The S&P 500 has moved over its 50-day simple moving average and has broken above the trading range that has been in place since mid-December. It is a good example of how a combination of negative sentiment and poor positioning can produce a very energetic move in a bear market.
There isn't any major news driving the action. There is optimism that China is coming out of its economic downturn, but economic uncertainty in the U.S. is still significant. Expectations for the upcoming earnings season are low, but that doesn't seem to matter much Monday.
It is very likely that buyers are not betting on a significant market bottom. They are looking ahead to some good earnings reports and the likelihood that Thursday's consumer price index report comes is weak and gives the market another boost.
Chances that the Fed will hike rates by a quarter percentage point at its next meeting on Feb. 1 are 77%, which is helping market sentiment. The real issue that the market will need to eventually confront is how much economic slowing will occur due to the Fed rate hikes, but the market is still hoping that a recession can be avoided or will be quite shallow.
It is becoming difficult to put money to work after this big two-day move, but there isn't any reason to rush to sell, either. I've tightened up stops and will likely start to cut some exposure soon.