It looked like it was going to be another day of "fade the gap-up open," but traders saw it coming and were in position for some upside action when the market opened close to flat. Rather than sell into strength, traders were looking to buy some of the stocks that had been beaten down the last couple of weeks.
At the closing bell, breadth was a very healthy 5,500 gainers to 2,500 decliners. This wasn't a wild snapback rally like those that occur after a steep dive, but it was a good countertrend move with speculative traders bottom fishing groups such as cannabis while they chased small-cap energy and certain cryptocurrency-related plays.
All the indices were up around 0.8% or so, and there wasn't much wild rotation this time. It was primarily stock pickers looking for opportunities in favored names that have been beaten up. The pockets of momentum were relatively narrow, but they increased steadily during the day.
The question now is whether this is just a little countertrend bounce that will set us up for another leg down, or is it the start of the bottoming process that will provide support for a recovery over the next few weeks.
At this juncture, the most important thing is that the recent lows not be undercut. A lower low will trigger some sell stops and will quickly shift sentiment back to negative. There aren't many good reasons to be too trusting of this bounce, but it does help to give us better technical levels to consider as we move forward.
Have a good evening. I'll see you Thursday.