Never underestimate the strength of a bounce after a panicky move to the downside

Momentum is cyclical and long side momentum takes some time to play itself out. Things are different on short side. Markets often turn on dime on short side. Yesterday's action is a classic example of this market observation. The market rebounded from the weak open and ended at top of range.

In few weeks the market has rebounded sharply and erased the effect of the China induced down move. If you look at the numbers below and compare them to the numbers just a few weeks ago, you would notice very impressive recovery. It is not yet clear if this rally has more legs, but the learning is clear, never underestimate the strength of a bounce after a panicky move. That is the way markets work.

Market Monitor
Total 4% plus bullish breakouts=108
Total 4% plus bearish breakouts=39
65 day bullish/bearish ratio= 789/297
Stocks up 50% or more in a month=6
Stocks up 25% or more in a month=38
Number of stocks with 100% plus move =355
Number of stocks up 200% or more = 68
4% plus signals for 100plus universe=34
4% plus signals for 200plus universe=11

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