Turg on avanemas kerges miinuses: Dow Jones -0,40%, Nasdaq -0,18% ...
Rev Shark:
"If I am anything, which I highly doubt, I have made myself so by hard work."
-- Sir Isaac Newton.
The stock market regularly produces oversold bounces. They require real effort. When the market trades lower for several weeks in a row like it did in July, there eventually comes a point when the pressure builds to such a degree that a bounce is simply a matter of reflex.
At some point the easy, oversold bounce ends and the real work begins. We are now very close to that point in all of the major indices. If the bulls are really going to keep this upturn moving the hard work starts now.
Take a look at the S&P 500. It topped out at the end of June around the 1145 area and then proceeded to fall in almost a straight line to the 1078 level over the next three weeks. Last week the skid came to an end and we have now had five higher days in a row. That certainly seems encouraging but if we look a bit closer, there are some troubling signs about this bounce.
Foremost is that volume has fallen each of the last five days. That tells us that the big buyers are not willing to buy this move. Moves that come on falling volume simply don't have momentum. There is no great anxiety among buyers to rush into this market as it bounces higher. That can still occur, but the light volume is a bright, glowing warning sign that institutional money is not participating in this move so far.
In addition to the light volume, the other big problem is that the indices are now heading into some major technical overhead. The S&P 500, for example, is right at its 200-day simple moving average of 1107. Some of the folks who bought during the July swoon are now back close to even and the recent dip buyers have some profit to protect. Those two factors make the upward path more difficult. We'll talk some more about overhead resistance later today.
So as we start the day we are looking at a market that has had a light-volume oversold bounce into increasingly heavier overhead resistance. That doesn't mean the market can't keep going higher but it does mean that it is going to require some very hard work by the bulls to keep things moving. They need to increase the intensity of their buying if they are going to overcome the lack of recent momentum and cut through overhead.
Given the technical conditions I don't expect to see the bulls able to move the market much higher at this point. They need to consolidate or even pull back for a couple of days and regroup. Unfortunately they have a very weak foundation now and they need to shore things up if they are going to take this market higher.
In the early going we have a slightly negative open. Crude oil continues to move higher as it reacts to comments from OPEC leaders about the difficulty of increasing production levels. Overseas markets are mixed. We have personal income statistics coming up but not much in the way of news at the moment.