Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk 

I welcome this rally because I have played this market awfully and was stuck in the stock funds last week.  I will likely use a big up day in stocks to sell as I suspect that we may not be out of the woods yet. 

I always look forward to Jason's commentary at sentimenTrader.com after a day or week like we had last week.  He always has great insight into how the market reacted during previous similar situations. 

As I wrote on the chart above, Jason says history suggests that the market could trade within Thursday's daily trading range for the next several weeks to months.  He had several examples, but I'll just post one to illustrate the point...

    

Here were Jason's conclusions:

*  There might be 1-3 days more selling pressure after the shock, especially intraday the following day...but that was more typical when stocks ended near their low on the shock day, unlike yesterday.

*  After the initial low, there was typically a 2-5 day vicious rally.

*  Every time, that initial rally failed and we ended up re-testing the panic low.

*  The intraday range during the shock day (the yellow highlights) contained most of the trading for the next 1-3 months - any probe above or below was usually beaten back quickly.

*  All of these occurrences precipitated fairly major intermediate-term market bottoms.


I suspect today will start the 2-5 day "vicious rally" and I will use it to get the heck out of the way.  It may be the wrong thing to do, which is what I am prone to do, but if we are going to make lower lows or test Thursday's low, I want to have cash on hand to take advantage of it.

As you might expect, the NYSE overbought/oversold indicator is very oversold and near the -1000 oversold level, which tends to be close to a near term rally.  But if you'll notice, the -1000 tends to see double dips into that area before rebounding... 

                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
 
So, I don't expect the market to just shoot up to new highs in the next several days.  I'd be more inclined to believe that we will see a rebound, and then another pullback.

The TSP Talk Sentiment Survey has moved to a buy signal for this week after last week's 36% bulls, 54% bears, 0.67 to 1 bulls to bears ratio.  That was pretty predictable considering we took the survey on Thursday.

The news out of Greece is good today, so stocks seem prepared to rebound, but as we saw with the bailouts in our country back in '07 and '08, the market can be fickle after good news and there will be many who will use the rally to sell.  I plan to be one of them.

Thanks for reading.  We'll see you back here tomorrow.

Tom Crowley