after an ugly two-day pullback blamed on a spike in oil prices, we got a bit of a bounce today, as oil fell back $2.50. given how far and fast the markets fell, a bounce was to be expected, and the softening in oil prices was a good justification.
unfortunately, the action today didn't seem to indicate that bargain hunters are rushing in to take advantage of the lower prices. in fact, some of the hot sectors, like solar energy, bulk shipping, and metals and mining, saw some severe dumping, as momentum players moved to the sidelines.
most likely the bulls' best hope at this point is that energy prices will ease further and help dampen some of the concerns about inflation. i don't think it's going to be that easy, and even if oil does fall further, we still have a number of other concerns out there that may persist. all one has to do is look at how poorly the financial sector has been acting if you want proof that there are still some problems brewing out there.
with the three-day weekend in front of us, trading tomorrow is likely to be quite thin. in fact, i would not be surprised if volume ends up being the lightest of the year. however, holiday trading tends to have a positive bias, so i would be hesitant to press shorts at this point. next week will be the real test of whether the "worst is over" rally was just a bear market bounce or something more lasting. lots of smart people are betting on the bears at this point.