Tough to tell what you want if you are a bull. We know that the sellers have to wash out, and we aren't yet seeing signs of that. We know that the overflow and backup of initial public offerings has to relent, and that has not happened either. We know that we need to see people who haven't liked stocks, such as the SunTrust analyst who upgraded Yelp (YELP), go positive. We know that we need to see interest rates go higher. And we know that it is vital that Alcoa (AA) not totally stink up the joint.
We need to see the technical damage healed. We need to see the margin calls ending. We need to hear that the redemptions and send-backs are over. We need to get some earnings in the hard-hit sectors affirmed. We need to see more takeovers as the market comes down. We need to see some negative biotech analysts go positive.
We need to see...
Yep, the bulls have a tall order ahead of them. The bears, on the other hand, have an easy run. There are profits galore, insider selling to beat the band and a never-ending supply of high multiple to sales, not earnings.
The strange thing, though, is that the bears do have a real strike against them: People are turning extremely negative in the face of the tape. My friend Dennis Gartman came on "Fast Money" yesterday and traced out an apocalyptic scenario that I don't see happening. I am thinking the selling can be contained to last April's swoon and not even necessarily to January's blowup.
But you need more Gartmans, and you need more data points that can send bonds down in price and up in rates, which is the proximate cause of what caused yesterday's bizarre selloff, where all but a handful of bond-market equivalents and stocks with no long-term gains could rally.
The recipe is a good one: an up opening that wasn't sustainable, a whoosh down to test some of yesterday's levels, and then stabilization for the moment.
The only problem? It's awfully early. If you haven't bought anything yet, you might have to hold off soon. The bounce might be ephemeral and must last through redemption hour between 1 and 2 p.m. and then not get slogged down in profit-taking from the buys in the last half hour as we had just yesterday.