The late day rally in stocks erased sizeable intraday losses. Even after the past 3 days of trading the market still has yet to eclipse the highs set on Monday of this week. A positive here is we have held Monday’s low for now. On the downside Europe continues its woes with the DAX looking it wants to take out its August lows. Europe continues to be in a weak position with the DAX appearing it will take out August lows at any day. Our markets are not out of the woods just yet as the most recent rally could be of the dead-cat variety. The S&P 500 is now within a possible follow-through day range. We will be on the look out for a possible confirmation, but we still need to see leadership form. As of now while we are in range of a follow-through day we are not seeing a ton of leadership potential. Anything is possible, but odds remain low for a sustainable rally.

Sentiment as swung back towards bearish side. AAII Bears jumped 11 points ending the week at 39.9%. Bulls dropped four points to 28.1% while those who were neutral dropped 7 points to 32%. The thing here is bears are essentially at a level where we would expect a rally. It would have been more telling if the number of bears were higher and bulls dropping in the low twenties.

The amount of activity majority of market participants should be pretty inactive here. This market is just not producing any end of day signals. In 2011 after the initial drop in early August the market chopped a long until early October. It could be another few weeks before this market produces anything viable. We still see so many traders believing they are picking the bottom of the market only to be railroaded. No need to guess. Be patient. The market will eventually come around and produce sizeable returns.

Have a great weekend.