Friday, June 27, 2008

Oh! Where's the bounce?

A swathe of bad news and oil price hikes sent any 'will-I-won't-I' buyers scurrying to the hills, taking a few bag holders with them. The Fed bounce which was so nicely teed up was stomped into the ground.

The pressure of higher oil prices will influence action today, but I would be surprised if markets don't close around yesterday's lows with some volatilty thrown in during the day. Futures are flat, so there is no immediate downside pressure from the current oil price. The question for bulls is if they can regain all of yesterday's losses, will that effort exhaust them to the extent prices drift lower to new lows?

The concern (as I see it) was another poor response from the volatilty index.

Volatilty doesn't have to spike higher to mark a bottom, but yesterday was the kind of day where a spike would have at least suggested a bottom was in place.

The Dow chucked a gut as money flow rushed out because of GM.

But it should be oversold enough to see a push back to 12,000 or thereabouts (the declining channel resistance line most likely, with former declining support tackled over the coming few days).

P.S. Check out the latest article on Vix and More. You will get a better argument for current VIX action. Remember, the Dow was hurt by GM but its the S&P which is used as the basis for the VIX.

Dr. Declan Fallon, Senior Market Technician, the free stock alerts, market alerts and stock charts website