news about these poor bounces is that they do help chart patterns to develop. When lows hold when retested, then we have some obvious support levels that can be used to manage trades.
I see plenty of stocks that I want to buy and build, but they don't have very good charts right now. They need support and some time to develop. There just isn't any good reason to rush into them at this point.
The most difficult thing about this market right now is staying patient. Traders tend to anxiously anticipate bounces because they are bored and tired of the dismal market action. They force trades and risk being caught in sudden reversals.
It isn't much fun, but the best move right now is to stay patient and wait for better technical conditions to develop. There simply is no reason to trust a counter-trend bounce to last very long right now.
