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Stocks Rebound Off Oversold Conditions But Volume Falls

|Includes: DIA, PowerShares QQQ Trust ETF (QQQ), SPY

Coming off extreme oversold conditions the market was able to find support. Volume came in lower on the day giving the indication institutions weren't in a rush to get back into stocks. Greece was still in the forefront as Thursday's deadline for bondholders. Small cap stocks lead the way with the Russell 2000 closing higher by 1.13%. It was the first time the Russell 2000 showed relative strength. AAPL's even caused quite a stir with the stock creating intraday volatility. The first rebound attempt for this market wasn't too impressive and we'll need to see some further power to erase the damage over the past few trading sessions.

Leading stocks have been largely okay throughout this rally. Stocks like KORS have been big winners, but we haven't seen the multitude of 100% or more winners. Normally, in an uptrend like this we see the market produce many of these winners. Perhaps in the massive Quantitative Easing world we are going to miss out on having multiple BIG winners. It will take much more skill to find and hold onto the winners the market is producing for us.

Tomorrow I will be able to get the AAII survey, but the most recent II survey has the number of bulls dropping below 50% to 47.9%. Last week the survey sat at 51.1% clearly the most recent sell off had some effect on weak bulls. The number of bears didn't increase dramatically moving up just slightly to 26.6%. It appears all we got from the past few days was to shake out a few weak bulls. Perhaps further downside will take care of that. Anything is possible and why it is important to have a game plan for the market.

Yesterday the McClellan Oscillator sat at -321 which is an extreme level. It was clear the downside was a bit limited in the very near term. Oversold markets can become more oversold, but at yesterday's level a bounce certainly was very likely to occur. Today the oscillator sits at -186 and it won't take much further upside to clear any oversold condition. Remember, this is not a substitute for price and volume, but merely a secondary indicator aiding your ability to analyze the market.

Friday we get the jobs report and it should provide us with some fun talking points. Will the unemployment rate rise, fall, or stay the same? It doesn't matter to us, we simply care about the price and volume action. Stay disciplined and cut those losses.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.