Last week's indicator review noted that we were oversold, but that indicators were weakening and it was dangerous to try to catch the falling knives. That turned out to be pretty good advice, as we became even more oversold (top chart)--reaching levels seen at recent intermediate-term market bottoms--but continued to see an expansion of stocks making new lows (middle chart). Buying sentiment, as measured by the cumulative TICK (bottom chart) remains nowhere to be seen, as bounces have led to reversals. In short, the weak market has become weaker. Traders looking for signs of capitulation in the usual indicators have been frustrated; it's been a grinding decline rather than a sharp panic.

The advance-decline lines specific to NYSE common stocks and S&P 500 issues have both moved to bear market lows this past week. We've also seen an expansion in the number of stocks making fresh 52-week lows. The over-300 new lows among NYSE common stocks eclipsed the March level, though the 90+ new lows among S&P 500 stocks remain beneath the peaks from January and March (though still expanding). Only 14% of NYSE stocks are trading above their 50-day moving averages, also quite an oversold level commensurate with recent intermediate-term market bottoms.

When markets make a bottom, we like to see divergences and a narrowing of participation to the downside. Recently, however, the opposite has been the case. Sectors that had been strong, such as materials, have joined the downside and the small caps, which had been showing relative strength, have been quite weak of late. Indeed, only 14% of S&P 600 small cap issues are trading above their 50-day moving averages, down from 70% in May; a level similar to the market overall, as noted above.

With the widening number of issues making new lows, the falling advance-decline lines, and the weak sentiment/TICK, I once again am not inclined to try to pick the bottom. We're overdue for a bounce, and we're at oversold levels that have been associated with market rallies. Until we see some stabilization among the housing and banking issues, however, I suspect it will be difficult to sustain any such rallies. As always, I will be updating many of these indicators in my daily Twitter posts, along with links to posts and articles on market moving themes.

• More by Brett Steenbarger »
• More on SPY, IVV, NYC »
• More on Technical Analysis, Market Outlook »
• Forums: SPY, IVV, NYC »