The market's oversold condition has deepened over the first couple
of weeks in July. As pointed out in the 6/27 comment on the
market, I have, as a gentleman of leisure, opted to spend quality
time out on the deck with the occasional drink and cigar. I have
stayed away from the market, and I may do so further. The
break below important support in late June reaffirmed the bear
market and, as subsequently mentioned, set up the possibility of a
breakaway downleg, which we have been experiencing. The
failure of the bulls to sustain a rally in recent weeks plus the
absence of heavy downside volume relative to upside volume
leaves me cold -- concerned that traders are looking for a
demonstrative capitulation to the downside before stepping in
to rally the market. In short, we have a breakaway downleg that
could spike down on heavy downside volume before this move
completes.
Hunches can get you into trouble as easy as not, and since I
have no trading capital in the market, I would like to find a spot
to play a rally from a deep oversold. But I am not going to push it
and instead will take my cue from the action ahead.
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