My primary thesis recently has been that market players are underinvested and anxious to make up some relative performance before the end of the year. The many obvious big-picture negatives have made it very easy to stay skeptical and to be distrustful of strength.
I believe the action today tends to confirm that thesis. The gap-down open pulled in the dip-buyers, and more buyers stepped in when we held the early lows. That is an indication that folks are more focused on trying to add long exposure than on protecting gains.
The market has been driven so often by high-frequency trading and the news out of Europe that I find it refreshing to see some old-fashioned psychology operating once again. The looming end of the year is causing the action to revert to more ordinary worries and concerns like trying to outperform benchmarks.
We are going to continue to be hit with big-picture news that will keep things choppy, but I look for these underlying bids to persist. In particular we will have to deal with the "super-committee" as it approaches its deadline for a deal. If we follow the same pattern that played out in Europe, we should see a "U.S. is saved!" rally after a few scares.
My point here is that it isn't going to be easy to kill this market because so many folks simply are not positioned very well. I find that even though I have a bullish bias, I still have too much idle cash because the action in individual stocks has prevented me from being as aggressive as I would like.
It should be a good market for opportunistic traders. Just keep an open mind and don't be overly dogmatic about market direction.