In my previous post, I discussed how uncommon it is for this market to have a panic open. There are too many dip buyers and not enough fear for markets to drop sharply -- even after a close like yesterday's.
Another, related phenomena in this market is the inability of the bears to create downside momentum. Even when they have an edge, both technically and fundamentally, there consistently are buyers that prevent strong downside momentum from building.
Consider what happened following the worst day of the year -- on Mar. 21. The indices bounced back the next day and held steady for a few more days before a strong intraday reversal occurred and helped produce multi-day upside.
Today we have another example of how incapable the bears are of producing downside momentum. Both the headlines and the technical patterns are supportive of downside, but the dip buyers held things steady -- and now the buyers are inching back in. We'll see how we close, but it doesn't look like there is too much worry among the bulls.
Keep in mind that we have the monthly jobs news tomorrow. The early strength yesterday was due to a better-than-expected ADP jobs report, but with the Fed balance sheet now an issue, a strong report may no longer be a major positive.
The ability of this market to shrug off events that seem to be significant has been an ongoing theme. That is why we have to focus on price action above everything else. Someday there will be a news event that has a significant and lasting impact on the market, but the jury is still out as to whether yesterday's Fed minutes are the long-awaited event that the bears have been looking for. This market isn't looking very worried right now.
I came into the day close to net flat, with a few long positions and some index shorts in the form of ETFs. I'd prefer more downside to provide better entries, but the market seldom seems to cooperate in that regard these days. Nonetheless, I'm in no rush to add to add to positions right now. Some of the optical names I like, such as Oclaro (OCLR) and Applied Optoelectronics (AAOI) , are bouncing, but I'm not convinced that they are going straight back up.