I mentioned this morning that one of the themes in this market for quite a while is the inability of the bears to generate sustained downside. Many times in recent years the market has been on the brink of falling into a downtrend but finds its footing just in time.
Monday night, following the poor action, Investors Business Daily changed its market view to 'uptrend under pressure'. That means that enhanced caution should be used but far too often these technical signals have been contrary indicators. IBD uses a proprietary approach that takes into account things like distribution days, leadership, volume, etc., but this market too often seems to act contrary to the historic precedents.
This may well turn out to be just an oversold bounce. In fact, that is the most likely scenario given the intensity of the selling that we have seen in various stocks lately. The big question is whether Apple (AAPL) earnings tonight will be a catalyst for a further bounce or will it trigger another barrage of selling? The likelihood is that there is a large faction of traders that will be looking for a 'sell the news' reaction to AAPL. It may not hit as fast as it did with Amazon (AMZN) but even Alphabet (GOOGL) didn't stay up for more than a couple days before the profit taking hit.
Don't forget we also have the Fed interest rate decision tomorrow and that is likely to add some extra volatility. Today is a nice respite after two days of selling but the uptrend is under pressure now, like IBD has stated, and we need to be ready for another selling spree.
The biggest and best bounce tends to occur in poor markets and that is what this feels like.