The sellers came back to Wall Street today, as an early rally attempt faltered around 11:00 and stocks stairstepped their way lower the rest of the day, closing near their lows and with decent sized losses. Volume appears to be lower on the S&P but heavier on the Nasdaq, which drastically underperformed today.
Technically, I said last night that it looked the indices were just consolidating their recent move lower and since many individual stocks were forming bear flags, I had to assume we are just pausing here before heading lower. Today fits with that description. If you look at things this whole week, we had extremely oversold conditions, and we got a total of one day of bounce. Since that one-day bounce on Tuesday, we have fallen and the fact that that was the best bounce the bulls could manufacture in the face of such extreme conditions is very disconcerting or should be for any bulls out there. We have worked off a lot of the oversold condition so a big move lower would be perfectly normal here - most oscillators or indicators are pretty much neutral right now. I was hoping for a bounce that went a little higher, but it is starting to look like we may not get it.
This is a short commentary because my household is kind of sick - including me. Having two young kids is challenging enough, but when you have a stomach bug going through the house, it becomes even more challenging. For tomorrow, I would watch for a break of 743 on the S&P and 1386 on the Nasdaq as signals of the possible continuation of this move lower. I didn't pay much attention to the market today but I should have watched the financials more - XLF almost touched the top of its channel today and definitely looks poised to head lower. Check out the watchlist I put out last night - most look still playable as bear flags that haven't yet broken down. Depending on how I feel, I may start playing some of these tomorrow. Good luck.