Markets Pop – Revenge of the Nerds

We finally got our oversold bounce on Wednesday, and it was a good one, with the SPX and NDX both gaining better than 3%, the Dow a little less, the RUT a little more. The SPX finished above 1040 and the Dow regained the 10,000 mark. The “nerds” or losers of the recent stock market correction made big moves, as the most recent trend was turned upside down, at least for a day. The big NYSE financials roared ahead –  Wells Fargo up 6%, JP Morgan  5%, B of A and GE 4.6% each – as did several of the oil majors; over on the NASDAQ many of the big techs posted similar numbers.

Near term bottom or dead cat bounce? My view: the market blew up the shorts, and in the process is giving us another chance to get out of positions we haven’t sold but aren’t comfortable holding. Volume wasn’t particularly inspiring, and most of these charts still look busted. There has been massive distribution in the stock market – institutional selling – and a counter-trend move is to be expected here and there.

What to look for the rest of the week: price and volume action, of course. If the bounce continues and volume picks up, then the bullish case has merit. If the bounce fizzles quickly, or continues a few days on falling volume, the bears will maintain the upper hand.

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