As noted this morning, I ignored the oversold reading on the 14-day average RSI chart to my forecasting peril. But while of course the bulls are out claiming victory, in the face of deteriorating longer-term breadth and poor seasonality, this bounce only prolongs the inevitable 5-10% correction, and could make it *worse*. Based on 200dma breadth (see following chart), the S&P 500 would need to fall more than 7% from current levels in order to correct the negative divergence that has formed between the index and the % of stocks over their 200dma. (As way of explanation, going back to late 2016, the market *should* be trading near the top red line in the chart below if it were to stay true to 200dma breadth, as indicated by the bottom red line…giving the market a bit of the benefit of the doubt.)
We’ll see what happens, but I suspect the market will make another lower high in 50dma breadth before topping out again.
Lastly – the obnoxious buy-the-dip attitude by the Ritholtz/”Downtown”/”Common Sense” crowd is well demonstrated by the following tweet this afternoon by Mr. Downtown himself: