The major indexes recovered a little less than half the losses they suffered on Monday.
It was a routine oversold bounce that had a little additional fuel due to the chaos after the close on Monday, when the Trump Administration named China a currency manipulator. Too many folks were expecting a more dramatic downside Tuesday, and they ended up as fodder for the upside when there was no downside follow-through.
While this bounce was enough to produce a sigh of relief for the folks caught with too much long inventory over the past week, it doesn't do much to correct the recent technical damage. There is still room for more bounce, but formidable overhead resistance remains at the 50-day simple moving average of the major indexes.
Many market players have grown used to V-shaped recoveries, which have become much more common in recent years. Traditionally technicians tend to look for retests, before they declare a market bottom, but that has not been a good approach in algorithmic-driven markets that tend to take advantage of both shorts and underinvested longs.
I'm looking for a bit more bounce in the next few days, but I am not expecting this market to run away to the upside unless there is some major new news form the Fed or on China. Both those events seem very unlikely, as we enter the dog days of summer.
Disney (DIS) has been one of the better-acting stocks in recent months, but it is stumbling on its earnings Tuesday. It is involved in a messy consolidation of assets from Fox Corp. (FOX) , and that is likely causing some confusion.
There are also hundreds of small-cap reports hitting in the next couple of days, which should provide some trading interest, but this is a market that faces some substantial challenges after the recent technical breakdowns.
Have a good evening. I'll see you tomorrow.
Disney is a holding in Jim Cramer's Action Alerts PLUS member club.