The market bounced back from selling pressure this morning, but volatility is increasing as the bulls cut back ahead of the weekend following a big week.
The bears were unable to dig their claws into the market, probably because they didn't want to jump in front of next week's two-day Federal Open Market Committee meeting. There is a high level of anticipation that the Fed is going to announce some form of quantitative easing and, given its recent history, it's not a good idea to bet against a positive market reaction. I'm sure the bears will be looking for a sell-the-news reaction, but that leaves them on the sidelines for now.
For a week that has seen such big gains in the indices, I've heard an amazing amount of grumbling from traders. Far too many have negative big-picture views and they were caught out of position by this market action. Many anticipated a bounce, but few expected this much vigor, especially with all the negative news in Europe.
It has been contrarian-type action, with the market doing its best to frustrate the negative consensus. Once a move like this starts, a lot of factors come into play to keep it going. Shorts get squeezed, dip buyers become more aggressive and performance anxiety kicks in.
The biggest complaint I hear from traders is that they don't see charts they like. There aren't any clear areas of leadership other than a few big-cap names like Amazon (AMZN) and Apple (AAPL), and most charts are still trying to rebuild after the early August meltdown.
If you are a momentum trader who likes high relative-strength names, there isn't a whole lot for you.
The bears are rooting for aggressive profit taking to end the week, but with the Fed meeting on deck, we'll continue to have underlying bids.