Holy cow. Amazingly, the market has once again logged a session that told us absolutely nothing concrete about its likely future. Yes, stocks fell more than a little bit on Friday, but they didn't break under any critical floors. In fact, the major indices used those critical floors as a pushoff point today. The bulls remain in the hunt. On the other hand... Advertisement Your MarketClub Trial Has Been Paid For What's better than access to powerful, proven trading tools? Easy, someone else paying for you to use them! MarketClub is proud to announce a close partner has stepped up to cover the trial costs for a limited number of new MarketClub subscribers. You'll have a full two weeks to check the Trade Triangle entry and exit signals, scan for new markets to trade with Smart Scan, and get a feel for the Email Alerts to see if they will fit into your trading strategy. Start Your MarketClub Trial - Cost Covered Advertisement While the market's uptrend is still technically intact, I'm still in the bearish camp. Although the most commonly used charts appear healthy enough, the uncommon charts and the obscure stuff we rarely think about are painting an increasingly bearish picture. Running on Fumes Just as a quick refresher, we still believe the confirming sign of a market meltdown is going to be the S&P 500's (or the NASDAQ's, or whatever) close under the 20-day moving average line, currently at 1974. We're also going to need to see the VIX make another close above its near-term ceiling around 13.3. We got one close above 13.3 last week, but it didn't stick. The next one - now that we have some higher highs and higher lows under our belt - should be the game-changer. Now, take a look at the chart of the S&P 500 below. The index only had to touch the 20-day average line for the bulls to start piling back in, and although the VIX did edge higher, it didn't move beyond its big line in the sand. Still, we're leaning bearishly here for a handful of reasons that aren't easy to see but are still important. The first of the reasons is also a segue into a note one of our readers sent in after yesterday's newsletter. Richard writes: My take on "high volume" (and narrow range) last 2 days... market churn. High volume of nearly equal buyers & sellers causes small range days at cycle tops. Keep up the good work! This is something we discuss from time to time, but we rarely get into because it's tough to describe a picture. It's even tougher to describe a theory. In this particular case, however, it's worth wading into these waters. What Richard is talking about is the span (or lack thereof) of Wednesday's and Thursday's low-to-high trading ranges, not just of the S&P 500, but of all the indices. Considering how much activity/volume we saw for those days, we would have expected more net movement and more intraday volatility. Not seeing any real movement suggests - as Richard pointed out - there's an equilibrium of buyers and sellers... an equilibrium possibly found because we're in a transition from a net-buying to a net-selling environment. We didn't mention it at the time, but there's a related, similar clue with Wednesday's and Thursday's bars - they're both doji bars, where the open and close are basically the same value, and are effectively in the middle of the daily range. This also hints of the equilibrium found between the end of a buying spree and the onset of a selling spree. Today's sharp dip certainly bolsters the idea that Thursday was a pivot for the market. There's more. Remember a few days ago when we took a closer look at the NYSE's advancer trend, decliner trend, its up volume trend, and its down volume trend? We had a feeling at the time the market's undertow was turning bearish, though the picture wasn't clear then. It's clearer now. On the first chart below we've plotted all four trends of the aforementioned data against the S&P 500. We can see how the advancer and the up volume trend lines have continued to fade, while the down volume and the decliner trend lines have continued to rise. Now take a look at the same data plots and trend lines with the advancers and decliners overlaid, and the up volume and down volume trends overlaid. We've not quite crossed all the way over into bearish trends yet, but we're right on the verge. And bear in mind we're using 20-day moving average lines as our trend indicators here, so it's not like we can just chalk up these near-crossovers to the couple of stumbles we've seem in the past two weeks. The undertow has been shifting in a bearish direction for nearly three weeks now, even though stocks are actually up for that timeframe. It's a red flag nobody can afford to ignore. All the same, we'd really like to see the S&P 500 close under the 20-day average line at 1974 and the VIX close above 13.3 before wading all the way into bearish waters. It looks like we won't have to wait too long to do so, at our present rate. Now, let's see on Monday if Friday's dip was truly the beginning of a pullback or just some end-of-week cleanout of trading portfolios. Don't Freak Out Over Weak New Home Sales You may have already seen the headlines yesterday, but if not, June's new-home sales were a little lackluster. As the media so fondly pointed out, the pace of 406,000 units was a three-month low, inciting a small number of forecasts for a real estate implosion. As is always the case though, there's more to the story.... or maybe less, in this case. By "less", we just mean the headlines made things seem a little more dire than they actually were. June's annualized sales of 406,000 was indeed a disappointing figure compared to the estimate of 480,000, but this kind of volatility isn't unheard of. As a matter of fact, we saw a similar plunge last summer too. The longer-term trend here remains healthy, as it does for most - though not all - of the real estate indicators. From the Site Let's wrap up this newsletter and the trading week by pointing you to my two favorite commentaries posted at the site today. First up, if you've got a banking hole to fill in your portfolio and just can't get jazzed about habitually-troubled Citigroup (C) or Bank of America (BAC), why not think small? Bryan Murphy dug up a good-looking small cap bank that looks a heck of a lot healthier than its large cap counterparts. Second, you know all this recent chatter about U.S. companies moving overseas to escape high U.S. tax rates? John Udovich took a closer look at three that uprooted themselves and moved to ultra-business-friendly Bermuda. Has it paid off? You'll just have to read. By the way, Udovich also dissected five former U.S. companies that have set up shop in Ireland, while Murphy told it like it is for MannKind (MNKD). The highly-touted and now-slumping biotech stock has been under some serious fire this week, but Murphy seems to be calling BS on that beat-down effort.