The DJIA fell 617 points on Monday. So far today it's trading up 292 points.
Nothing changed fundamentally. President Trump posted a number of positive tweets about China trade and other things, but the news that drove the market down Monday hasn't changed.
What changed was technical conditions. The big drop yesterday created an environment that favored computer-driven buy programs - programs purely focused on price action. They don't care what the president might say. Once the bounce started, the buy programs keep it running because it kept working.
There is a bit of a pause in the buying now, but the buy programs tend to persist longer than many folks think they will. That is a big part of the reason they work. The longer they work, the greater the anxiety of those sitting on the sidelines with idle cash.
When the buy programs stop working, the shift in the action can be very swift, which can trap newly-minted bulls. But trying to time that with any precision is extremely difficult.
My game plan is to look for this bounce to eventually fail, but don't be in any rush to try to anticipate when that might be. There isn't any change in the fundamentals to remove the doubts that were created yesterday.
When the buy programs run their course, then we will have to grapple with those issues again, so I'm not rushing to put money to work.
The breakdown Monday was a very clear technical warning. The bounce Tuesday is very clearly algorithm-driven buying.
The likely outcome is that the bounce will fail. The hard part is the timing.