While it is likely a combination of bottom fishing and short covering, the markets found some relief today. We bounced after another bout of selling but it didn’t have the vigor we’d associate with a true bottom. The semiconductors, which held yesterday, showed life today with the sector closing up close to 2%. Areas we don’t like to see as leaders, such as oil and gold, continued to sell off which is a good sign going forward.

Breadth was slightly negative on the Nasdaq but very negative on the NYSE probably due to broad weakness in energy, oil and commodity stocks. The big scandal at Refco, which is a major commodity broker probably helped drive that action.

Strength in technology stocks such as Apple (AAPL) and Microsoft (MSFT) was encouraging and we are remaining hopeful that technology may step up and lead, especially as money rotates out of the commodity stocks.

Furthermore, after a long and arduous couple of weeks, we are starting to see opportunities,. Opportunities worth considering; however, keeping a very tight leash should the trades go against you. This is an environment in which trades can not be given much room to go astray. 

Tomorrow we have the Consumer Price Index report at 8:30 am ET. It is an extremely important report as it will either support or undermine the Fed’s recent hawkish jawboning. Should this report show higher than expected inflation it may just be what is needed to wash us out and form a bottom.

We are in no way throwing caution to the wind, and as individual investors we should respect the technical damage that has been done however we feel we are getting closer to a tradable bottom and that more good opportunities will begin to pop up. It is starting but we still have a very long way to go before we can embrace this market.

Have a good evening.