The early morning rally did not last very long as sellers took the market by storm.  Many stocks were breaking to new lows and volume was flying higher.  However, by mid-day stocks were finding a footing as sellers appeared to have been exhausted.  As the market moved higher volume didn’t surge back into the market, although higher buyers weren’t vigorous in their efforts to accumulate stock.   While the markets were able to find support at some key levels the lack of conviction on the upside confirms this correction has much more to go before any new uptrend is established.

At the open the put/call ratio began the day at 2.44, which is, by history’s standard very high.  Extreme pessimism was certainly grabbing a hold of the market as of late, but today certainly was the pinnacle.  With the VIX nearing 40 near the day’s low it certainly appeared a capitulation type day was upon us.  However, without the lack of upside in the afternoon this is more than likely a short-term bottom.  We have a good chance for today’s low to be tested once again, but first we’ll likely see a rally before today’s low is revisited.

Another sign a rally may be imminent was the action in the financials today.  While many struck new low quotations many of them rallied into the close and finishing green in the close.  You can take a look at XLF today, notice the volume coming into the SPDR ETF.  It simply signals buyers were willing to step up and support financials.  While you may think this is a great “value” to get long here, but buyer beware.  Many stocks remain broken and time is what we need to work out the broken charts.  But, the XLF is a signal that in the very short-term a rally is likely.

Cash still remains a good place to be while this market sorts out where it wants to go.  You can miss little rallies as the biggest money is made during strong uptrends like we saw from February into late April.  When the market is a correction the moves higher within a correction will hardly yield any big moves and by that token its best to stand aside and wait for high probability setups.

Take the opportunity to continue study charts and history.  While this market works out its kinks, sharpen your skills.

Stay positive.