The indices are still in the red but we are seeing classic "buy the dip" action so far today. The lows of the day were hit in the first few minutes of trading and have been trending upward since. The Nasdaq is already in positive territory and the other indices are not far behind. Breadth has gone from about 3-to-1 negative to about 2,650 gainers to 4,000 decliners. It is the sort of action that has happened so often in recent years that it causes many traders to automatically buy any and all pullbacks.
Buying the dip was the "easy" trade. The challenge now is determining what comes next. The technical action has not been particularly good lately and the bears are very loud with the narrative that the Trump trade is coming to an end. There is a long list of very compelling bearish arguments, but what they have been missing for so long is the price action to support their views. Being a bear is easy if you aren't worried about timing.
While the bounce today is impressive, the issue for the bulls is that they haven't been able to produce a new high in nearly a month. The longer-term trend is still positive but there has been a downtrend in place since March 1. The bounce today doesn't do much to change that picture. In fact, if I was looking for some short-side entries, this is probably the best way to get some setups.
From a bullish standpoint, there is some good stock picking action. I mentioned my Stock of the Week, Supernus Pharm (SUPN) and the ocular sector looks downright frothy with Applied Optoelectronics (AAOI) leading the way.
This bounce action is likely squeezing some bears as it continues, but that doesn't mean putting cash to work is easy.