Bouncing along in the trading range

It is certainly possible that we could see a bounce in the stock market after Monday's sell-off, but it is also very possible that any initial bounce could be short-lived and evaporate as quickly as it appears. The basic question is whether or when we reach "selling exhaustion", the point where everybody who was going to sell in the short-term has already done so. Plus you have nervous short sellers who see the downward momentum evaporate and then begin to close out their short positions to lock in their profits, causing the bounce to accelerate. That's when you see upward momentum build for a bounce as the short-term trading bias reverses to "risk on", at least for a little while.

 

In any case, the stock market is still locked within a sloppy trading range with both limited upside and limited downside until the economic and fiscal outlooks become a little more clear.

-- Jack Krupansky