After the pounding the market has taken over the past week, conditions were good for an oversold bounce. China provided a convenient excuse when they didn't take further action to weaken their currency and the Trump Administration tried to suggest that negotiations are ongoing.
The indices gapped up on the news but buyers are not aggressively chasing the action so far. The S&P 500 ETF (SPY) has broken the early trading range to the downside and breadth is slipping quickly. If the opening gap is filled it is going to have a negative impact on sentiment. Yesterday's lows are the key technical levels right now.
The problem that buyers face is that in addition to technical overhead there just isn't any strong potential positive catalyst on the horizon. The only reason that there is a bounce on China trade headlines is that it didn't become worse. There is not likely to be any positive development in the near term
The other big obstacle right now is seasonality. There are plenty of market players planning to take a break before they go back to work in September and they have no desire to carry a high level of inventory. In fact, many would be happy to see deeper corrective action at this point to set up a rebound into China negotiations and the next Fed meeting.
I've made a couple of small buys but am more inclined to remount index shorts if there isn't better buying interest soon. I see no rush to build individual positions at this point.
Market players have come to expect quick and easy V-shaped bounces and have been right more often than not in recent years. The current conditions don't' look as favorable.