My recent market thesis has been that once a reversal finally kicks in, we are likely to run for at least a few days due to poor positioning, the need for relative performance and the self-fulfilling nature of seasonality. The reversal finally kicked in this morning, and it has been straight-up action all day as market players are finally feeling anxious about being underinvested.
The nature of this market has been to go from looking horrible, like we did at the close yesterday, to acting euphorically, like we are seeing today. Since many folks are caught by surprise, it creates a mad scramble to find long exposure, and stocks can run much further than seems reasonable.
The big question on my mind is whether we can see some of the "V-shaped" action that has occurred so often when the market turns upward. The action in October was a particularly good example. Given the psychological factors that are now in play, I definitely will be giving the bulls room to run.
Even if you are confident in a bullish bias at this point, you still have the challenge of putting cash to work. At this point, most charts are simply dead cat bounces or running into overhead resistance. You aren't going to see many great charts when we go down for two weeks and then have a sudden burst of action like we are seeing today.
I'll be looking to put more cash to work before the close today. I believe this rally is likely to have some legs. At a minimum, the dip buyers should regain a bit of confidence.