Trader Talk

Buyer Exhaustion Coming?

Buyer exhaustion coming? Careful here. I mentioned earlier in the day that today (Wednesday) is the lightest volume day since the recent volatility began three weeks ago. On recent days, fewer macro headlines have meant quieter markets.

This is clearly a case of seller exhaustion, but we are seeing very little buyer enthusiasm. In other words, after the big dropoff markets have drifted up on oversold conditions, and on some attempting to pick up a few bargains.

But we are reaching the end of bargain hunting; the S&P has recovered about a third of its recent losses, that is more than enough for any bargain hunting.

Now we face a new dilemma: buyer exhaustion. If the macro headlines continue to be light, the risk is to the downside because only a small group have shown any enthusiasm in buying a bottom. That group is likely done.

On Friday, options expiration. The largest open position on the S&P 500 is at 1, a lot of professionals own a lot of contracts 40 points below where the market is now...I would think they would be very happy to see the market a little lower in the next day, so they can unload their inventory.

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