The big gap down open has triggered dip buying but there is some hesitation. Breadth is three to one red but Facebook (FB) and a number of other stocks are straight up off the opening lows.
Buying this sort of open is reflexive but the key is the close. If the indices close near the lows it will change the complexion of the action quickly. If we have a day-high close, even if it is still negative, it will give the bulls some confidence.
One of the hardest trades in this market is betting on sustained downside momentum. If you try to catch a continuation move after obvious breaches of key technical levels, you have had very limited success. There are just too many traders always looking to buy weakness. This is a mindset that doesn't change quickly because it has worked so well for so low.
When I look at the markets this morning my initial thought isn't "what should I sell" but "what should I buy?" I see too many stocks that I like that I would be happy to buy at better prices. For example, I added to Baozun (BZUN) and Clearside Biomedical (CLSD) this morning and have my eye on a half dozen others.
There is no question that the indices are in precarious position but that doesn't mean they are going to suddenly collapse and go straight down. We have to take advantage of the trading opportunities even if we think a downtrend may be emerging.
I'm not bullish but I am a buyer of selective names.