EARLY BOUNCE FADES -- VERY LITTLE HAS CHANGED

S&P 500 SPDRS FADE... Although the S&P 500 SPDRs closed higher today, they ended well off their earlier high. The increase in volume was pretty much concentrated in the first hour of trading. After that, trading trailed off. In my view, very little changed in the overall market picture. The SPY is still above its early October peak at 114.34, but remains well below its 50-day moving average at 119. Daily MACD lines are still negative. However, the 20-day Commodity Channel Index (CCI) shows it to be in an oversold condition. Within the overall scheme of things, there's still room for another retest of the old highs. If that's going to happen, however, the market will have to turn in a better performance than it did today.

Chart 1

NASDAQ 100 IS ALSO OVERSOLD AND NEAR SUPPORT... The Nasdaq 100 Shares (QQQQ) also gave big a big chunk of its morning gains. Volume decline in the bounce however. Here again, little has changed. The QQQQ is testing chart support along its October peaks (ranging from 36.37 to 36.47) and its 200-day moving average (currently at 36.10). Its 20-day CCI oscillator shows it to be oversold and giving a short-term positive divergence. That may suggest that the weakest of the major stock indexes is reaching a point where a rally attempt can be attempted. It had better do it pretty soon. That's because it's downside correction is getting dangerously close to the point where it could start sustaining longer-term damage.

Chart 2