While for most of the day, we did not see this, toward the end of the day we did. That's about the time the market started selling off into the close.
The 1 min ended in a leading negative divergence, the 5 min ended with selling pressure into the close. It's still very possible that the late day weakness could carry over to the open. If this is the case, we'll be looking for signs of a positive divergence into any weakness to buy into.
The price/volume relationship today was dominant and bearish-Price Up/ Volume down. This reflects trades backing away from higher prices, but is usually found in a maturing uptrend, this is not even an established uptrend so my take on the P/V relationship is one of skepticism as to whether the market can really bounce. There's a lot of media calling attention to "6 consecutive weeks down in the market" so the skepticism is natural.
The one bright spot was 5+% gainers which were dominant with 106 closing up on higher volume, that's the strongest relationship and about the extent of any positive price/volume relationship action.
What I did find odd, but somewhat understandable was the top 10 sub-industry groups today: Building Materials, Recreational Vehicles, Home Improvement Stores, Department Stores, Sporting Goods Stores, Gaming Activities, Electronics Stores, Movie Production-Theaters, Cement and Heavy Construction.
Most of these are likely to be among some of the biggest losers in a bear market. It makes some sense if you look at the bounce as an opportunity for Wall Street to set up short positions, which is the same way I view the usefulness of any bounce (although as I said earlier, a bounce is certainly tradable).
All of these groups performed in the 3% - 4.25% range-solid gains for industry groups.
Of the worst performing groups (There were only 5 groups of 239 in the red today and the losses were from -.11% - -1.77%) : Manufactured Housing, Regional Mid-Atlantic Banks (which were among the best performers yesterday), Dairy Products, Credit Services and Closed End Debt Funds. The only one that stands out is Manufactured housing which has been a poor performer over the 11 timeframes I track including 1 day, 5 day, 10-day, 21- day, 31 day, 42 day, 52 day, 63 day, 84 day, 126 day and 250 day. Manufactured Housing has shown losses in every timeframe.
As for our bellwether, AAPL-it showed improvement in 3C in all timeframes other then 1 min (like the rest of the market). The positive divergences grew sharper and advanced further. I take this as a healthy sign for AAPL and by extension, for the overall market.
In precious metals, silver did show some improvement today, as if t would be willing to participate in a market bounce, it's not quite at the point in which I would consider it a buy as I believe there may be early weakness tomorrow, it is on that weakness I would consider it for a purchase. This is all predicated on the theory that our bounce probability is still alive, which I lean toward as the most likely outcome, even if we get some weakness tomorrow.
As for Gold, I think it too has the ability to bounce, although I don't see GLD as going to much further north then $150.50 where there's decent gap resistance.
Energy
USO looks like it wants to head higher, I think the $41 area would be a reasonable target for any bounce in USO. More broadly speaking, the energy group represented by XLE did manage to break through it' short term downtrend line around $73.7. XLE in general looks to be much weaker then other important industry group such as Technology which looks set to outperform. You might consider buying TQQQ to play a bounce on any weakness (so long as there's a positive divergence). In fact, between Energy, Technology and Financials, Technology looks to be the strongest group as of today.
As for Bernanke's prepared comments today, they were explicitly geared toward Congress and the impasse or gridlock there with an emphasis on the debt ceiling and budget deficits. Bernanke seems particularly concerned with the Republican idea of a short term technical debt default. There was no language about regulation of the financial industry as we have seen the last two trading days, thus it didn't do much to move the market.
As for the European wild card, Greece, thing are not looking good there. EU finance ministers can not agree on a path forward, there's the disagreement between Germany and the ECB with regard to the bondholder situation and it all may be a moot point if the Greek parliament can't pass their intermediate term austerity/budget measures which is looking less likely everyday with PMs peeling off from the majority parliamentary party nearly everyday the last several days. In effect, PMs are summing up their vote in terms of "I'd like to be able to safely walk down the streets" as the Greek population is not in the least supportive of more austerity measures. It's seeming more and more like Greece will default in one form or another and the implications of that will be very dark for Europe and as such, the world economy.
As I have maintained for quite some time, I do believe that we are moving closer and closer to a market meltdown that will have equity investors trading in the first secular bear market in equity history and it is within this framework that I believe those who quickly adapt will have unprecedented trading opportunities.
I'm going to run some more scans and take a more intensive look at market breadth and I'll be posting a follow up later tonight.
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