So perhaps what transpires is that the selling dries up and as soon as we start to lift a bit, the shorts rush to in to cover. I'm just speculating on this because surely I have no idea.

What I do know is that the put/call ratio was high once again, and was that way all day. So you have a combination of selling drying up on the downside and folks leaning bearish. When you consider that the last three out of four days the market has been down, it's not so out of character for folks to start seeing a pattern and leaning bearish.

Yes, the indicators say we should go down, but each time we do, the selling dries up. Since three out of the last four trading days have had negative breadth, we have a positive and a negative. The positive is that if we keep this up for another several days we'll be oversold, while the negative is that the McClellan Summation Index turned back down and did so without making a higher high.

On Monday, I noted that the Dollar Index should run into some resistance in the 81-ish area and then might just come back down to give us a right shoulder of a head-and-shoulders bottom. You might recall last week I thought the dollar was oversold enough to give us a pullback in gold too.

I see gold has come down to an uptrend line and ought to bounce from here. I suspect in the end we'll see gold fail the first time up, perhaps around $970-ish, but for now I'd say gold is inching toward being oversold. Of course you know I would prefer to see it break the uptrend line and shake out the weak holders, but I doubt that will occur right now.