Now that was a high volume day. Breadth ended at -94%. That is the worst day since the 2011 mini meltdown. New lows came in at 1312 which was even worse then in 2011. New highs dropped down to 7. Needless to say the technical damage is quite significant.
The futures hit the overnight limit and after the open they went right to daily limit down, but trading didn't get halted. There was very little interest in selling into that big gap down so traders were able to spark a rally. Later in the day some sellers returned.
In Daily update 6/4 Low volatility periods I showed multiple three year periods of low volatility and noted that it was about time for volatility to pick up again. I think that just happened. I expect higher volatility the rest of the decade.
The market is extremely oversold short term. However, that does not mean it will bounce significantly. The volume was very heavy today, but it did not seem like a selling climax. I am certain people will be selling rallies. SPX finally managed to close off the low. That means a gap up would not have particularly high odds of retesting the low. It could be time for a bounce day. I don't know that we could expect a bounce to last any longer then that. I am sure there will be a lot of margin calls now. This will take a while to shake out and we can still go significantly lower on this first leg down.
Today turned the intermediate trends down across the board. I don't see any need to rush into longer term long positions. SPX's 200 DMA has turned down the last two days. Many people look at that for trend direction and they will be thinking down. Everything that has happened over the last year is consistent with a bull market top. Odds are high we are entering a bear market and it could be quite severe. Until the market does something that gives us a signal it was just kidding about that and the bull market is going to get reestablished caution is in order.
Bob
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