Reflex Bounce

• It was a impressive reflex bounce. With readings of 900 plus on long side. There is a high probability that this bounce might last for few weeks. Too early to say it is the bottom, and such big moves are common in bear markets. But in the short run for nimble traders there will be opportunities in heavily shorted stocks.
• We were witnessing 300 plus days for many weeks on downside. Lot of selling is out of the way. Against that backdrop when market did not go down much in reaction to the worldwide selloff, it seemed like sellers were not aggressive and short sellers were covering positions. Lot of what has gone up yesterday is beaten down, heavily shorted stuff.
• For a meaningful rally to develop and a bull market to start you need to see leadership group emerge. They are unlikely to emerge from sectors in which almost all stocks are trading around their 52 week lows. From a leadership perspective Medical/biotech is still best positioned. If you look at the top 30 stocks in MDT scan , they are mostly biotech and medical stocks.
• A rally here will allow trapped longs to escape and create good shorting opportunities in the long run if it fails after few weeks.