After all the selling on Tuesday some sort of bounce action would not have been a surprise. What was surprising was how quickly the market came back Wednesday. It completely recouped Tuesday's losses on very powerful breadth and good volume. Any technical negatives that occurred due to the Italian bond selloff were wiped away.
The tipoff that the Italian bond selloff might not be such a big deal was the fact that so many stocks held up well on Tuesday. The selling is mainly contained to financials, which was a sign that buyers were not too worried about a broad market impact.
Breadth Wednesday was 5,400 gainers to 1,600 decliners and there were more than 420 stocks making new 12-month highs. That is a powerful move and suggests that the momentum may continue.
The bounce in the S&P 500 took it right back into the middle of the trading range that has been in place since May 10. There is still resistance at around the 2740 level but this is a good setup for a move over that level in the next day or two.
There was some very good stock-picking today. I had particularly good luck with some recent China-based IPOs such as iQIYI (IQ) and HUYA (HUYA) . I was disappointed there wasn't better strength in some of the technology names such as Alibaba (BABA) and Twitter (TWTR) but they remain in good shape technically.
The bulls are much better at this momentum thing than the bears are, so we will see if they can produce some follow through Thursday. The bears obviously failed badly at follow through and now they are just helping to fuel the move in the other direction.
Have a good evening. I'll see you tomorrow.