Bears Squander a Promising Opportunity

Weaker-than-expected consumer sentiment caused a sharp drop in the market shortly after the open on Tuesday morning, but the bears wasted their opportunity, and the bulls quickly took control once again. 

The bears needed a weak close to trigger a potential market top, but the dip-buyers were very aggressive, and by the closing bell, the intraday losses were fully recovered, and breadth was very healthy with around 5,900 gainers to 3,400 decliners. More than 1,150 stocks hit new 12-month highs to just 145 at 12-month lows.

The quick drop made for a good day-trading opportunity but it is still extremely difficult to put more capital to work. I've been whining about the lack of attractive entry points for a while, and Tuesday's action did nothing to change that. 

If you want to increase your market exposure, it is necessary to chase and buy extended charts. The S&P 500 has gone nowhere for a week, which is helping with overbought conditions, but many things are still quite extended.

The bears probably would have had better luck with a reversal, but China announced a substantial stimulus plan that boosted oil, commodities, and China-related names. In addition, shares of Nvidia NVDA jumped over 3% after an indication that insiders are likely done with major selling.

Cannabis MSOS continued its bounce, and biotechnology XBI was under extreme pressure again before bouncing back in the afternoon.

There is more economic data due later this week, including home sales and PCE inflation news, that may have an impact. The reaction to consumer confidence on Tuesday illustrates a high level of nervousness about economic slowing. The bulls are embracing the soft-landing narrative, but it won't take much to upset that thinking.

I'm ready for a pullback, but the market doesn't seem to care.

Have a good evening. I'll see you Wednesday.

At the time of publictaion, Rev Shark was long NVDA and MSOS.