Despite the oversold condition of the market on Friday, stocks and indices alike continued to bleed lower and closed poorly on the day. The QQQQ closed at its 50-day average and the SPY closed at its 200-day average, so both are likely to bounce.
Nevertheless, we would not be looking for more than a bounce of the dead cat variety. Last week we noted that we were unable to find anything worth buying despite heavy scanning. Over the weekend we scanned even more thoroughly expecting to find some bounce plays. Instead what we found were a plethora of short set ups.
Lately the indices have not been reflective of underlying stocks. As index prices moved higher, individual stocks were performing poorly. Breakouts were failing and stock prices behaved as if they were stuck in the mud. Once the index prices finally let go last week, stocks finally blew through support levels and sold off with gusto.
We would expect then, that even if we get a weak bounce on the indices this week, that we may in fact see stocks continue to test their supports in a distributive fashion. The number of stocks that are setting up to go lower indicates this.
No comments:
Post a Comment