Stock Market Due for a Little Bounce

Trader Talk

The major stock indexes suffered a volatile whipsaw day today as sellers jumped on board positive early action, driving the stock indexes hard into the red, only to see a late-day rally attempt stem some of the lost red ink. Volume was heavy, with most stocks doing much worse than the stock indexes.

Officially, the NASDAQ fell 0.1% on 2.4 billion shares, while the Dow Industrials dropped 0.5% on NYSE volume of 5.3 billion shares. The leadership profile remains VERY negative, with 43 stocks making new highs versus 1,137 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The S&P500 continues to smash through the March low, with zero sign yet that the sell wave is set to end anytime soon. The MACD turning positive from this position would be one clear sign that the breakdown was a fake out before a snap-back rally would launch a new bull phase, though that indicator also continues to trend down in classic bear fashion. We are oversold, and due a bounce, though investor sentiment remains stubbornly complacent, with the VIX closing no where near the 40ish level that indicates the necessary fear is present for a bull turn to land. The VIX spikes to such levels at important bottoms as investors race to buy protection from further losses in the put option market. Such a spike happened around the March lows that lead to a two month advance, and so far such fear has yet to materialize. Which means the capitulation crash - real or fake-out - has yet to land. A bona-fide crash is not out of the question from this position.

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

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