{"id":59619,"date":"2022-05-03T00:13:17","date_gmt":"2022-05-03T07:13:17","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=59619"},"modified":"2022-05-03T00:23:33","modified_gmt":"2022-05-03T07:23:33","slug":"worst-kind-of-oversold-bounce-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/05\/03\/worst-kind-of-oversold-bounce-the-market-breadth\/","title":{"rendered":"The Worst Kind of Oversold Bounce – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary<\/strong>:<\/h2>\n\n\n\n

The expected first of the month buying<\/a> only showed up in the last hour of trading, but it still made an important impression. The recovery created a picture perfect bounce off the oversold threshold. At the same time the S&P 500 perfectly tapped its May, 2021 closing low before recovering. The volatility index faded from a near challenge of its March intraday high. Combined, this poetry in motion delivered the worst kind of oversold bounce. Not only do the moves look overly mechanical (no rush to sell or signs of exhausting sellers), but also they come ahead of an important meeting of the Federal Reserve. If these rebounds happened in the wake of the Fed news, I would be ready to declare a tradable bottom. Instead, I remain wary.<\/p>\n\n\n\n

The Stock Market Indices<\/strong><\/h2>\n\n\n\n

At the lows of the day, the S&P 500 (SPY) revisited its May, 2021 closing low for the first time in almost a year. Like a reawakening, this test suddenly got the buyers (probably more like the algorithms) interested again. The index barely looked back as users rallied into the close for a 0.6% gain. <\/p>\n\n\n\n

\"The<\/a>
The S&P 500<\/a> (SPY) created a picture-perfect test of the May, 2021 low and rebounded into a 0.6% gain on the day. <\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n
\"\"\/<\/a>
This 5-minute chart<\/a> shows how a very orderly decline in the S&P 500 suddenly reversed in the last hour of the day. Volume steadily increased over that hour.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The NASDAQ (COMPQX) did not decline fast enough to deliver its own poetry in motion. When the S&P 500 triggered the buying surge, the tech-laden index was just 157 points away from its September, 2020 high. The scramble to buy benefited the NASDAQ even more than it helped the S&P 500. The NASDAQ ended the day with a 1.6% gain.<\/p>\n\n\n\n

\"The<\/a>
The NASDAQ<\/a> (COMPQX) did not quite test its September, 2020 high before rebounding into a 1.6% gain on the day.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) was relatively unremarkable compared to the tests facing the S&P 500 and the NASDAQ. The ETF of small caps finished the day with a 1.1% gain. Buyers saved IWM from closing at a fresh 18-month low.<\/p>\n\n\n\n

\"The<\/a>
The iShares Russell 2000 ETF<\/a> (IWM) gained 1.1% and still has a way to go for its next important test of support.<\/em><\/strong><\/figcaption><\/figure><\/div>\n\n\n\n