I have written a number of times lately that the biggest bounces occur in poor markets. We had a classic example of that today. It was an absolute rampage of buying with the biggest gains and best breadth since March. The bears will point out that volume wasn't that great but that has not been a good predictive of follow through in many years.
The big issue now is whether the bulls can build on this. When we have a bounce like this it helps to create a new supply of dip buyers. They missed the move and now they are afraid the market will run away without them. They don't like to chase but they will buy on a shallow pullback.
With this bounce we now have clear downside support levels around the 200-day simple moving average of the S&P 500 around 2,765 level. I am not looking for a V-shaped move from here. In fact it would be a cause for concern but I'm not looking for a rest of last weeks lows to occur in the near term.
Netflix (NFLX) kicks off the earnings for the "glamour" names with a solid beat and some strong guidance for new subscribers. The company cut guidance for the fourth quarter but they seem to be playing the low ball game like Apple (AAPL) used to do under Steve Jobs.
Netflix is trading up about 12% after hours as I write, which will take it back over the recent highs and cause some painful squeezing. Both analysts and the chart were indicating that some disappoint was likely but there were wrong. I would not try to short this stock at this point.
IBM (IBM) has been a serial disappointer and it is disappointing once gain. This will weigh a little bit on the DJIA tomorrow due to its weighting but it is not a bellwether name and will be scoffed at as irrelevant.
The bulls not only won the battle today but they regained some momentum and are in position for another push. They have not yet repaired all of the recent technical damage but they have made a very good start.
Have a good evening. I'll see you tomorrow.