Bounce immanent but I think more work still needs to be done on the downside after it

A couple of short term indicators I track are just about as stretched as it gets with respect to being oversold except for rare cases of a crash. Today's action was much better with respect to rebuilding the ST wall of worry which I have been pointing out needs repairing (the LT wall of worry is still well in tact). Bonds were strong and the put/call ratio came in at 1 which is finally showing some pessimism but this is only a 1 day reading. But such a reading along with the extreme in some ST trading oscillators argues for a bounce here which should send the SPX back to about 1075-1080 making a potential lower high. I'm thinking it starts tomorrow. At the very least, I wouldn't want to be short right here.

I believe the market might play out in a similar way as it did from June to early July. By mid June the market rolled over from an IT peak right at the nice and neat 950 level similar to how we have rolled over from the nice and neat 1100 level. We then saw a bounce (like we probably will get now) which eventually failed as the market made a lower low and H&S formation which got the bears all jacked up going for the kill, then...KABOOM! the bear trap was sprung and market blasted off never looking back. I doubt we will see things play out exactly the same way but I do think there's a good chance we will see some lower high, lower low action to get the bears all excited. Bulls need to the bears to get all confident again building up shorts/puts so that they get squeezed yet again to trigger the next up leg.

I'm thinking a little too far ahead here. As always I'll let market action and the behavior of the indicators dictate the story. Who knows, perhaps the market action and indictors will suggest a bearish resolution to all of this....quite frankly I don't care and neither should you. If the bear's back (doubtful) then giddy up and let's make money on the downside. This is the way you should think. Who cares what you predicted before or told your friends at the coffee shop...if the story changes you change with it and don't let a 30-50% portfolio haircut be the instrument of your change either.

Thursday morning before the bell 3rd quarter GDP estimate gets released which has the potential to be a market mover. There are a lot of cross-currents out there so beware whatever side you play.

Even though I expect a bounce I still haven't received an "all clear" signal for the bulls to take back control of the market yet and because of this I will be very careful at trying to play this bounce. I'm sure a lot of traders are seeing the same things I do and so if too many try to put on the same trade we could end up seeing any bounce attempt fizzle out and postponed to Thursday or Friday.