A bottoming process normally entails a series of lows, which are accompanied by progressively worse news until the majority of those who would be affected by such news will have sold, and the supply and demand balance shifts toward the bulls. By that time, investors are so focused on the problems that they have trouble believing a more substantial upturn will occur. Sentiment, which had gotten too bullish in mid-May, weakened considerably until two weeks ago, giving us some extreme readings of the ratio of downside volume vs. upside volume. We were encouraged that such extremes were occurring so rapidly. Ironically, now that expectations are becoming rampantly negative, the coming earnings season, due to start in the second week of July, may prove to be more benign than expected and provide impetus for the next rally.
Every situation properly perceived, becomes an opportunity.