The two most powerful forces in the stock market are Apple (AAPL) and the Fed. Both will have news within the next 26 hours that will determine what happens next.
So far Tuesday, stocks have come back strongly from the coronavirus scare. There are no additional cases in the U.S. and there are some indications that officials in China are containing the spread. There is still plenty of uncertainty about the situation, but immediate fears have subsided and that is the basis for the bounce.
While the action is positive, the market still has technical issues and Apple and the Fed will determine how that plays out. Apple has had a huge run-up into this earnings report and is in a position for a "sell the news" reaction if there are any flaws in its report.
The Fed has provided nearly a half-trillion dollars in additional liquidity in recent months and any signal that the spigot is turning off is likely to impact the market as well.
While there are potential negative ramifications from both events, the market has an inclination to celebrate both Apple and the Fed. Even when they issue news that can be spun as negative, the market tends to look for the positive spin.
It seems logical at this point that a bounce should sputter out and that Apple or the Fed will be the catalyst for some softness. The problem is that common-sense logic like that often doesn't apply to the market. The market doesn't act like a rational individual would. It moves on a variety of factors and is far more emotional and subjective than you would think.
Two powerful forces are going to hit this market as technical traders look for reasons to fade the bounce. More often than not they have turned into short-squeeze fodder under similar circumstances in the past.