Something To Work With

The carnage ended on Wall Street today and last week's crash fear was replaced with buy the dip chatter.

The good news is that we have something to work with. Last Friday's low in the S&P 500 at 1458 gives us a level to watch and to trade from. As most technical analysts will readily suggest, if the correction is really over we will successfully retest Friday's low and then power higher. In fact, we don't have to go back very far into history to understand this line of thinking. Just look at the textbook low retest last March.

The current hope is that we're now seeing an easy "this is another bull market buying opportunity" repeat. The clear and present danger, of course, is that investors will now load up on stocks and the retest will fail miserably. When and if that should occur, it will get nasty in a hurry.

Like all market tops, market bottoms also are formed over a series of days, which is why I'm sharing screens of stocks (like 50-day bounces) that may help you understand what tells I'm looking at below the surface. For the most part, I was encouraged by what I was seeing out there though we need much more of the same beyond the end of the month markup which could have very well played a larger role than the bulls want us to recognize today. When oversold conditions are worked off (either through time (i.e. sideways basing) or price (more upside)), we'll have more pieces to the market's puzzle. This will be very interesting.