An Uninspiring Bounce

• Posted by Robert Sinn
• on April 11th, 2012

While many will applaud today’s market action as confirmation that equities remain resilient in the face of bad news and bearish sentiment I am a bit less enthused. By most accounts the market was oversold at yesterday’s close and a bounce to squeeze tardy bears is certainly normal in such a situation. However, the S&P 500 was unable to close back above 1370 and in fact spent most of the session trading sideways to lower. Meanwhile, the market leaders ($AAPL $PCLN) came under heavy pressure and there is some significant evidence that these stocks are undergoing a change of character:

Click to enlarge

$AAPL’s first consecutive solid red bodied candles since December

 

$PCLN needs to hold 700 or things could get very ugly

Meanwhile, the energy ($XLE) and materials ($FCX $XLB) look poor to say the least:

$FCX – Another $2 “air pocket” below 35.50

 

$XLE – One of the only sectors of the market trading below its 200-day moving average

While these charts may paint a fairly gloomy picture I caution readers from becoming too bearish given that equities are still in a strong uptrend. Moreover, this market has proven its ability to turn higher on a dime even at times when it seemed fairly improbable. I view the broader equity market as currently being in a low probability area; essentially this means that there is little justification for being positioned aggressively to either side and a market neutral posture appears to be most prudent for the time being.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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