Bulls who have been smacked around by record oil prices were happy to see a sharp drop in that commodity this morning. However, they're not happy with the very meager response from the stock market, where buyers are again showing little enthusiasm.
To recap, the bulls are worried. Here's why:
1) The bulls have argued that lower oil prices will get the market going. Indeed, saw the effect lower oil has had on stocks this morning: a very modest rally. A 4-point move in the S&P, after a 50-point decline last week, is a pretty modest rebound. Indeed, if bulls are right and it's commodities that matter, this "rally" is pretty disappointing.
The reason we are not getting a stronger rally is because the vast majority of the market is not convinced that oil is any notable downtrend, at least not yet.
2) While there has been a modest uptrend since the market bottom in April, it has not been very convincing; rallies have occurred on meager volume since April;
3) While there seems to be little enthusiasm for selling stocks aggressively since the March lows, there has also been little enthusiasm for buying. This equilibrium began to change a bit last week, when we clearly saw a spate of selling interest, with little enthusiasm from buyers despite lower prices;
4) New leadership is not emerging. Yes, tech is off its lows, but it is hardly shining, and financials have fallen back.
This, of course, plays into the bears' hands. Their thesis is that the rally off the March lows is illusory: it's been based on seller exhaustion, not buyer enthusiasm, and with no increase in buyer enthusiasm stocks will at best be range-bound through the summer.
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