After the worst two-day period of selling so far this year, the market quickly reverted to "not a worry in the world" action. It started a little slow this morning as the bears made one attempt at the open to fade the strength, but when that didn't work very well it slowly climbed higher and finished the day at the highs. Volume was light but breadth was solid at over 2-to-1 positive.
In the old days, I'd be very skeptical that a bounce like this could continue. I would expect pressure to kick in as folks who were burned \Wednesday and Thursday look for exits. But in the new world, low-volume bounces have a tendency to keep on running. It may not seem very logical but that may be exactly why it tends to occur.
Although the market bounced and closed well today, I'm sticking with my market bias that a topping process is now occurring. I expect to see strong action as things play out, but I will be surprised if we see another strong breakout.
Next week the sequestration issue will heat up and will likely be a catalyst for some market movement. With earnings season now over and positive seasonality coming to an end, the bulls don't have a lot of positives to work with, but lack of good news hasn't been a big problem.
It was a good day today but it wasn't good enough to offset the damage that was done. Increased caution is in order, but that doesn't mean we won't find some good trades.
Have a great weekend. I'll see you Monday.
