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Summary CommentsPrior to yesterday heavier volume sell-o, volume on most major markets during the snap back had been ane-mic, making us suspect that a solid low was not in place. Yesterday’s ailure on the S&P 500 occurred on a rallyback into the 100 day moving average, while the NASDAQ stalled and reversed o its overhead 200 day movingaverage. At this juncture it appears this recent rally was a typical reaction low, oversold bounce. Absent a ca-pitulatory sell-o we remain skeptical that a lasting bounce can occur just yet.Yesterday’s trading activity onlyreinorced the idea that sellers are still the aggressors, as volume remains heavier and with more consistency ondown sessions than up sessions.As we said in other recent writings, durable rallies are built on liquidity and the condence that higher prices canbe achieved. In this type o environment stocks reside in the hands o strong-handed buyers, who typically havelengthier holding horizons. However, in corrective periods these conditions reverse, as condence wanes andstocks all into the hands on “hot potato” traders, who take opportunist stabs to generate alpha. However thesehot potato traders are more the dating type, as opposed to the marrying kind, thus it’s a love ‘em and leave ‘emast mentality. This aorementioned condition is why rally attempts in a correction don’t last, as demand is tem-porary and feeting. The lasting bottoms occur when all the selling is washed out and the strong-handed buy-ers nd levels where they are willing to make a stand and go “all in” with their liquidity. So ar we haven’t seenconditions materialize to suggest we are there just yet. Now this is the electronic age and things can change inshort order, especially given the proper catalysts, however we they haven’t come to the surace yet. That said or those who can be tactical and/or noncommittal it makes sense to watch the ray rom aar andcoming in once the battle has been decide via a wash out or the subsequent, post washout, internals improve-ment phase.Now I am not saying you have to make new lows or a bottom to occur, but clearly you don’t gorom recent conditions where internals break down, new lows surge then just fip right back to going up, up,and away. Bottoms, like tops are a process, not a singular event. Below we take a quick look at the S&P 500, as a market proxy, in greater technical detail.
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