The market continues to undergo some intense corrective action. It has been ongoing for about a month now, and I've documented it well on Real Money as it has played out. There has been some good rotational action, some failed bounces and bull traps, and some strong countertrend moves as well.
Overall it has been a pretty typical correction so far, and there is really no way to judge how much longer it will last. My feeling is that the character of the action will shift as we approach earnings season. Once we start to see some stronger closes, then it is likely that the buyers will be more aggressive.
I tend to be very optimistic about trading, but that doesn't mean I'm wildly bullish. It means that I'm quite positive that the market will eventually provide us with some very favorable trading setups. I don't expect that to happen immediately. We have to go through the corrective process, and we could go even lower in the near term.
However, the great certainty of the market is cycles. The corrective cycles are always eventually followed by uptrends. It is just a matter of waiting for the right conditions to develop. I'm confident that will happen, so why wouldn't I be optimistic?
What we have to focus on is nailing the timing. I like the way this correction is playing out. I'm seeing some relative strength in places I want to see it. I'm not calling a bottom, and I'm not even very bullish right now, but I am very optimistic that the stars are aligning and those that stay patient and vigilant will be rewarded well by the market gods.