The indexes underwent a round trip on Tuesday and closed at the lows after a strong spike higher at mid-day. Most of the action was triggered by news that the US was banning the purchase of Russian oil and gas. This news was not a huge surprise, but it provided a trading catalyst for market players who want to try to catch an oversold bounce.
Unfortunately, the mid-day buyers had very little conviction, and the strength was quickly sold. Breadth wasn’t bad, but that was mostly due to strength in energy, metals, and commodities. There was a long list of stocks that were up more than 10%, but big caps lagged again.
I mentioned Monday that we are seeing the gap in performance between the indexes and big caps on the one hand and all the secondary stocks that have struggled for months on the other hand. The stocks that covered up a very broad weakness for so long are no longer hiding how poor this market is acting.
New 12-month lows exceed 1,400, and the Dow Jones industrial average had its lowest close since March 2021. It may not be a technical bear market for the indexes, but it certainly is one for most stocks.
The intraday volatility is pretty typical of a market that is undergoing a major correction and is struggling to find support. The bulls are hopeful when a bounce starts, but they are overwhelmed by flippers that are taking quick profits or trying to escape a stressful situation. Bear markets are driven by failed bounces and lower lows, and that is what we saw.
The good news is that the corrective process continues to advance, but the headline risk is going to be a major obstacle for a while.
Have a good evening. I’ll see you tomorrow.
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